Baku, Azerbaijan, July 14
By Leman Zeynalova – Trend:
There is no point to expect much from the upcoming talks between OPEC and US shale producers, Fenner Stewart, Director of Midwest Center for Energy Law & Policy, assistant professor, University of Calgary told Trend.
Earlier, OPEC Secretary General Mohammed Sanusi Barkindo said that another meeting will be held with companies producing shale oil in the US in 2017.
“If US shale producers were to decrease output, and that is a very big if, then I expect that this is the start of a very long conversation. I am not even sure that this is possible in any practical way (i.e., for private for-profit actors to coordinate with OPEC to control global oil supply),” said Stewart.
He recalled that there have been three moments in history in which a group of powerful oil actors have been able to coordinate the industry and successfully controlled global oil supply:
1) 1875 to 1880: when John D Rockefeller united the 15 largest oil refineries in the US, bringing under control about 80 percent of US capacity;
2) 1928: when Henry Deterding (Royal Dutch Shell), Walter Teagle (Standard Oil) and John Cadman (Anglo-Persian) met in Achnacarry Castle (Scotland) and worked out an agreement to coordinate competition to stabilize the global oil market;
3) 1965 to 1973: when OPEC took control of the global price for oil.
Stewart pointed out that today, markets are far more complex than they were the last time that private actors attempted to coordinate competition in 1928.
“Moreover, I find it hard to believe that the will exists to attempt to coordinate competition between producers in Texas,” he added.
The expert believes that there is a danger in attempting to characterize “U.S. shale producers” as a monolith.
“It is a diverse group of competing for-profit actors, who are pressured by markets in different ways (e.g., think of the range of pressures associated with just financing projects either through equity markets, or debt financing, or some variation of both). In addition, US shale producers rarely share similar corporate cultures,” he added.
Regarding the situation in the oil market, Stewart noted that the impacts associate with upturns and downturns on oil prices affect different players differently, depending on a multitude of factors.
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