Baku, Azerbaijan, Apr. 21
By Elena Kosolapova - Trend:
A deal on the oil production freeze even if it was reached at the meeting of oil producing countries in Doha, would not have worked, professor of economics in the US National Defense University, Adjunct Professor in Georgetown University and energy analyst Paul J. Sullivan believes.
"If those oil producers who were there, froze their production the price of oil would have gone up. This would have prompted those oil producers who were not there to produce more at the higher price," Sullivan told Trend in an email.
The expert noted that the countries producing a majority of the oil in the world were not at the table in Doha even if most of the real large producers were. For example, the US which is the largest oil producer, according to BP data, and Iran which is planning to pump up oil production, did not take part in the meeting.
Moreover, Sullivan noted that Iraq and others may have said they were going to freeze oil production, but as soon as they saw the prices going up (if they would have), they and others would have jumped into the market and immediately cut into whatever deal there may have been on oil production.
The analyst does not expect OPEC to agree to freeze oil production at the next meetings in 2016.
"Freezing oil production is likely impossible in this political and economic environment. Many of the OPEC countries are facing severe budget stress - and even economic distress for some," Sullivan said.
Sullivan noted that without nearly pure monopoly power and an ability to keep the other players in the near monopoly in line no freeze agreement could work.
OPEC is a lot weaker than it was decades ago and the more oil producers there are the weaker OPEC gets, according to expert.
The meeting of oil producing countries in Doha on the oil production freeze on Apr. 17 ended without reaching an agreement. In total, representatives of 17 countries took part in the meeting.
Edited by SI
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