Will OPEC fix the oil price? A few days ago the cartel met to try to agree production cuts. The aim? To push the oil price up from where it alternates between $45 and $50 a barrel to between $50 and $60/barrel. As this blog has written before there a number of contradictory things going on. Most oil producing countries whilst being able to sell the oil they take from the ground at a profit, are not currently able to sell it at a high enough price required by their economies. Moreover there are indications that Saudi Arabia needs to keep pumping due its dependency on natural gas for electricity. Other members play beggar my neighbour. There are also indications that Saudi Arabia wanted to hit Iran and Russia for political reasons, finish off the US shale industry and possibly hit electric cars.
The problem is that Saudi Arabia needs the money that oil brings. It has decided that the money is getting more important with huge government cuts taking place and the Saudi’s having to borrow (partly to fund at least one ruinous war). In a strange move given the politics Russia has been brought in and said it will cut production. Russia needs the cash too. Will this OPEC fix work? Probably not. It never has before. Few of the countries can be relied on to stick at their production quotas, certainly by looking at history. US shale producers have cut their costs and stand ready to increase production and oil stocks are very high. However in the short term its succeeded and it looks like the days of very cheap petrol and diesel are behind us for the moment. Good news for the planet and renewables.