OPEC’s comedy routine

December 26, 2014

This week United Arab Emirates Energy Minister Suhail Al Mazrouei said something funny about oil’s plummeting prices. Speaking from Abu Dhabi on Sunday, Mazrouei said, “Irresponsible production from outside OPEC is behind the fall in prices. We call on all other producers to stop the increase.” This was a transparent swipe at U.S. production, which is at its highest level in decades, adding to—if not directly prompting—the glut that has caused prices to almost halve since June.

Not that OPEC will do anything to stanch the bleeding, mind you. In an interview with the Middle East Economic Survey, Saudi Oil Minister Ali Al-Naimi said, “As a policy for OPEC, and I convinced OPEC of this, even Mr. al-Badri (the OPEC Secretary General) is now convinced, it is not in the interest of OPEC producers to cut their production, whatever the price is. … Whether it goes down to $20, $40, $50, $60, it is irrelevant.”

It’s easy to understand the basis for OPEC’s composed freakout. Oil-producing countries have different per-barrel price points at which their 2014 budgets break even. For half of the selected producers in this Reuters graphic, that price is above the year-to-date average of about $100, but all 14 of the countries sampled have break-even prices above Brent crude’s current cost of roughly $60 per barrel.

One could make the argument that Russia is being hardest hit by oil’s decline, and U.S. producers have already trimmed the expansion of new shale projects, so OPEC’s one-sided pronouncement is laughable. “I command you to act in my best interests” isn’t a very compelling tact to take in life, much less in business.

OilBreakeven122414

2 comments

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let’s have a conversation– how long can OPEC hold out?

Posted by TigerFalls | Report as abusive

pretty handy stuff, overall I feel this is worthy of a bookmark, thanks

Posted by Chicago local news | Report as abusive