Advertisement

Is OPEC Dead? Oil Exporters, the Paris Agreement and the Transition to a Post-carbon World

  • Thijs Van de GraafEmail author
Chapter
  • 9 Downloads

Abstract

The Organization of the Petroleum-Exporting Countries (OPEC) faces a perfect storm. It is squeezed between the revolution in unconventionals, which has increased the global supply of hydrocarbons and lowered their price, and the prospect of a global peak in oil demand, stemming from climate policies and the falling costs of alternative energy technologies. In the face of these challenges, media commentators have declared the death of OPEC as a cartel. This perspective argues that the claims about OPEC’s demise are misguided for four reasons: (1) OPEC never acted as a cartel, let alone a powerful one; (2) thanks to its cheap production costs, OPEC’s oil will remain competitive in a low-cost environment; (3) the group has always proved to be flexible; and (4) OPEC is still attractive to its member states, most notably as a source of prestige, as is illustrated by the recent re-entries of Indonesia and Gabon. That said, over the longer term OPEC will inevitably need to adapt to a changing external environment. A likely possibility would be for the club to gradually morph from an output-setting cartel into a forum for deliberation and information sharing.

Keywords

Organization of Petroleum-Exporting Countries (OPEC) Paris climate agreement Oil demand peak Stranded assets 

Notes

Acknowledgements

Reprinted from Energy Research & Social Science, Vol. 23, Is OPEC dead? Oil exporters, the Paris agreement and the transition to a post-carbon world, Copyright (2017), with permission from Elsevier. I am grateful to Jeff Colgan, Andreas Goldthau, and Benjamin Sovacool for their helpful comments on an earlier version of this article. Any remaining errors are my own.

References

  1. Aalto, P. (2016). The new international energy charter: Instrumental or incremental progress in governance? Energy Research and Social Science, 11(4), 92–96.CrossRefGoogle Scholar
  2. Amuzegar, J. (1997). OPEC’s seventh life. Middle East Policy, 5(3), 25.Google Scholar
  3. Baffes, J., Kose, M. A., Ohnsorge, F., & Stocker, M. (2015). The great plunge in oil prices: Causes, consequences, and policy responses. Washington D.C.: World Bank.Google Scholar
  4. Bernholz, P. (2009). Are international organizations like the bank for international settlements unable to die? The Review of International Organizations, 4(4), 361–381.CrossRefGoogle Scholar
  5. Blas, J. (2012, June and 18). OPEC: Hold those obituaries. Financial Times.Google Scholar
  6. Bridge, G., & Wood, A. (2010). Less is more: Spectres of scarcity and the politics of resource access in the upstream sector. Geoforum, 41, 565–576.CrossRefGoogle Scholar
  7. Brown, W., & Kahn, H. (1997, July). Why OPEC is vulnerable. Fortune, 66–69.Google Scholar
  8. Carbon Tracker Initiative. (2014). Oil demand: Comparing projections and examining risks. Available from: http://www.carbontracker.org/wp-content/uploads/2014/05/Chapter1ETAdemandfinal1.pdf.
  9. Cherp, A., Jewell, J., Vinichenko, V., Bauer, N., & de Cian, E. (2013). Global energy security under different climate policies, GDP growth rates and fossil resource availabilities. Climatic Change, 121(1).  https://doi.org/10.1007/s10584-013-0950.
  10. Colgan, J. D. (2014). The emperor has no clothes: The limits of OPEC in the global oil market. International Organization, 68(03), 599–632.CrossRefGoogle Scholar
  11. Colgan, J. D., Keohane, R. O., & Van de Graaf, T. (2012). Punctuated equilibrium in the energy regime complex. The Review of International Organizations, 7(2), 117–143.CrossRefGoogle Scholar
  12. Crooks, E. (2016). The death of OPEC? FT Energy Source.Google Scholar
  13. Depledge, J. (2008). Striving for no: Saudi Arabia in the climate change regime. Global Environmental Politics, 8(4), 9–35.CrossRefGoogle Scholar
  14. EIA. (2016). Short-term energy outlook, September 7, 2016. Available at: https://www.eia.gov/forecasts/steo/report/us_oil.cfm.
  15. Fattouh, B., & Sen, A. (2016). The past, present and future role of OPEC. In T. Van de Graaf, B. K. Sovacool, A. Ghosh, F. Kern, & M. T. Klare (Eds.), The Palgrave handbook of the international political economy of energy (pp. 73–94). Palgrave Macmillan.Google Scholar
  16. Goldthau, A., & Witte, J. M. (2011). Assessing OPEC’s performance in global energy. Global Policy, 2(s1), 31–39.CrossRefGoogle Scholar
  17. Halff, A. (2016a). OPEC is not dead—It is adapting. Financial Times, June 2, 2016.Google Scholar
  18. Halff, A. (2016b). Congressional testimony before the committee on energy and natural resources, US Senate, 2nd Session, 114th Congress, January 19, 2016. Available at: http://energypolicy.columbia.edu/sites/default/files/energy/Halff%20Senate%20ENR%20Testimony_2016.01.19.pdf.
  19. IEA. (2014). Medium-term gas market report. Paris: IEA/OECD.Google Scholar
  20. IEA. (2015a). World energy outlook 2015. Paris: OECD/IEA.Google Scholar
  21. IEA. (2015b). World energy outlook 2015. Paris: IEA/OECD.Google Scholar
  22. IEA. (2016a). Medium-term oil market report (p. 12), February 2016.Google Scholar
  23. IEA. (2016b). Oil market report, August 11, 2016. Available at: https://www.iea.org/media/omrreports/fullissues/2016-08-11.pdf.
  24. IMF. (2016, April). World economic outlook database. Available at: https://www.imf.org/external/pubs/ft/weo/2016/01/weodata/index.aspx.
  25. Jaffe, A. M., & Morse, E. L. (2013). The end of OPEC. Foreign Policy, 16.Google Scholar
  26. Kemp, J. (2016). Doha meeting might not matter much for oil prices. Reuters.Google Scholar
  27. Keohane, R. O. (1984). After hegemony: Cooperation and discord in the world political economy. NJ: Princeton University Press.Google Scholar
  28. Klare, M. (2009). Rising powers, shrinking planet: The new geopolitics of energy. London: Palgrave Macmillan.Google Scholar
  29. Klare, M. (2012). The race for what’s left: The global scramble for the world’s last resources. London: Palgrave Macmillan.Google Scholar
  30. Kustova, I. (2016). A treaty à la carte? Some reflections on the modernization of the energy charter process. Journal of World Energy Law and Business, 9(5), 357–369.CrossRefGoogle Scholar
  31. Lazarus, M., Erickson, P., & Tempest, K. (2015). Supply-side climate policy: The road less taken. Stockholm Environment Institute, Working Paper, no. SEI-WP-2015-13 (October), pp. 1–24.Google Scholar
  32. McGlade, C., & Ekins, P. (2014). Un-burnable oil: An examination of oil resource utilisation in a decarbonised energy system. Energy Policy, 64, 102–112.CrossRefGoogle Scholar
  33. McGlade, C., & Ekins, P. (2015). The geographical distribution of fossil fuels unused when limiting global warming to 2 [deg] C. Nature, 517(7533), 187–190.CrossRefGoogle Scholar
  34. Morse, E. (2016, January and 28). Welcome to the new oil order. Financial Times.Google Scholar
  35. Myers Jaffe, A. (2016). The role of the US in the geopolitics of climate policy and stranded oil reserves. Nature Energy.Google Scholar
  36. OPEC. (2015a). OPEC annual statistical bulletin 2015. Available at: http://www.opec.org/opec_web/static_files_project/media/downloads/publications/ASB2015.pdf.
  37. OPEC. (2015b). OPEC 168th meeting concludes. Press Release No 8/2015, Vienna, Austria, 4 December 2015. Available at: http://www.opec.org/opec_web/en/press_room/3193.htm.
  38. OPEC. (2016). 170th (extraordinary) meeting of the OPEC conference. Press Release No 11/2016, Algiers, Algeria, 28 September 2016. Available at: http://www.opec.org/opec_web/en/press_room/3706.htm.
  39. Randall, T. (2015) Citi: Oil could plunge to $20, and this might be ‘the End of OPEC’. Bloomberg.Google Scholar
  40. Rogelj, J., Reisinger, A., McCollum, D. L., Knutti, R., Riahi, K., & Meinshausen, M. (2015a). Mitigation choices impact carbon budget size compatible with low temperature goals. Environmental Research Letters, 10(7), 075003.CrossRefGoogle Scholar
  41. Rogelj, J., Schaeffer, M., Meinshausen, M., Knutti, R., Alcamo, J., Riahi, K., et al. (2015b). Zero emission targets as long-term global goals for climate protection. Environmental Research Letters, 10(10), 105007.CrossRefGoogle Scholar
  42. Strange, S. (1998). Why do international organizations never die? In B. Reinalda & B. Verbeek (Eds.), Autonomous policy making by international organizations (pp. 213–220). London: Routledge.Google Scholar
  43. UNEP. (2015). Emissions gap report, 2015. In K. Levin & T. Fransen (Eds.), Insider: Why are INDC studies reaching different temperature estimates. WRI blog post, November 9, 2015. Available at: http://www.wri.org/blog/2015/11/insider-why-are-indc-studies-reaching-different-temperature-estimates.
  44. Van de Graaf, T. (2012). Obsolete or resurgent? The international energy agency in a changing global landscape. Energy Policy, 48, 233–241. Google Scholar
  45. Van de Graaf, T. (2014). Toxic mix of oil and politics threatens Libya’s cohesion. World Politics Review.Google Scholar
  46. Van de Graaf, T. (2015). The IEA, the new energy order and the future of global energy governance. In D. Lesage & T. Van de Graaf (Eds.), Rising powers and multilateral institutions (pp. 79–95). UK: Palgrave Macmillan.Google Scholar
  47. Van de Graaf, T., & Verbruggen, A. (2015). The oil endgame: Strategies of oil exporters in a carbon-constrained world. Environmental Science and Policy, 54, 456–462.Google Scholar
  48. Van de Graaf, T., & Lesage, D. (2009). The international energy agency after 35 years: Reform needs and institutional adaptability. The Review of International Organizations, 4(3), 293–317.Google Scholar
  49. van der Ploeg, F. (2016). Fossil fuel producers under threat. Oxford Review of Economic Policy, 32(2), 206–222.CrossRefGoogle Scholar
  50. Wallander, C. A. (2000). Institutional assets and adaptability: NATO after the cold war. International Organization, 54(04), 705–735.CrossRefGoogle Scholar
  51. World Economic Forum. (2016). Global agenda council on the future of oil & gas, future oil demand scenarios. http://www3.weforum.org/docs/FutureOilDemandScenarios.pdf.
  52. Zhdannikov, D., & El Gamal, R. (2016). Exclusive: Shift in Saudi oil thinking deepens OPEC split. Reuters.Google Scholar

Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.Ghent UniversityGhentBelgium

Personalised recommendations