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Oil ministers from OPEC and non-OPEC partners during their last meeting in Vienna agreed to cut an extra 503.000 b d from their total production in a bid to help stabilize the oil market. The OPEC and non-OPEC producers would now remove a total of 1.703 mb d of oil from their output.
Agreement between OPEC and non-OPEC allies would be a significant success for oil producers. indicating their coordination in safeguarding their national interests. However. it should be kept in mind that crude oil is not a mere commodity. rather it is a contributor to short-term and long-term interests.
Policymakers often see oil and energy like other issues without taking into consideration future effects. They only look for short-term interests. That would harm producers. consumers and oil companies in the long-term by disrupting the energy supply.
OPEC producers and their non-OPEC allies seem to have shifted to future issues in their policymaking and planning.
Over recent years. OPEC’s share of oil market has been constantly falling. Continuation of this trend could pose challenges to OPEC producers in the future. These obstacles would not be crossed easily if they are not overcome today.
One major challenge is OPEC and non-OPEC focus on oil prices. They no longer give priority to market share. Plans under way by the US and mainly shale oil production lay bare such challenges.
The US oil sanctions against OPEC members Iran and Venezuela. without any legal basis. may be explained by the US’s policy of market control in order to make shale oil production economical.
The US has brought its shale oil output to about 5mb d in recent years while OPEC has been cutting its production ceiling and some OPEC members have been slapped with sanctions. Therefore. OPEC has lost a big portion of its market.
Using oil as a weapon against the economy of independent nations and depriving their people of oil benefits run contrary to human ethics and international law. however. in the long term everyone would be harmed. The result of such policies would be lower investment in production. which would in turn harm the balance between production and consumption and hinder the energy supply stability and security at the global level. This aspect has been neglected by some politicians while some governments mete out a biased treatment of this issue. sacrificing their short-term interests for long-term interests.
