EMEA News
OPEC Should Consider Boosting, Not Reducing, Its Output: Consultant
Although the continued overproduction of oil into a massively oversupplied market has driven prices down to near 11 year lows, a prominent consultant believes the Organization of Petroleum Exporting Countries (OPEC) should consider even greater output - a move that would give Saudi Arabia and the Cartel's other key members several benefits.
Writing in the December 27 edition of The National, Robin Mills, head of consulting for Manaar Energy, says that Saudi Arabia, the United Arab Emirates, Kuwait, Iraq, Iran, and Venezuela can all easily expand their low-cost production well beyond current levels.
Mills says that while the move would keep oil prices low, such a massive increase would at least keep them stable and allow for "easier planning."
Those countries would also gain revenues through higher volumes, and raise their share back to more than half of the market, says Mills.
He adds that high-cost non-Opec reserves would remain undeveloped, and competition within the organization would also be reduced.
Moreover, the consultant believes the strategy would either slow or halt the spread of the global shale revolution, which he predicts will soon consist of Argentinian, Australian, and Russian as well as North American producers, and that cheap oil would "allow higher global economic growth and so increase oil demand."
While acknowledging that growing attention to climate change threatens to constrain oil demand in the long term, Mills argues that "if climate policy limits the amount of petroleum burnt over the next 50 to 100 years, most of it would be OPEC's."
Mills stresses that, in order for the strategy to be a success, the major OPEC producers would have to be sure that "under a range of scenarios, their long-term revenues would outweigh the unavoidable years of short-term pain" as well as consider the impact on members who could not follow their plan.
But he concludes that the strategy is worth considering, not least because those states "have long borne the burden of sustaining prices for high-cost competitors."
"As the late US general George Patton said, `No one ever won a war by dying for his country. He won it by making some other dumb guy die for his,'" he said.
In its latest World Oil Outlook, OPEC downgraded its outlook for global crude oil prices out to 2040.
