Baku, Azerbaijan, Oct.2
By Leman Zeynalova – Trend:
More cartel behavior is needed in the global oil market, Fenner Stewart, Director of Midwest Center for Energy Law & Policy, assistant professor, University of Calgary told Trend.
“It is generally accepted that cartels need not only consist of private companies, it could consist of a group of countries as well. The public-private distinction is of little importance. The key to a cartel is that it is a group of producers (public or private) that act as one to control the price of a good through the control of production. Some, in particular the US, see such meddling with the price function as very bad. However, global oil and gas has a long history of cartel behavior from its very inception with the consolidation of upstream and midstream activities by Standard Oil in the US,” said the expert.
That said, OPEC is more than a cartel, said Stewart, adding that it does attempt to coordinate the economic export policy of its members, but it also offers technical support and aid to them as well.
The expert pointed out that in recent years, OPEC has been less able to set prices and control price fluctuations.
“Its members cannot agree as they once did. More importantly, its influence has decreased. The Saudis no longer enjoys “swing state” status in the global market, with so much crude being produced outside OPEC,” he said.
The expert believes that more cartel behavior is needed in the global oil market.
“OPEC provided a valuable service to the global oil and gas community. Yet, I bet there are a lot of producers out there that miss the positives of a strong OPEC, stabilizing oil prices and creating much more long-term business certainty than we appear to have today,” he noted.
Steward pointed out that no strategy has worked to get rid of the two-headed monster of over production and glut.
“Being squarely business-minded, cartel behavior is needed to overcome this challenge. A reliable and reasonable price for oil will help ensure business certainty and country stability. Oil and gas production demands a massive capital investment in upstream and midstream and it takes many years of returns to actualize return on investment. More market stability is required. In my opinion, that takes more than competition in this case, coordination is required too,” he added.
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