It's the best of both worlds for OPEC as cheap oil prices increase demand while high-cost rival oil producers are forced to close down wells according to an OPEC study released Oct. 12. And it was all planned.
The strategy by the Organization of the Petroleum Exporting Countries (OPEC) of letting prices fall has been more successful than predicted according to new report. The study (104-page pdf) shows that demand will increase due to the lowest oil prices in 6.5 years.
At the same time, the OPEC strategy has proven successful on the supply end of the equation as high-cost drilling wells in the United States and elsewhere are forced to shut down.
"OPEC forecast on (Oct. 12) that demand for its oil in 2016 would be much higher than previously thought as its strategy of letting prices fall hits U.S. shale oil and other rival supplies, reducing a global surplus," writes Alex Lawler for Reuters.
OPEC's forecast, if realized, would be a further indication its strategy is working. The group last year refused to prop up prices and instead raised output, seeking to recover market share taken by higher-cost rival production.
Supply outside OPEC is expected to decline by 130,000 bpd in 2016, the report said, as output falls in the United States, the former Soviet Union, Africa, the Middle East and much of Europe. Last month, OPEC predicted growth of 160,000 bpd.
Fracking in the United States resulted in "the biggest source of non-OPEC supply growth in recent years," writes Lawler. Drilling has been reduced "and tighter credit conditions have reduced companies' access to funds."
In an earlier piece in The New York Times, energy correspondent Clifford Krauss describes the various factors behind the historically low prices of oil, among them:
What happened to OPEC?
A central factor in the sharp price drops, analysts say, is the continuing unwillingness of OPEC, a cartel of oil producers, to intervene to stabilize markets that are widely viewed as oversupplied. Prices of OPEC’s benchmark crude oil have fallen about 50 percent since the organization declined to cut production at a 2014 meeting in Vienna.
"As of early 2015, the International Energy Agency Oil Market Report forecast average demand for the year of more than 93 million barrels of oil and liquid fuels per day worldwide," according to the IEA.
FULL STORY: OPEC sees more demand for its crude in 2016 as cheap oil hits rivals
OPEC Sees U.S. Motorists as Their Ally
An IEA report suggests that oil prices have bottomed-out, are now on the rebound, and that demand for OPEC's oil will start rising next year. OPEC predicts that U.S. oil consumption will increase after years of decline, thanks to U.S. motorists.
OPEC Plus Decision to Reduce Oil Output Could Lead to Global Recession
A decision earlier this month by a group of the world's largest oil exporters to drastically reduce oil production to stem the decline in oil prices could be a ‘tipping point’ for a global recession, says the International Energy Agency.
Just What the Planet Needs: More Oil Production
A surge of oil from four countries—Norway, Guyana, Canada and Brazil—will more than compensate for slowing growth of U.S. oil production. The new sources might cause oil prices to dip to $50 a barrel and slow the transition to electric vehicles.
Maui's Vacation Rental Debate Turns Ugly
Verbal attacks, misinformation campaigns and fistfights plague a high-stakes debate to convert thousands of vacation rentals into long-term housing.
Planetizen Federal Action Tracker
A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.
In Urban Planning, AI Prompting Could be the New Design Thinking
Creativity has long been key to great urban design. What if we see AI as our new creative partner?
Cal Fire Chatbot Fails to Answer Basic Questions
An AI chatbot designed to provide information about wildfires can’t answer questions about evacuation orders, among other problems.
What Happens if Trump Kills Section 8?
The Trump admin aims to slash federal rental aid by nearly half and shift distribution to states. Experts warn this could spike homelessness and destabilize communities nationwide.
Sean Duffy Targets Rainbow Crosswalks in Road Safety Efforts
Despite evidence that colorful crosswalks actually improve intersection safety — and the lack of almost any crosswalks at all on the nation’s most dangerous arterial roads — U.S. Transportation Secretary Duffy is calling on states to remove them.
Urban Design for Planners 1: Software Tools
This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.
Planning for Universal Design
Learn the tools for implementing Universal Design in planning regulations.
Appalachian Highlands Housing Partners
Gallatin County Department of Planning & Community Development
Heyer Gruel & Associates PA
Mpact (founded as Rail~Volution)
City of Camden Redevelopment Agency
City of Astoria
City of Portland
City of Laramie