The Organisation of Petroleum Exporting Countries (OPEC) sell about 30% of the world’s crude oil and has been identified as a price regulator, supplying more into the market as it felt necessary – this has led to accusations of price fixing.
However recent days has seen OPEC’s influence over price diminish. Even when you consider the inconclusive OPEC meeting last week on production quotas, its members were already breaking their quotas putting an extra 1.5 million barrels of oil a day on the market. As you know this should shift the supply curve to the right and therefore reduce inflationary pressures on the price of oil. However for a couple of weeks the price of a barrel of oil has been around US$100. Furthermore when news got out that OPEC ministers were squabbling the market reacted by increasing the price of oil and it seemed to be more concerned about the oil supply rather than the collapse of OPEC.
With the actuality of the global supply and demand it now seems that OPEC has lost control of the oil market. It transpires that the OPEC meeting broke down mainly because Iran and others hindered a bid by Saudi Arabia and its Gulf allies to increase output at a time of world economic weakness. Rejecting the rise keeps oil prices high which helps Iran’s bank balance as well as having a negative impact on any recovery from the US economy.
The Iran led opposition to rasing output was about “sticking it to the Saudis and psychologically sticking it to the US”
Here is a clip from AlJazeera