New Oil Map
By Isaac Cohen*
Experts agree, the decision by the Organization of Petroleum Exporting Countries (OPEC), adopted last week, of no change in production levels, signals the emergence of a new world oil map. According to the energy historian Daniel Yergin, “the oil exporters now recognize that this is a new market.”
The consequences of this decision were immediately felt. The stocks of energy companies plunged and the currencies of some of the main oil exporters stumbled, while the price of a barrel of oil declined to around $65, from $116 in June, the lowest price in almost five years.
Two main factors explain this change. First, the world economic slowdown, particularly in Europe, Japan and China, has pushed down the demand for energy products. Second and more decisive, as a result of the utilization of new technologies, US oil and gas production has increased to the point that it is close to becoming the main world producer. The US Energy Information Administration said US oil production this year will reach 9 million barrels per day, the same as Saudi Arabia and close to Russia’s 10.6 million barrels per day.
Any economic event generates winners and losers. In this case, the main losers are those oil producers, such as Iran and Venezuela, who were expecting oil prices to remain above $100 to support high levels of government expenditure. The main winners are consumers, who can enjoy a Christmas present of gasoline prices under $3 per gallon.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.