OPEC Behaviour and IOC strategy Professor Paul Stevens Distinguished Fellow, Chatham House Professor Emeritus, University of Dundee Visiting Professor,

Slides:



Advertisements
Similar presentations
International Developments in Oil and Natural Gas Markets and their Impact on Arab Countries Christopher Allsopp Oxford Institute for Energy Studies New.
Advertisements

Petroleum and Natural Gas Outlook Briefing for the National Association of State Energy Officials 2005 Energy Outlook Conference Washington, DC Mike Burdette.
OSU February 22-23, 2010James L. Williams WTRG Economics Global Oil Market James L. Williams WTRG Economics Oklahoma State University.
U.S. Energy Information Administration Independent Statistics & Analysis Global Oil Geopolitics Rio Oil & Gas Conference September 17, 2012|
© OECD/IEA 2014 Global Oil Market Update: Markets & Geopolitics Center on Global Energy Policy Columbia University July 17, 2014 Antoine Halff.
Carbon Markets: Volatility & Trading Institutions Craig Pirrong Bauer College of Business University of Houston.
The Role of Fiscal Regimes in Determining Competitiveness of Company Investments Marianne Kah 32 nd USAEE/IAEE North American Conference Petroleum Fiscal.
OPEC Organization of Petroleum Exporting Countries- Information for Standard SS7E6c.
Non-renewable resources & energy Economics, management, and policy.
WORLD ENERGY INVESTMENT OUTLOOK
AGEC/FNR 406 LECTURE 24. “America is addicted to oil” - President George Bush (2006 State of the Union Address) Three reasons for concern: 1. Volatile.
Oil, Economic Growth and Strategic Petroleum Stocks Carmine Difiglio, Ph.D. U.S. Department of Energy 37th IAEE International Conference Energy & the Economy.
Jet Fuel Supply/Price Outlook: Fueling the Recovery Energy Information Administration Presentation to 4th International Jet Fuel Conference February 11,
China and Its Impact on World Energy Consumption Dan Westbrook.
Future Global Trends – Resource security: How Sovereign Wealth Funds will benefit.
Africa in the new oil geopolitics
Chapter 36 Energy Prices Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.
Why Are Oil Prices So High and Where are They Going? Guy F. Caruso Administrator Energy Information Administration Global Finance Forum Washington, DC.
The Rise of National Oil Companies and Peak Oil Amy Myers Jaffe James A. Baker III Institute for Public Policy, Rice University February 14, 2008.
An Atlantic Basin Energy System? Paul Isbell Calouste Gulbenkian Fellow Center for Transatlantic Relations Johns Hopkins University School for Advanced.
 Today oil supplies about 40% of the world’s energy and 96% of its transportation energy.  Since the shift to oil, the world has consumed over 875 billion.
Global economic prospects Jan Friederich, Senior Economist December 2005.
Secretary General of the GECF “The Role of the Gas Exporting Countries Forum in Global Energy Security” RPGC 2010 Moscow, June 22, 2010.
Powerful Thinking for the global energy industry Outlook for 2011 Oil Markets: Why Oil Prices Will Stay in the Double Digits David Knapp, Chief Energy.
Niagara Falls, October 2009 WORLD AGRICULTURAL SITUATION Niagara Falls, October 2009.
April 2009 Fanta Aw American University. Economic Indicators GDP (as of March 2009) USA-2.2% Canada-1.5% Japan-5.3% Euro Area-2.4% China+6.0% India+5.0%
The Outlook for Energy Markets.  World oil markets have become increasingly tight since  Global demand growth, fed by worldwide economic growth,
OPEC Organization of Petroleum Exporting Countries Founded 1960 by 5 member nations 1.Iran, Iraq, Kuwait, Saudi Arabia, Venezuela 2.HQ = Vienna, Austria.
Managing the Growth Shock Warwick J. McKibbin Director, ANU Research School of Economics Presentation to the 2011 Economic & Social Outlook Conference,
SS7E5 The student will analyze different economic systems. Compare and contrast the economic systems in Israel, Saudi Arabia, and Turkey.
Long Term Oil Prices: Goldman Sachs vs. OPEC PRICE ELASTICITY OF DEMAND ERIKA SOLEM.
Victorian Furtney Emily Field Haille Monteiro. Purpose  Coordinates and unifies the petroleum policies of its Member Countries and ensures the stabilization.
Petroleum Supply and Market Outlook Briefing for the 7 th Annual International Airport Operations/Jet Fuel Conference Orlando, Florida Mike Burdette Petroleum.
U.S. Energy Information Administration Independent Statistics & Analysis International Energy Outlook 2013 for Center for Strategic and International.
U.S. Oil & Gas Industry Development of both oil and natural gas reserves in the United States is essential to meet future demand for energy The United.
NS4054 Fall Term 2013 Oil Markets: Crude Predicement.
The World Oil Market in 2006 tutor2u
OIL AND GOVERNANCE Depletion Policy. 1 Some authors (Stevens 2008) say that measuring the performance of NOCs is difficult and controversial. These are.
IMC-ERTF Panel Discussion on ‘Crude Oil Market Outlook and Implications for India’ January 27, 2016 Global market may begin to Rebalance in Q G.
1 The Fuel Price Dilemma Oil Price Developments: the Supply and Demand Balance presented by Mr. Mohammad Alipour-Jeddi Head, Petroleum Market Analysis.
Mitigating Energy Market Volatility Noé van Hulst, Secretary General, International Energy Forum (IEF) International Energy Forum G20 Conference on Commodity.
U.S. Ambassador’s Speakers Series Rio de Janeiro 10 March 2016 Geopolitics of Energy: Where do we go from here? Edward C. Chow Senior Fellow.
Organization of the Petroleum Exporting Countries 1 Oil and the fuel price: the link to market stability Mohammed Barkindo Acting for the Secretary General.
Prospects For Recovery: An Economic Update Karr Ingham Petroleum Economist Texas Alliance of Energy Producers Webinar, May 24, 2016
The Future of Oil Mike Lee, Roy Ju, Christine Chen, Jon Stein.
Erin Lowdon.  OPEC: The Organization of the Petroleum Exporting Countries ◦ Permanent intergovernmental organization ◦ Created at the Baghdad Conference.
Topic 9: aggregate demand and aggregate supply
USAEE CONFERENCE TULSA – OCTOBER 24, 2016 What Price for Oil in 2017
Oil price : Saudi Arabia vs Shale oil
40th IAEE International Conference 19 June 2017, Singapore
Oil, gas prices, and conflict in the middle east
Chapter 36 Energy Prices.
Disclaimer This presentation is being provided solely for informational purposes. Mercantile Exchange Nepal Limited does not warrant the accuracy or completeness.
Macros in brief for Oil Markets
AGA 7th Annual Energy Market Regulation Conference Value Proposition for U.S. LNG Exports: Market Study October 2014.
NS4960 Spring Term 2018 Oil Markets: Crude Predicament
NS4960 Spring Term 2018 Nuclear Deal Withdrawal and Oil Markets
IAEE Bergen, June 20, 2016 OPEC: WHAT HAS CHANGED?
Oil In the Middle East Today oil supplies about 40% of the world’s energy and 96% of its transportation energy. Since the shift to oil, the world has consumed.
OPEC.
OPEC.
Washington, September 24, 2018 USAEE Conference
The Organization of the Petroleum Exporting Countries
OPEC Organization of Petroleum Exporting Countries
Crude Oil Outlook Oil Demand Growth Oil Supply Growth Stocks
NS4054 Fall Term 2015 Oil Markets: Crude Predicement
The Oil Price Outlook Through 2004
OPEC.
The Future of World Oil Prices: Some Keys to the Puzzle
The Organization of the Petroleum Exporting Countries
Presentation transcript:

OPEC Behaviour and IOC strategy Professor Paul Stevens Distinguished Fellow, Chatham House Professor Emeritus, University of Dundee Visiting Professor, University College London (Australia) Distinguished Fellow, Institute of Energy Economics, Japan Petroleum Market Fundamentals and Risk IAEE 39 th Annual conference Bergen 20 June 2016

Chatham House | The Royal Institute of International Affairs 2 Presentation outline What has OPEC behaviour been? The current state of the oil market? Future state of the oil market IOC Strategies? NOC Strategies? Implications for OPEC behaviour? Will OPEC need to assert control? Can OPEC assert control?

Chatham House | The Royal Institute of International Affairs3 What has OPEC behaviour been? OPEC’s objective has always been defence of price September 1960 Resolution Needed a controlled market because of the tendency to create excess capacity Presence of economic rent Tendency to consensus “Accidents” Spare capacity mostly unintended except post-1985: Saudi strategy Record of control: mixed Currently???

Chatham House | The Royal Institute of International Affairs 4 Current State of the oil market (1) Since June 2014 oil prices have collapsed. Caused by uncontrolled spare capacity arising from “OPEC’s Dilemma” and the shale technology revolution leading to record inventories November 2014: the OPEC meeting launched prices onto a competitive market. First time since 16 September 1928 – Achnacarry agreement Not an OPEC response – a Saudi response: unwilling to act as “swing producer” Arguably no choice –legacy of Forget conspiracy theories: simply wanted the supply curve to go the right way = collateral damage?

Chatham House | The Royal Institute of International Affairs5 Current State of the oil market (2) Is the Saudi strategy beginning to work? Inventories falling (?) US tight oil supply falling Prices beginning to rise since January “Dead cat bounce” ? Demand recovery – how much strategic stock building outside OECD? Outages – Canada, Iraq, Libya, Iran(?) etc. BUT Took a lot longer than expected break-even versus shut-in prices AND there is a price ceiling “Fracklog” Increased price elasticity of supply plus shorter lead times July 2015 June 2016

Chatham House | The Royal Institute of International Affairs6 Two key questions for the future: 1. Will spare capacity re-appear? 2. Can OPEC control any spare capacity? 1. Will spare capacity re-appear? Remember before, apart from Saudi Arabia’s policy post 1985 its emergence was unintended – Demand - uncertain State of global GDP? Impact of “OECD disease”? – Supply – very uncertain BUT will be the key to future spare capacity Behaviour of the IOCs? Behaviour of the NOCs?

Chatham House | The Royal Institute of International Affairs7 IOC strategies: Problems with the upstream Lost their technological edge Post 2008 financial markets have become anti large, long term, high risk projects Resource nationalism has limited access to low cost reserves Cash flow problems and maintaining the dividend; the unburnable carbon issue. How much are they likely to invest in the upstream?

Chatham House | The Royal Institute of International Affairs8 Behaviour of the NOCs OPEC countries need to increase q to offset a lower p But being starved of funds? Opening up of the upstream to FDI? Will become very competitive given trying to attract the contracting investment pot?

Chatham House | The Royal Institute of International Affairs9 1. Will spare capacity re-appear? Current outages unlikely to be resolved soon IOC’s supply will probably be constrained NOC’s supply may also be constrained depending on their ability to attract FDI Will Saudi Arabia deliberately maintain spare capacity? Ultimately as spare capacity hovers around the danger zone: Prospects for a price spike are greater?

Chatham House | The Royal Institute of International Affairs10 2. Will OPEC be able to control any spare capacity? February: production cap agreement: Russia, Venezuela and Qatar – meaningless April in Doha: failed Given the state of Saudi-Iranian relations any agreement is extremely unlikely. Overall conclusion: Oil prices will experience ever greater volatility as the result of a competitive market

THANK YOU FOR YOUR ATTENTION