OPEC DISCIPLINE AND MEMORIES OF 1998

The year 1999 will prove to have been a good one for members of the Organization of Petroleum Exporting Countries-but not that good.

It will have been a good year in the sense that it was not 1998.

Total oil-export revenue of the OPEC member-countries, according to projections of the US Energy Information Administration, will be up 24% in 1999 from year-earlier levels.

Average oil prices, in EIA's estimation, will be up 29%.

The reason for the disparity is the production volumes OPEC sacrificed last April to prop up prices.

EIA projects OPEC revenue from oil exports this year at $123.6 billion. The estimated $99.9 billion total for last year compares darkly with $154 billion in 1997.

These figures need historic perspective.

Adjusted to 1990 dollars for comparison, the 1998 revenue figure was $80 billion, lowest since the $77 billion of 1972, the year before the Arab oil embargo. OPEC's oil export revenue in 1986, when crude values collapsed, totaled $83 billion on the same inflation-adjusted basis.

OPEC's best year was 1980, when total oil revenue reached $439 billion (again, in 1990 dollars).

The same inflation adjustment pulls this year's projection to $97 billion-better than 1998 but still on the low side by historic standards.

Regarding revenue shares of individual OPEC members, EIA notes five trends.

  1. Saudi Arabia earns more from oil than any other OPEC member, but its share swings widely. The kingdom's revenue now account for 28% of OPEC total. But the share has been less than 20% (in 1972) and more than 40% (in the early 1980s).
  2. Iran has never recovered the revenue share it lost after the Islamic Revolution of 1978-79 and war with Iraq during the 1980s. Its current share of OPEC earnings from oil exports: about 11%.
  3. Iraq's share of the OPEC total has been as high as 15% in the late 1980s and as low as near 0% after the invasion of Kuwait. Producing under United Nations supervision to raise funds for humanitarian purposes, Iraq now accounts for about 11% of total OPEC oil revenue.
  4. Venezuela has maintained a fairly constant share of OPEC oil revenue at 10-12%.
  5. The rest of OPEC has accounted for 40-50% of total oil revenue since 1972. Kuwait, the UAE, and Qatar together account for about half of that share.

Oil earnings have always driven OPEC behavior. This year, however, the group's members-or at least the most important ones-have demonstrated an ability, absent in years past, to stick with production limits undertaken to support the value of crude oil.

The unifying factor is last year's pain in producing countries that fund major portions of their national budgets with oil revenues. The low crude prices and historically low revenue levels of 1998 hurt budgets enough to make those countries fear political instability.

Hence this year's production discipline. The payoff for OPEC members is a rebound in revenue sufficient, at least so far, to keep political pressure under control. By historic standards, however, the payoff hasn't been lavish.

So the temptation on OPEC's most important members to cheat on production quotas remains a problem for the market. What holds the temptation at bay is the memory of 1998.

Related Articles

Alaska LNG project partners file resource reports with FERC

02/12/2015 A series of draft environmental and socioeconomic reports for the Alaska LNG project have been submitted to the US Federal Energy Regulatory Commis...

US House vote sends Keystone XL approval bill to Obama’s desk

02/12/2015 The US House of Representatives voted by 270 to 152 to pass S. 1, which would deem the proposed Keystone XL crude oil pipeline approved more than 6...

Australia Pacific LNG receives first gas at Curtis Island

02/12/2015 The Origin Energy Ltd.-led Australia Pacific LNG (APLNG) has reached a major milestone with first gas arriving at the group’s LNG plant on Curtis I...

TransCanada challenges EPA’s comments on Keystone XL SEIS

02/11/2015 TransCanada Corp. responded to the Feb. 2 comment letter from the US Environmental Protection Agency on the US Department of State’s final suppleme...

PNR cuts capital spending nearly in half

02/11/2015 Pioneer Natural Resources Co. (PNR), Dallas, plans to spend $1.85 billion in 2015 following a fourth quarter in which the company reported a net in...

InterOil wins arbitration over rights dispute with Oil Search

02/11/2015 The International Chamber of Commerce arbitration panel in London has found in favor of InterOil Corp. in its battle with Oil Search Ltd. over pree...

Study finds FLNG scheme ‘viable’ for Pandora field development

02/11/2015 A recent study has found that Cott Oil & Gas Ltd’s plans to use a floating LNG (FLNG) vessel for development of Pandora gas field in the Gulf o...

PACE survey finds 69% support for crude exports to trading partners

02/11/2015 More than two thirds of registered voters responding in a nationwide telephone survey commissioned by Producers for American Crude Exports (PACE) s...

New study finds wide variations in gathering systems’ methane samples

02/11/2015 Samples of methane emissions from 114 natural gas gathering stations and 16 processing plants across 13 states found wide variations in amounts act...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected