OPEC Production Research Articles

OPEC production capacity: the need for expansion

OPEC production capacity: the need for expansion

The united states naval blockade of Iraq: A foreign policy and international law analysis

The current Persian Gulf crisis may signal a new period in human history in which the United Nations is viewed as the forum of first resort for the resolution of international harms and disputes. This is particularly striking since the Security Council, because of east-west divisions, has been unable to act in a collective manner to addresses serious international breaches of the peace. This two part essay deals with the events leading up to the Iraqi invasion of Kuwait, the step-by-step reaction by the U.S. Government, the imposition of the U.S. Navy blockade of Kuwaiti shipping, and the legal justification for the introduction of forces. The reader is left to decide whether the Rule of Law and Charter ideals of collective security, are the real victors in the current conflict. Part 1 of the essay examines the detailed economic and political causes for the Iraqi invasion. Even though some commentators have characterized Saddam Hussein's entry into Kuwait as “naked aggression” which was driven by Saddam Hussein's hamartia to become the new Nasser, OPEC production disputes, allegations of excessive Kuwaiti pumping of the Rumalia oil field (straddles both countries), the need for an Iraqi coastline, and large Iraqi debt to Kuwait are seen as “rational” reasons for the invasion. A historical examination of the Iran-Iraq conflict is grafted into part one to assist the reader in appreciating the fact that belligerent conduct is viewed in Iraq as a normative mode of conflict resolution and that in the context of all current and future military and diplomatic interchanges, the proven bellicosity of Iraq should figure prominently in the approaches which are taken. The U.S. military presence in the Persian Gulf must be viewed in the context of the U.S.'s diplomatic and economic interests in the region. The essay concludes that the actions of the United States in the first forty days after the Iraqi invasion were masterful because of the skilled use of the U.N. security council (to build a broad political base) as well as the introduction of limited force (imposition of a naval blockade) to signal to Saddam Hussein that the international community was serious in its resolve. The shooting which is taking place is most unfortunate; but U.S. efforts were properly tailored to keep the world coalition intact and prevent a shooting war. Until approximately 3 weeks into the actual conflict, the level of anti-U.S. rhetoric was noticeably small- a triumph for U.S. foreign policy makers in forming a world-wide consensus and maintaining it and a triumph for international respect for law. The final portion of Part 1 deals with the history of blockades before and after the 1945 U.N. Charter. Blockade actions have been used since the Middle Ages but the 1856 Pact of Paris and the 1909 Declaration of London are the modern sources for the Law of Blockade. Becuase of the sheer intensity of conflict in the First and Second World Wars, the normative rules contained in the two written sources of law fell into disuse. Even so, most of the substantive provisions from the 19th and early 20th century doctrines are incorporated into contemporary law and policy. Commander Rosen argues strenuously for a modernization of the international conventions to codify the rules of blockade since, given the utter destructiveness of modern warfare, blockades remain a relatively benign use of force in those situations in which use of force is legally justified. But, however laudable the U.N. Charter ideals are to sharply restrict the use of force to exceptionally limited circumstances and make state aggression illegal, situations will arise in which use of force will be necessary to respond to illegal aggression. Resurrection of the old concept of pacific blockade (similar to the naval action taken in connection with the Cuban Missile Crisis) is urged because unanimity in the U.N. is transitory and nations, particularly superpowers, need the legal flexibility to react to illegal aggression with limited uses of force--below the threshold uses of force authorized by the U.N. Charter.

OPEC production quotas and their application to non-OPEC countries

OPEC has employed production or supply quotas on various occasions since March 1982 in an effort to control oil prices. No explicit formula has been used to allocate quotas among members. Nevertheless, an implicit formula may be derived from OPEC's observed behaviour. The principal elements in the formula so derived are each individual member's oil production capacity and (merchandise) imports per capita. When an effort is made to extend this implicit formula to cover selected non-OPEC oil exporters, the results are unrealistic in terms of political acceptability. Therefore prospects for cooperative production restraint between OPEC and non-OPEC have been, and remain, extremely slim.

A small forecasting model of the world oil market

An annual, small-scale econometric model of the world oil market was developed to analyze oil market conditions and oil prices for the period 1986–1991. The model determines the oil price by a market-clearing condition, given world economic activity and the strategic supply behavior of the OPEC core countries. The effects of OPEC production cut in 1987 upon oil prices are evaluated, and alternative oil price profiles are provided. A simulation experiment suggests that if the OPEC core is pressed to defend the OPEC share in oil supply, then wide price swings may become inevitable.

The Reserve-Production Ratio

A good concise examination of the significance of the reserve production (R/P) ratio for the future availability of oil can be found in a short paper by Edward W. Erickson in the Energy Journal (1985). He notes that the worldwide R/P ratio is 35, but this ratio is not uniform across the world. For the three core countries of the Gulf (Saudi Arabia, Kuwait, and the United Arab Emirates) it is 100. For the rest of the world it is 25, although according to my calculations, for the world outside OPEC and the communist areas it may be close to 18. Furthermore, with the fall in OPEC production that has taken place over the past few years and the rise in production outside of OPEC, about half of the world oil output is now generated in areas where the aggregate R/P ratio is less than 20.

Geopolitical Implications of Middle East Oil

A partir de l'etude de la repartition des reserves en hydrocarbures dans le monde et du marche petrolier aux Etats-Unis en relation avec les tensions entre les pays du Moyen-Orient et les Etats-Unis, l'auteur montre que les Etats-Unis vont dependre de plus en plus des pays producteurs de petrole s'ils n'adoptent pas de politique offensive en matiere d'exploration et d'exploitation des ressources petrolieres. Une nouvelle crise se prepare

Oil supply and economic development strategy: A dynamic planning approach

Most oligopolistic models of the oil market begin with the assumption of rising supply curves for oil. Lack of convincing evidence that high oil prices are being maintained by oligopolistic action has raised the possibility of competitive behavior in the oil market and therefore of a backward bending supply curve. This paper presents numerical solutions of a linear dynamic planning model of an oil exporting country with a development strategy which consists of utilizing oil revenues for building an export sector to replace oil. To make a stronger case a high absorber, Algeria, is used as an example. The numerical results are consistent with the hypothesis that there may well be good economic reasons to restrict supply of oil in response to increased prices. Three important characteristics of the model which produce this result are (a) diminishing marginal utility of consumption, (b) absorptive capacity, and (c) imperfect capital markets. A ‘perverse’ supply behavior is found consistent with optimal allocation of oil resources when a price increase is expected to last for a long time. The effects of temporary price changes which can, for example, result from temporary supply shocks or demand changes during the business cycle are also studied. It is shown that in response to such short term price changes competitive behavior is ‘normal’, i.e., supply varies in the same direction as the price. This implies that reductions in OPEC production which have taken place during the recent market downturns cannot be taken as evidence of cartel coordination, as they usually are, since they are also consistent with price-taking behavior.

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

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.

LOWER OIL PRICES AND THE UK ECONOMY

Demand for oil remains weak, and OPEC production is running ahead of quota in most member countries, so the possibility that oil prices could fall in the near future has increased. In this Forecast Release we examine the medium‐term impact on the UK economy of lower oil prices. We find that, if the government does not intervene to protect the exchange rate, there is an immediate stimulus to output growth. The inflation rate, though, is 1–2 percentage points higher after three years.

Allocation of OPEC production: A foreign exchange requirements approach

Allocation of OPEC production: A foreign exchange requirements approach

Past, Present and Future Trends in Oil Reserves and OPEC Production Capacity

The recent dramatic fall in oil demand has been parallelled by significant changes in the level of oil reserves, reserve/production ratios and the utilisation of OPEC production capacity. This paper reviews recent production trends worldwide, analyses the latest reserve developments and the relationship between OPEC capacity utilisation and market pressure and assesses the longer-term prospects for reserves.

Economic and political risks of world oil markets

The present easing on the world oil market could foster the illusion that energy problems are now resolved. During 1981 various oil-producing countries (OPEC and non-OPEC alike) found they had to cut their prices. OPEC production has had to be reduced by about one-third from the 1979 level of 31 mbd1. Last September’s OPEC output of 20 mbd was the lowest monthly figure for 12 years and has by year-end 1981 recovered to just 22 mbd. “The OPEC is no longer able to dictate prices; there is more oil than the market can take.” These are typical recent comments, but they reflect too short-term and superficial a view. The real issue is the question whether energy supplies are secure in thelong term, too, and whether energy itself presents a danger for general economic and political developments.

OPEC PRODUCTION ‐ RESERVE BEHAVIOUR A STATISTICAL APPROACH

OPEC ReviewVolume 5, Issue 1 p. 60-108 OPEC PRODUCTION - RESERVE BEHAVIOUR A STATISTICAL APPROACH First published: March 1981 https://doi.org/10.1111/j.1468-0076.1981.tb00539.xCitations: 7Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume5, Issue1March 1981Pages 60-108 RelatedInformation

A Bushel of Wheat for a Barrel of Oil: Can We Offset OPEC's Gain With a Grain Cartel

Among the proposals for retaliating against OPEC prices and production cuts is a grain cartel that will match a bushel of wheat for a barrel of oil. The concept is not valid, however, because the grain market does not have the particular economic conditions which allow OPEC to succeed. Cartels are able to charge higher prices than a competitive industry, but the profit-maximizing rate of output will be less. A US grain cartel would be ineffective because a rise in prices would only result in increased world production by non-cartel members. A food cartel would also harm less-developed countries and would increase famine. 19 references, 5 tables. (DCK)

The role of speculation in the oil price ratchet process

The world price of oil could be as low as extraction costs or so high that alternative energy resources would displace oil on a massive scale. The actual price depends on the interactive policies of exporting and importing countries. In fact, the world oil price has increased sharply three times since 1970 and exhibited relative stability between the sharp upward movements; this is what is meant by the upward price ratchet. This paper emphasizes the role of inventory speculation in driving oil prices upward. Inventory speculation is also responsible for much of the variability in OPEC production. The oil importing countries could hold oil prices down by invoking stand-by measures to temporarily increase production, reduce consumption and mitigate the procyclical effects of inventory speculation. The timing of intervention into the market mechanism is critical. Elimination of stand-by measures after the market has stabilized is also important. Policies designed to reduce consumption in the long-run may cause the price to be ratcheted to even higher levels in the near future and should be rethought in light of the ratchet process.

OPEC RESERVES, PRODUCTION AND EXPORTS : A LONG‐RANGE VIEW

OPEC ReviewVolume 1, Issue 4 p. 13-19 OPEC RESERVES, PRODUCTION AND EXPORTS : A LONG-RANGE VIEW A. Al-Janabi, A. Al-Janabi Senior Economic Analyst OPEC Economics DepartmentSearch for more papers by this author A. Al-Janabi, A. Al-Janabi Senior Economic Analyst OPEC Economics DepartmentSearch for more papers by this author First published: April 1977 https://doi.org/10.1111/j.1468-0076.1977.tb00149.xCitations: 1AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume1, Issue4April 1977Pages 13-19 RelatedInformation

Future OPEC price and production strategies as affected by its capacity to absorb oil revenues

Future OPEC price and production strategies as affected by its capacity to absorb oil revenues

A dynamic model of OPEC trade and production

A dynamic simulation model is presented of the world energy market, covering the period 1974–1995. It is used to assess and rank six possible price or output policies that OPEC may adopt with respect to oil exports, given a range of assumptions relating to such important variables as the rate of growth of domestic absorption of oil revenues within OPEC, the rate of capacity expansion for oil production, the responsiveness of investment in alternative sources of energy to changes in oil prices, and the rate of growth of world demand for energy. Furthermore, an illustrative analysis is given of possible conflict situations within OPEC, and their impact on the choice of price or output policy is discussed. The main conclusion drawn is that the supply response of alternative energy sources to OPEC oil will be the key to predicting whether oil prices will go up or down.