OPEC and the stagnant price of oil – Counting the Cost

The 15th International Energy Forum, held in Algiers earlier this week, saw OPEC members decide to cut production by about 800,000 barrels per day. The cut would not be consistent across all member states but was significant nonetheless, being the first in eight years.The move is forecast to stabilise global oil prices.

“Today OPEC has taken an historic decision. OPEC will go back to its role of monitoring the market. It’s a role that it lost many years ago, that it is now reclaiming,” said Noureddine Boutarfa, Algerian energy minister.

We’ve seen that in the past, when Saudi Arabia was serious about cutting down oil, it has significantly impacted the oil price.

John Sfakianakis, Gulf Research Center

Many oil income reliant states have welcomed OPEC’s decision, in light of the dramatic drops in oil prices from 0 per barrel in 2014, to less than per barrel this year.

However, details on the production cut are still vague. There are yet to be any specifics concerning which of the OPEC states will be set to decrease their output, how long for and when the plan will come into play.

With a formal OPEC gathering set for 30th November – which means that realistically, effects from this decision will only really come to fruition in the New Year – concerns about compliance are arising.

Experts say the oil price wars have been affected by the competition between traditional oil producers and U.S. shale producers. Regionally, there is also a high tension relationship between Saudi Arabia and Iran, to consider. Saudi Arabia and fellow Gulf states, however, maintain that no politically-driven decisions have been made. Some analysts have faith in what is to come from these member states.

“The change in tone, the body language from Saudi Arabia, that they are willing to work together with other producers… and it’s not that they haven’t been trying to do that – other producers have to give something as well,” says Amrita Sen, chief oil analyst at Energy Aspects.

Also on Counting the Cost:

A new domain name system: As of October 1, the U.S. government will no longer supervise the internet’s domain name system – domains are the ‘addresses’ by which autonomous networks around the global internet scope connect with each other on a voluntary basis. The Internet Corporation for Assigned Names and Numbers (ICANN) is now responsible for managing these addresses.

We speak with Andrew Sullivan, fellow at the DYN Internet Company, about safeguarding the internet, ensuring the absence of political intervention and how ICANN’s new role can affect the 3.5 billion internet users worldwide.

Protectionism and the U.S. elections: We sit with Christine Lagarde, the managing director of the International Monetary Fund to discuss the fear of protectionism resultant from the current presidential election race, plus her take on gender equality measures.

“Efforts have to be undertaken, deliberate efforts, to include women. It does not reduce the pie, it does not eliminate boys – men. It improves the position.”

Mission to Mars: CEO of SpaceX, Elon Musk, says he has a plan for interplanetary transport between Earth and Mars. A fleet of one thousand spaceships, carrying 100 volunteers at a time are part of the plan to see if humans can colonise Mars. An unmanned mission is set for 2018, whilst plans for the first human visitor are a decade away.

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