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.
Trump Administration Could Effectively End Housing Voucher Program
Federal officials are eyeing major cuts to the Section 8 program that helps millions of low-income households pay rent.
Planetizen Federal Action Tracker
A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.
Canada vs. Kamala: Whose Liberal Housing Platform Comes Out on Top?
As Canada votes for a new Prime Minister, what can America learn from the leading liberal candidate of its neighbor to the north?
LA to Replace Inglewood Light Rail Project With Bus Shuttles
LA Metro says the change is in response to community engagement and that the new design will be ready before the 2028 Olympic Games.
Paris Voters Approve More Car-Free Streets
Paris Mayor Anne Hidalgo says the city will develop a plan to close 500 streets to car traffic and add new bike and pedestrian infrastructure after a referendum on the proposal passed with 66 percent of the vote.
Making Mobility More Inclusive
A new study highlights the challenges people with disabilities continue to face in navigating urban spaces.
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.
Heyer Gruel & Associates PA
Ada County Highway District
Institute for Housing and Urban Development Studies (IHS)
City of Grandview
Harvard GSD Executive Education
Toledo-Lucas County Plan Commissions
Salt Lake City
NYU Wagner Graduate School of Public Service