Tags: Nocera | OPEC | oil | supply

NYT's Nocera: 'OPEC Has Become a Paper Tiger'

By    |   Tuesday, 21 October 2014 12:34 PM

Should someone be writing the obituary for OPEC?

That's not totally far-fetched, according to Joe Nocera, an op-ed columnist at The New York Times.

"Thanks to the shale revolution, OPEC has become a paper tiger," he wrote.

He noted that 41 years ago, OPEC launched an Arab oil embargo that changed the world and forced drastically higher prices.

"Perhaps more important than the price increases themselves was the new world order the embargo signaled," said Nocera.

He cited a Foreign Policy magazine conclusion then that OPEC had managed to take control of global oil production and prices from the major global oil companies. Now one of the authors of that piece, Ed Morse, global head of commodities research at Citigroup, believes OPEC will likely collapse within 10 years. "It has become extremely difficult for them to forge an agreement," he said of the OPEC membership.

Nocera noted oil prices recently plummeted over 25 percent, from more than $100 per barrel to the mid-to-low $80s. However, he said OPEC member Venezuela, for example, needs prices to be more than $100 per barrel to meet its budgetary needs, and the United Arab Emirates needs prices to be at least somewhere above $80.

Moreover, he said the cartel members cannot agree on production cuts that might boost prices.

"Simply put, the supply of oil is greater than the demand, and OPEC has lost its ability to control the supply," wrote Nocera. "But an even bigger part of the reason is that the shale revolution in North America is utterly changing the supply-demand dynamic."

Economist Ed Yardeni, chief investment strategist at Yardeni Research, wrote on his blog that stagnant oil demand is revealing a slowing global economy, according to the latest September totals cited by Oil Market Intelligence.

Yardeni said global oil supplies are now at a record high, with demand stalling in developed nations and growing considerably slower that previously in emerging nations such as China and India.

Bloomberg reported that at prices below $80 per barrel, about one-third of U.S. shale oil production could become unprofitable, Bloomberg reported.

MarketWatch reported that if low oil prices persist, it could end up lowering earnings in the S&P 500, as energy companies begin to suffer.

© 2019 Newsmax Finance. All rights reserved.

1Like our page
Should someone be writing the obituary for OPEC?
Nocera, OPEC, oil, supply
Tuesday, 21 October 2014 12:34 PM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
© Newsmax Media, Inc.
All Rights Reserved