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MENA and World Oil Markets

  • Mohammed Akacem
  • Dennis Dixon Miller
  • John Leonard Faulkner
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Abstract

The world oil markets have evolved since the 1950s when the oil majors were in full control of the market from the MENA’s oil-producing wells to the gas stations in oil-consuming countries. Since then, OPEC has asserted its power, but recently it is facing challenges from the shale oil revolution as well as alternatives and renewable energy sources.

Oil markets have gone through several phases. Prior to the 1970s, the major oil companies, known as the Seven Sisters, controlled the oil production and ramped up the rate of depletion because of the impending threat of nationalization by oil producers (the countries producing oil). Eventually, the oil producers reasserted control over their oil and reduced production resulting in the oil shocks of the 1970s. Later phases resemble the first phase with the vertical integration of some of the oil producers and major oil companies operating along with the national oil companies.

OPEC’s long-term viability and its ability to secure a stable level of oil revenue to its members are now tested by the oil shale revolution. The latter has displaced a number of OPEC members’ oil exports as well as tampered the cartel’s control over oil prices. To make matters worse, the oil producers in MENA consume a large and growing share of their own production due to energy subsidies in an effort to appease the population.

A dilemma facing the oil MENA and the OPEC cartel is that at its core, a cartel’s main goal is to restrict output. Doing so leads to higher oil prices which makes marginal oil wells outside of the MENA region and oil shale more profitable. It also increases investment into alternative sources of energy and renewables. If the cartel chooses to flood the oil markets to lower oil prices and keep shale oil and other marginal producers at bay, it only hurts itself financially with much lower oil revenues.

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  • Mohammed Akacem
    • 1
  • Dennis Dixon Miller
    • 2
  • John Leonard Faulkner
    • 3
  1. 1.Department of Economics Campus Box 77Metropolitan State University of DenverDenverUSA
  2. 2.Baldwin Wallace UniversityBereaUSA
  3. 3.ArlingtonUSA

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