OPEC's well deserved field day

To be be painted as the villain is something that the world’s largest oil producers must have got used to by now. OPEC has been the villain for decades but at the same time it has also been the single entity capable of ensuring adequate supply of crude oil to a world running on oil.

In recent years, the focus has been on the villainy, although OPEC also became, in the words of some observers, increasingly irrelevant, in a world on the path to net zero. Right now, however, the cartel is grabbing the chance to get back at everyone and it has every right to.

“The idea that Russia and Saudi Arabia and other major producers are not going to pump more oil so people can have gasoline to get to and from work, for example, is not right,” U.S. President Joe Biden said this weekend at the G20 meeting.

"Gas prices, of course, are based on a global oil market. That oil market is controlled by a cartel. That cartel is Opec," Energy Secretary Jennifer Granholm told NBC's Meet the Press also on Sunday. "So that cartel has more say about what is going on."

The leaders of OPEC countries must be getting a feeling that’s very familiar to the leader of their biggest partner: whatever Russia’s president does, he’s always in the wrong in the eyes of his Western audiences. The same appears to be the case with OPEC now. Before the energy crunch, OPEC was guilty of keeping the world hooked on oil. Now, the cartel — because it is a cartel, that much is true — is being accused of keeping oil from consumers.

There is only so much hostility a person — or a nation, or a group of nations — can take, it seems, and now OPEC is getting back, with comments from several OPEC members stating that the the global oil market was well balanced and did not need additional amounts of oil being added to the OPEC+ total.

Someone of a more sensitive nature would say this is blatantly untrue but OPEC has the uncertainty argument on its side. Indeed, the current demand trend may or may not continue. Nobody knows. So OPEC+ is sticking to its original plan to add just 400,000 bpd to its total output every month until it reaches pre-pandemic production levels.

But there’s more. The extended cartel is not actually adding 400,000 bpd monthly. OPEC has been adding much less than that for most of the months since the agreement was struck. The official reason for the shortfall is production problems in Nigeria and Angola, which have both been suffering from underinvestment and delays in maintenance that affect their output rates.

Yet other members of OPEC have the capacity to boost their production more and two have been doing it — Saudi Arabia and Iraq. According to Energy Aspects’ Amrita Sen, Saudi Arabia, the United Arab Emirates, Kuwait, Iraq, and Azerbaijan all have the capacity to pump to their agreed quotas. Given that Nigeria and Angola have been producing an average of 276,000 bpd below their combined target, chances are those five producers above would have been able to compensate for the shortfall if they worked together. And if they wanted to, which apparently they don’t.

OPEC likes prices where they are. Perhaps some in OPEC would like them even higher but they are aware that there is a fine line between high enough and prohibitively high, and will likely take action before prices become prohibitively high. Yet until that moment, the cartel will likely continue teasing the consumer camp.

One might say this is immature and unbecoming for an organisation such as OPEC, or any other organisation, for that matter. Yet it is equally immature to vilify a whole industry as the culprit behind the world’s biggest crisis and trying to paint the generations having consumed this industry’s products for decades as blameless victims.

The victimhood drive is strong in the West and spreading. A U.S. representative recently accused the oil industry of something she called “environmental racism”. Big Oil, like OPEC, is used to hostility. Only it is bound by its corporate structure to be a lot more polite about everything. So while various parties and individuals chastise Shell or Exxon for their part in anthropogenic climate change, those companies and their peers are raking in billions in profits generated thanks to the strong global demand for their products despite said climate change.

OPEC, meanwhile, has its collective hand on the tap and is watching just how far Biden, Granholm and the rest of the global political elite could go in their pleas and accusations. And they have no plans to boost production by more than originally agreed, it appears, based on recent comments from Saudi Arabia, Kuwait, and Iraq.

OPEC could probably benefit from lower oil prices, which will provide an additional demand boost. But it seems that for now the cartel prefers to play the waiting game and see just how many times consumer nations would blink. A lot of that blinking is likely blinking back tears as the pioneers of the renewable shift see their dreams sink into a pool of oil.

One might say the above is unnecessarily poetic and unfair. That it misses the big picture, which is an apocalyptic one because of the emissions generated by decades of oil (and coal, and gas) consumption. True as this might be, it seems the alternatives available at the moment are falling well short of expectations and, more importantly, energy needs.

This means that OPEC is not just still relevant. It is more relevant than ever as, per Secretary Granholm’s own admission, the cartel produces about half of the world’s oil. This is oil that the world needs, whether it likes it or not. And OPEC is making sure we all realise this. Could you really blame it?

The strongest argument in favour of alternative energy sources is energy security and independence. If you produce your own power from solar farms on your territory, you would certainly be independent from countries that export power. The problem with this sort of independence s that it would cost a lot more than any government is prepared to spend.

Interestingly enough, the energy independence argument does not seem to be particularly popular among those governments that rail against Big Oil and OPEC. We only hear it in times of crisis, like the current energy crunch in Europe and Asia. If anything, it appears that decision-makers want to make everyone less dependent on their own energy production, especially if this production comes from fossil fuels, therefore increasing their dependence on foreign fossil fuels in what increasingly looks like the ultimate vicious circle.

OPEC is having a field day. It is tough on the average energy consumer and driver such as myself, and it is a lot tougher on the poorer-than-average energy consumer. Yet, as two Russian geniuses of humour once wrote, the salvation of those drowning is in their own hands. Not, I might add, in the hands of life belt manufacturers, especially when those drowning haughtily shun those life belts as dirty and climate-changing.