The global oil market and its leaders

2018 had seen oil prices buffeted by bullish and bearish influences with oil prices seesawing from $66.87 a barrel on the first day of the year, to a high of $87 in early November then slumping before Christmas to a disappointing $54.10.

Who gets what?

But there were other forces at play that significantly influenced the price of oil in 2018. These forces were personalities whose decisions, utterances and in some cases farsightedness impacted directly on oil prices and the global oil market and may equally do so in 2019 as well.

The Founding of OPEC

The Organisation of the Petroleum Exporting Countries (OPEC) is an intergovernmental organisation of 15 nations founded in 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia and Venezuela) and headquartered since 1965 in Vienna, Austria. OPEC accounts for an estimated 42.6% of global oil production and 71.8% of the world’s proven oil reserves giving it a major influence on the global oil market and prices that were previously controlled by the so-called “Seven Sisters” (Exxon, Mobil, Chevron, Gulf Oil, Texaco, BP & Shell) cartel of the world’s largest multinational oil companies.

Sustainability is the practice of maintaining processes of productivity indefinitely—natural or human made—by replacing resources used with resources of equal or greater value without degrading or endangering natural biotic systems. Sustainable development binds together concern for the natural systems with the social, political, and economic challenges faced by humanity.

The three pillars of sustainable development are the economy, energy and the environment.  Interaction between these three pillars sustains a growing global economy which provides employment for millions of people and a decent standard of living in a healthy environment and the energy means that help enhance the quality of our life and mobility. The global economy has to be in a continuous state of healthy growth if it is to be able to feed 7.5 billion of people.

Since the withdrawal of the United States from the Nuclear Deal with Iran and its decision to re-introduce sanctions on Iran particularly Iranian oil exports, analysts and experts alike have been competing with each other in their projections about how much Iran will lose from its oil exports as a result of the sanctions. Their projections have ranged from 500,000 barrels a day (b/d) to 1.5 million barrels a day (mbd) out of estimated Iranian oil exports of 2.125 mbd.

Most of these projections were, in my opinion, based on faulty assumptions and lack of understanding of the dynamics of the global oil market and virtually bordering on daydreaming and wishful thinking.