Violent protests in Venezuela and resurgent militancy in Libya provide troubling reminders about the wretched method of limiting oil supply. Most members of the Organization of Petroleum Exporting Countries restrain production by closing valves or suspending drilling and allowing flow to abate naturally. In a few restive OPEC nations, control happens too readily through sudden violence.
Libya, in fact, is relatively new to OPEC's subgroup of producers where anything might happen at any moment, which since 2002 has included Nigeria and Iraq as well as Venezuela. Libya achieved this status by falling into chaos after the outbreak of civil war in 2011. Because of their troubles, Libya and Venezuela escaped quotas when OPEC reinstated supply management on Jan. 1.
Venezuelan protests
Venezuela is beset by escalating protests at presstime. Tired of deprivation and crime, marchers seek the ouster of President Nicolas Maduro, who has extended the socialist despoliation of Venezuela's economy begun in 1999 by his predecessor, the late Hugo Chavez. True to form, Maduro is splintering Venezuela's legal framework to keep power. Opposition anger flared after the judiciary, which Maduro controls, assumed powers of the more-independent legislature. The court reversed itself under international pressure, but the political damage was done. At least six people have been killed during the protests, including a teenaged passer-by shot by Maduro supporters as huge crowds from both sides of the conflict marched in Caracas on Apr. 19.
Venezuelan oil production has been slightly above 2 million b/d recently, below the country's implicit OPEC quota of 2.7 million b/d.
Libyan oil production fluctuates with the sporadic operation of pipelines and ports. The government in Tripoli has support of the United Nations but competition from power centers elsewhere in the country. Expectations for growth in oil exports have given way to contests among warlords for control of terminals. Now factional violence is erupting in the country's south. The humanitarian crisis worsens as Libyans fleeing deplorable conditions in their country risk treacherous crossings of the Mediterranean in flimsy rafts.
Libyan production in March was about 600,000 b/d, down 1 million b/d from its level before the civil war.
Compared with Venezuela and Libya, Iraq and Nigeria are bright spots.
Despite its security problems, Iraq has increased oil production, which reached 4.4 million b/d in March. Government forces, meanwhile, have recaptured territory from Islamic State militants in Ninevah, al-Anbar, Salahuddin, and Diyala provinces and reclaimed the eastern half of Mosul. Problems remain, of course. Having lost ground, the Islamic State will revert to insurgent terrorism. And Prime Minister Haider al-Abadi has lost a measure of popular support as political infighting blocks reforms addressing corruption. Still, tactical victories over the Islamic State raise confidence in the Iraqi army and should move Iraq closer to much-needed but elusive reunification.
Trying to end economically devastating attacks on oil facilities, the Nigerian government recently changed strategy against the militant group Niger Delta Avengers. Instead of responding to vandalism with armed confrontation, the government is negotiating with activist leaders and boosting local development. Attacks are reported to have subsided.
Nigerian oil production remains suppressed, nevertheless, averaging only 1.3 million b/d in March. A government target of 2.5 million b/d by 2020 seems ambitious. But pacification of the oil fields, if it lasts, at least will allow output to grow.
Potential for loss
Production subject to disruption has been part of the OPEC supply spectrum for so long that the potential for sudden loss tends to be forgotten. The tendency is especially strong now, with promptly available new production no longer confined to the exporters' group. Yet production from Venezuela, Libya, Iraq, and Nigeria remains fragile.
Vulnerability to costly surprise is still a disturbing reality of the oil business. More regrettable, however, is mass poverty in countries with rich endowments of oil and gas. Life should be better than it is in those places. It should be much better. If it were, oil supply wouldn't be so precarious.