OPEC's oil price war with the US and Russia
- By Zhang Jingwei
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E-mail China.org.cn, December 10, 2014
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Cheaper oil [By Zhai Haijun/China.org.cn] |
Despite the rapid decline in oil prices in recent months, the Organization of Petroleum Exporting Countries announced that it will keep its oil output target at 30 million barrels per day.
OPEC refused to cut down oil production for a variety of complex reasons, starting an oil price war.
Inside OPEC, there are both open and veiled struggles over oil output. Saudi Arabia, a major power in OPEC, has used cuts in oil output to promote price rises amid global price declines over the last century, but its cut of 10 million barrels a day led to a domestic financial crisis instead of a price rise. It was not until Saudi Arabia announced an increase in oil production at the end of 1985 that the global oil price bottomed out.
Saudi Arabia might have refused to cut production because of this bad experience. Big powers like Saudi Arabia and Kuwait can bear a price decline to US$60 per barrel. But other member countries like Nigeria, Venezuela and Iran can only see a domestic financial balance when oil price stands at US$100 per barrel. In Iran, in particular, since half of its revenue comes from oil exports and Western economic sanctions have been going on for years, the current oil price is already low enough to turn the country's finances into a disaster.
Therefore, it is possible that the 12 OPEC members will form their own alliances to compete with each other. Some believe that, due to their close relationship with the United States, Saudi Arabia and Kuwait will use oil production as a weapon against Iran and Venezuela. This may possibly be true because Iran's possession of nuclear weapons will pose a major threat to Saudi Arabia, especially now that the Iran nuclear talks have been extended again.
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