OPEC, a golden raspberry

OPEC, the oil producers’ cartel, turns 50 today, September 14, 2010.

To mark the occasion, OPEC’s Secretariat in Vienna has produced a lengthy brochure, with scrapbook photos and a fairly partisan version of the organisation’s history. 

OPEC's first meeting in Baghdad, Sept. 14, 1960 (Source: OPEC)

OPEC Secretary-General, Abdalla Salem el-Badri, sets the nationalistic tone in his introduction:

“It was therefore a heroic act by the Founder Members to come together in the Iraqi capital 50 years ago and decide that enough was enough. They could no longer allow the lifeblood of their economies to be drained” … by their colonial masters, in the shape of the “Seven Sisters”, the big oil companies that controlled world oil resources up to that point.

Writing in Foreign Policy magazine under the title “How to Ruin OPEC’s Birthday”, Gal Luft, an academic and former lieutenant colonel in the Israeli Defence Forces, takes the counterpoising position. Since the 1973 oil embargo, implemented to deter western support for Israel in the Yom Kippur war, “OPEC has earned a reputation as a club of greedy, non democratic governments whose oil ministers, who gather in Vienna every few months to set the price of crude, hold everyone else’s economic fate in their hands,” Mr Luft asserts.

Furthermore, Mr Luft observes: ” OPEC’s well-deserved reputation as a bully obscures another fact: For all its bluster, the group seems almost uninterested in actually getting all its oil out of the ground. Today, the cartel’s 12 members account for 78% of global oil reserves, but produce only one-third of the actual oil supply; the world’s non-OPEC producers, with little more than a fifth of the world’s oil at their disposal, pump twice as much. Even with the 2007 induction of two new members, Angola and Ecuador, who collectively produce as much oil each day as Norway, OPEC produces today less oil than it did before the 1973 embargo.”

Mr Luft’s recommendation for spoiling OPEC’s birthday is twofold: a longer-term move to electric vehicles and a shorter term law – for the US, at any rate – requiring cars to be flex-fuel capable, running ethanol and methanol with conventional petroleum products.

In the Financial Times, Javier Blas takes a somewhat more circumspect view, listing what he sees as the main challenges for OPEC. Having demonstrated that a technocratic approach works better than a politically-motivated one, the FT reckons that OPEC will need to replace its technocrat-in-chief in the next year or so, namely Saudi oil minister Ali al Naimi, who turns 75 next month. The cartel will also have to deal with the ramping up of Iraqi oil, which is targeted to rise four-fold over the next decade to 10m, assuming the country continues to stabilise and can garner the investment required by international oil companies. Finally, OPEC will have to work within a world that is looking for alternatives to oil – and fossil fuels in general – more seriously that at any time before.

But the piece closes with a quote that acknowledges a fact that was as true at OPEC’s birth as it will be when and if it reaches its centennial: we have no clue what the energy world will look like in 50 years.

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