OPEC Is a Saudi Stick
On 27 November, OPEC met in Vienna and, surprisingly, decided against cutting production. You’re enjoying the lower gas prices. Libya and Venezuela are facing catastrophe. There is no economic rationale to explain this decision. Since no one ever acts against their own interests, there must be an explanation based in something other than economics.
It seems clear to me that Saudi Arabia is using ever-lower oil prices to punish fellow OPEC member Iran and non-member Russia for their support of Bashar al-Assad. There’s no doubt this will be effective, until it isn’t. If the Saudis go too far in their dominance of their OPEC partners, there remains little incentive to stay in the cartel. Libya and Venezuela probably can’t survive much longer with such low prices. Iran will only be pushed so far. The U.S., acting on economic interests, is competing with the Saudis and driving prices ever lower. OPEC seems irrelevant in a world where non-cartel producers matter and OPEC is a Saudi foreign policy tool.