As last week’s OPEC meeting in Vienna came to a close, once again no consensus was formed on price and production levels, leaving OPEC to now be what many analysts are calling, a dead and finished organization.
For the entire year, and especially after the U.S. removed sanctions from Iran to allow them to start selling oil in the public markets again, OPEC has been split between production increases and freezes, and it has led the coalition to crack after almost 50 years of lock-step agreement between the world’s major producers of oil.
This of course now opens the door to a vital power struggle, which is likely to see Russia emerge as the head of a new energy partnership that could leave Saudi Arabia out in the cold, since their reserves are on the downside of peak production, and the U.S. has chosen to throw them under the bus now that the petro-dollar is out as the global standard.
In its meeting Thursday in Vienna , the Organization of the Petroleum Exporting Countries failed to agree on a new production ceiling and therefore did not change its oil output policy. The cartel has been pumping oil at record levels despite the drop in global crude prices that began in 2014.
Russia has the advantage to take over the lead in energy policy since the majority of new energy infrastructures and processes over the past five years have come out of Russia, and not OPEC or the Middle East. In fact, when you take into consideration the two new North and South pipelines expected to supply oil and natural gas into Europe which is then being complimented with a new pricing mechanism that allows producers and consumers both to purchase oil in either Rubles or Yuan, the petrodollar system is also in its final days as the global standard.
The Saudi Kingdom already appears to be throwing in the towel as it has plans to take its sovereign oil franchise public, and use a newly created sovereign wealth fund to invest in different industries outside the energy sector. And perhaps in all of this, it is most ironic that the individual who led the creation of OPEC back in the late 1960’s, may have also been the trigger for its demise when the U.S. had Libya’s Muammar Qadaffi killed back in 2011.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.