[COPY] Does the Market Need OPEC/OPEC+?
Does the global oil market need management? Why or why not? What will happen if OPEC/OPEC+ are dissolved?
This article was posted in late 2023 but remains relevant today after the UAE left OPEC. The above is from
an old paper that proves that OPEC is not a cartel.
The oil industry, just like any other extractive industry, is capital intensive with its costs mostly being sunk cost, while the operating cost is relatively small. During a period of an economic downturn and very low oil prices, producers focus on the operating cost. They continue to produce despite the hefty losses. As history shows us, the result is cut-throat competition and a waste of the world’s scarce resources.