Of course, the cartel's clout isn't what it was. It now controls only about 40 percent of the world oil market unlike the early '70s when it controlled 70 percent and first realized its monopoly power. Nonetheless, it still has muscle, particularly when it allies with another major producer. For the last three years it has teamed up with Russia to constrain supply and keep prices up. However that arrangement collapsed acrimoniously on Friday when Moscow refused to support deeper cuts to cope with the drop in demand caused by the coronavirus. OPEC answered by unleashing it own production. Oil prices have dropped accordingly.
Canada's oil patch is bracing for what Judith Dwarkin, chief economist at RS Energy Group, is calling a "toxic recipe" for prices. With the coronavirus effect and now OPEC freeing up supply, things are not looking good. Incentive to invest in oil declines even further. Can bankruptcies be far behind?
Do not be surprised if Jason Kenney blames both the coronavirus and the collapse of the Russia-OPEC deal on the diabolical machinations of the Prime Minister. Justin will stop at nothing.
2 comments:
Hi, Bill. Great minds... I was jolted when I received a bulletin from Business Insider that OPEC+ may be cratering as Russia and the Saudis lock horns over oil production. BI reports that the Sunday overnight price has dropped 31 per cent, the biggest crash since the Gulf War in 1991.
I wonder if Teck, that recently had to take a $900 million write down on its minority (21% interest) in the Fort Hills mine is relieved that it didn't plunge headlong into the Frontier mine project?
Rather than spewing conspiracy theories and tantrums about leaving Confederation, this might be a terrific opportunity for Kenney et al to address site remediation and transitioning Alberta's economy to free it from the vagaries of world oil markets.
Amen to the latter.
Post a Comment