OPEC and the structural changes in the oil market: The outlook after the counter-revolution

Abstract

The two oil price revolutions of the 1970s have been followed by the counter-revolution of 1980–1983. Events in that period have changed the shape of the oil industry as effectively as the oil price shocks of the 1970s. In the aftermath of the counter-revolution, there are once again uncertainties in the structure of demand, supply, and price. The oil market remains nervous as to whether the OPEC nations can continue to restrain supplies; spot prices jump up and down in ways that do not necessarily relate to the underlying market forces; contracts and investment decisions are in many cases delayed until a clearer picture of market trends can emerge. The purpose of this paper is to identify a number of major parameters that are likely to affect the emerging shape of the oil market and to consider the role and importance of OPEC policies as a subset of these developments. Furthermore, this paper attempts to present a scenario of OPEC production and export policies as well as what the likely path of oil prices may be during the remainder of this decade.