By on May 18, 2015

Entrance_OPEC_Headquarter_Vienna

Those hoping for a return to $100 per barrel of oil are in for a long wait, as OPEC says oil will remain below the price point through the 2020s.

A report by the group forecasts oil will trade for around $76/barrel in 2025 under optimistic conditions, The Wall Street Journal reports, with $40/barrel under more dire straits. The forecasts take into account the group’s competitors in the United States coping through low prices amid increased production.

To combat this, the report recommends OPEC return to the production-quota system it ditched in 2011 amid conflict over how much each member state would be allowed to produce. Members are reluctant to go back, preferring to attract new business instead of being tied down by quotas most ignored already. However, the proposal would grant poorer members, like Algeria and Venezuela, the right to produce more oil, and would come into force if OPEC’s share of the global oil market fell below 32 percent, the size of the share it holds now.

The report comes amid worries among the members about their ability to balance their respective budgets with oil money. According to the International Monetary Fund, only Qatar and Kuwait can weather trading at $76/barrel, while most need trading to be as much as $130/barrel for a properly balanced budget.

[Photo credit: Vincent Eisfeld/Wikimedia Commons/CC BY-SA 4.0]

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58 Comments on “OPEC: Oil To Remain Below $100 Per Barrel Through 2020s...”


  • avatar
    210delray

    How does anyone know this?

    I always say the only thing certain about the price of gasoline is that it is always unpredictable.

    The same is true for oil.

    • 0 avatar
      Pch101

      You have to put these things into context. This is not a “forecast,” this is advocacy.

      The question is one of what is being advocated.

      The frack-centric (to coin a word) view would be to say that OPEC is trying to discourage future US fracking and Canadian tar sands production.

      My own view is that this is an effort by some members of OPEC to get the group to coordinate, get its act together and cut production. Contrary to the US-fixated media reports, OPEC production levels are not a function of some grand strategy to hurt the Russians or American frackers, but are the byproduct of those members who either do not think that their production cuts will impact oil prices or else do not trust the other members to not cheat by producing over quota.

      Either way, they see production cuts as taking money out of their own pockets.

      Cartels tend to fail over time because members will cheat. The fact that OPEC members badly need the money to support their one-trick-pony economies doesn’t boost their willingness to cooperate with coordinating supply restrictions. OPEC’s loss of global oil market share since the 1970s has likewise reduced its ability to influence the market.

      Whoever leaked this is trying to put a fire under the backsides of its members who will not cooperate. No amount of media leaking is likely to change this.

      • 0 avatar
        Trichobezoar

        Thanks, that’s some good perspective!

        Now that solar and electric is finally competitive with oil and gas, they know their days are numbered.

        I still made a small short-term investment in oil&gas a few months ago, though. Seemed a safe bet to invest in human stupidity during the price war.
        SUVs for everyone!

  • avatar
    PrincipalDan

    “Those hoping for a return to $100 per barrel of oil are in for a long wait, as OPEC says oil will remain below the price point through the 2020s.”

    YOU GET AN SUV! AND YOU GET AN SUV! AND YOU GET AN SUV!

    • 0 avatar
      fatalexception04

      Ahem…

      It’s more like you get a CUV!! you get a CUV!!

    • 0 avatar
      gtemnykh

      Not to ruffle any eco-feathers, but I would love to see a second coming of the midsize BOF-SUV. Montero comes back (along with the L200 based Montero Sport), 4Runner is stronger than ever, who knows maybe Isuzu reenters the market with a new Trooper and/or Rodeo, Nissan comes to their senses and gives us a serious 4×4 Pathfinder again, Chevy makes a Colorado based Blazer.

      A man can dream.

  • avatar
    jmo

    Do we have a sense of how accurate their predictions have been historically?

    • 0 avatar
      SayHiToYourMom

      This isn’t a prediction, OPEC controls the price of THEIR oil. It’s inelastic to demand if they choose to make it so. The reason that oil is so cheap is because Barack instructed OPEC to make oil cheap to weaken Russians petroeconomy. It’s working.

      • 0 avatar
        philipwitak

        “…reason that oil is so cheap is because…”

        don’t know the price of oil this day but the cost of a gallon of premium gasoline today around my parts of san diego was roughly $4.15

      • 0 avatar
        gtemnykh

        “The reason that oil is so cheap is because Barack instructed OPEC to make oil cheap to weaken Russians petroeconomy. It’s working.”

        This is my theory. We’re calling in a favor to the Saudis et al for our continued involvement in all of their conflicts (Syria, Yemen, etc).

  • avatar
    Hummer

    “Those hoping for a return…”

    Who is so masochistic to want oil above $100 a barrel? If you like paying that much for fuel go buy a 8.1l suburban and strip the fuel injection off and throw a 2 barrel on it.

    • 0 avatar
      Steve Biro

      Those hoping for a return of higher prices might include those who have invested in oil.

      • 0 avatar
        Hummer

        Good point, though on the other hand it would stand to reason lower oil prices would help other investments, possibly with better returns.

        Though I’m quite obviously not an economist or a broker.

        • 0 avatar
          DevilsRotary86

          If you want to look past the bankers, I would also include much of the city of Houston among those who wouldn’t mind seeing $100 per barrel return. And the State of Texas probably wouldn’t mind either. There are more than a few oilmen in Texas who would love to see the price of oil to perk up a little.

          Pop Quiz: Which state produces the most oil in the US?

          http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm

          1: Texas
          1a: Offshore Gulf of Mexico (not really a state but should be noted)
          2: North Dakota
          3: California (!!!!)
          4: Alaska

          Personally, it blew my mind that California outproduced Alaska for 2014.

          • 0 avatar
            indi500fan

            Alaska North Slope is a fraction of the old days.
            They’re at about 25% of their peak production

      • 0 avatar
        tonycd

        Bingo, Biro. I think the Saudis are bluffing they can keep the price low for the same reason they drove it down in the first place: to make fracking so unprofitable it shuts down, propping up the price long-term. In other words, the same reason any monopolist wages a price war.

        I agree with the observers far more knowledgeable than I who’ve speculated that the Saudis know they’re sitting on far less oil at this point than they want anyone to know. Long term, if a low price is to be maintained, I don’t believe they’re the ones who can enforce it. In fact, I don’t think anyone can.

        • 0 avatar
          64andahalf

          I think Tonycd is correct…Saudi Arabia is “talking their book” as they say on Wall Street and trying to stick it to alternative energy firms as well as Iran.

        • 0 avatar
          TW5

          Saudis are driving down the price of oil to drive it back up? Fracking will cease to be profitable when prices rise again?

          Saudi Arabia is telling everyone oil will be cheap so they’ll use it stupidly. They want demand for oil. They want trucking companies to stick with diesel, not switch to natural gas. They want American consumers to stick with pickups. They want China to maintain lax regulations.

          But most importantly they want to kill CAFE by making regulators believe that CAFE will kill the US oil industry and economic growth. Personally, I hope they successfully win a stay of execution of BoF offroaders, but that’s about it.

          • 0 avatar
            thelaine

            It would be awesome if CAFE died

          • 0 avatar
            28-Cars-Later

            End the federal mandate in this case and let the states deal with it if need be.

          • 0 avatar
            Steve Biro

            Saudi Arabia wants the U.S. to back off fracking in the belief that it isn’t needed because the global price of OPEC oil will remain low for the foreseeable future. That would keep oil customers buying most of their oil from OPEC.

            One might think that all OPEC would have to do is back off their own oil production to push prices higher, thereby solving their cash-flow problem. But, as others have written, not all OPEC member nations will honor production caps.

            Saudi Arabia knows this, having learned the hard way. The last time the Saudis cut production they lost substantial market share. It took them a decade or more to win it back even after they increased production again.

            So, to sum up: OPEC wants the U.S. to cut back on oil production. But they don’t want to cut back on thier own production.

            And to the poster complaining about gasoline prices in excess of $4.00 a gallon in the San Diego area: That’s mostly state and local taxes at work.

          • 0 avatar
            Vulpine

            “And to the poster complaining about gasoline prices in excess of $4.00 a gallon in the San Diego area: That’s mostly state and local taxes at work.”

            Except that those fuel prices aren’t only in the San Diego area–or even only in California. I live in a relatively rural town in the mid-Atlantic region and have pretty much those same numbers–in a sales-tax-free state.

          • 0 avatar
            mr.cranky

            @thelaine- It would be awesome if Libertarianism was grounded in reality.

          • 0 avatar
            28-Cars-Later

            It would be awesome if you substantiated your comment a bit more.

          • 0 avatar
            Pch101

            “And to the poster complaining about gasoline prices in excess of $4.00 a gallon in the San Diego area: That’s mostly state and local taxes at work.”

            No, it’s because California has unique fuel formulations that limit the number of refineries that produce fuel for the state. Add maintenance closures or an explosion to the mix, and fuel prices rise:

            http://www.latimes.com/business/la-fi-gas-prices-20150430-story.html

            The US would have lower fuel prices if this sort of thing was standardized.

          • 0 avatar
            thelaine

            Mr. Cranky,

            Whatever our differences, at least we have crankiness in common. Anyway, I just think consumers should decide where mileage fits among the characteristics that are important to them as car buyers.

        • 0 avatar
          Lorenzo

          Well, the report doesn’t mention sovereign wealth funds that can make up for oil revenue losses. Arab oil producing countries have something like $2.4 trillion dollars in assets, with the Saudis owning the biggest chunk of that in several funds.

          The Saudis can cover revenue shortfalls for a LONG time, but other OPEC members like Venezuela, Algeria and Nigeria would be in trouble much sooner. It makes you wonder if the Saudis are also playing a power game within OPEC.

          • 0 avatar
            JimC2

            “It makes you wonder if the Saudis are also playing a power game within OPEC.”

            I don’t wonder about that at all ;)

        • 0 avatar
          WheelMcCoy

          @tonycd – “I think the Saudis are bluffing they can keep the price low for the same reason they drove it down in the first place: to make fracking so unprofitable it shuts down”

          My thoughts exactly. At the same time, they renew America’s appetite for SUVs and make us complacent at the pump.

          But this time we’re on to them. Right guys? RIGHT??!! uh, guys?

        • 0 avatar
          redav

          There is zero doubt that the Saudis aren’t telling the truth with their reserves. However, I don’t think there’s any way to tell whether it’s low or high.

          • 0 avatar
            28-Cars-Later

            From what I have read the technical information is tightly controlled by the nationalized Saudi Aramco just for such a reason.

    • 0 avatar
      indi500fan

      An 8.1 with a 2 bbl would really SUCK, lol

    • 0 avatar
      87 Morgan

      Why a 2bbl? Man up son! dual Quads all. day. long. Keep speaking unfriendly I’ll take the hood off and go with a tunnel ram.

  • avatar
    Vulpine

    I’ll believe that when I see it.

    Meanwhile, gas prices have risen another dime over last week’s. At one station, it is now over $3/gallon.

    • 0 avatar
      Lorenzo

      The cheapest in San Diego today is $3.63 for regular. If you need premium for your V8, sorry dude. Due to the California special blend, the statewide average for regular is $3.82 (source: gasbuddy).

  • avatar
    skor

    Yup, OPEC oil will remain cheap into the 2020s…..or until someone drives a truck bomb into the Saudi royal palace….whichever occurs first.

    • 0 avatar
      28-Cars-Later

      …or there is a succession crisis in Riyadh.

    • 0 avatar
      thornmark

      >>Yup, OPEC oil will remain cheap into the 2020s…..or until someone drives a truck bomb into the Saudi royal palace….whichever occurs first.<<

      Cheap? OPEC was formed and exists to keep oil prices artificially high. That's what a cartel does.

      Fracking exists because OPEC was greedy and didn't think the US could make fracking work.

      Again, OPEC was formed and exists to keep oil prices artificially high but now fracking keeps a lid on what they can do, reducing their power unless they and Russia can shut fracking down. In Europe they have played a powerful role in stopping fracking there.

  • avatar
    readallover

    Would this be from the same group of genius Ivy-Leaguers who told us about `peak oil` and all the cheap oil was gone?

    • 0 avatar
      Lorenzo

      Nope. This is a report from OPEC itself, advising its members. They could be as wrong as anyone, from the Ivy League to Goldman Sachs, but they’re in the middle of the business, so I’ll assume they know something.

    • 0 avatar
      tonycd

      I’m not an Ivy Leaguer nor an enthusiast of same, but I firmly believe Peak Oil was/is correct.

      Earth is a rock of finite size. There’s a finite amount of oil under its surface, and it was made very very very slowly. We’re using it up very, very quickly. The very fact that we’re now going to extremes like underground explosions to pump pockets of oil out (also known as fracking) tells you that we’re running out of the large, easy and obvious pools of the stuff. It doesn’t take a genius, Ivy or otherwise, to get the message from that.

      And by the way, if you’re the type of creature who depends on drinking water or eating food produced from crops that need watering, fracking is a very dangerous thing. The fact that the Saudis find it an economic rival doesn’t make it a good idea for us in other ways.

  • avatar
    craiger

    Massive amounts of oil have been discovered in the past 10 years as exploration techniques have improved. Production technology has increased even more dramatically. Bottom line there’s a lot of extractable oil in the world.

    • 0 avatar
      ihatetrees

      Excellent point. Long term, the trend in oil prices is probably downward.
      But, unless I were hedging, I would never make a large bet in oil futures. Black Swan events can rock the oil market much too quickly. Leave it to the professionals…
      THAT said, the current oil price of about $60/barrel is kinda amazing given all the chaos in the middle east with Iran, the Saudis & Yemen, ISIS, Syria. Weird times…

    • 0 avatar
      redav

      Yes, we’ve discovered more oil, but I think it’s more important that we’ve learned how to extract oil that we knew about but couldn’t previously get.

  • avatar
    fordcomm

    At the risk of sounding like the grammar police, isn’t the use of the word “point” in the phrase “price point” kinda, well, pointless? I’m not convinced that it really adds much meaning. Pet peeve, I guess.

    • 0 avatar
      WheelMcCoy

      @fordcomm – “At the risk of sounding like the grammar police, isn’t the use of the word “point” in the phrase “price point” kinda, well, pointless? ”

      You are correct… price point, a common turn of phrase, is redundant. Price is sufficient. And I don’t see us as the grammar police. Since TTAC (historically) can’t afford a full-time editor, crowd-sourcing grammar is a very real alternative. As long as we stay nice about it.

      • 0 avatar
        JimC2

        While we’re on the topic, another common–but pointless–turn of phrase is “traveling at a high rate of speed.” It’s just “traveling at high speed” or “going fast.”

        High rate of speed means rapid acceleration; high speed is simply high speed. People who use the phrase “traveling at a high rate of speed” sound like some illiterate hick sheriff who ironically throws around extra words trying to sound edumacated while lecturing you about the dangers of zipping through his whistle stop kingdom.

        Come on, B&B. Those hick sheriffs hate auto enthusiasts like you and me. For the sake of your own self respect, don’t use this dumb phrase!!

        Rant over.

    • 0 avatar
      redav

      I interpret “price point” a little differently.

      To me, it’s the same as saying “target price.” It’s a reference value, not a real value while “price” is the actual transaction value. Thus, saying that the price will stay below a price point does make sense to me, although I freely admit it to not be the best phrasing.

  • avatar
    210delray

    Another redundant phrase that’s de rigeur these days is “on the ground.”

  • avatar
    RHD

    What was OPEC predicting for the next decade or so 1n 1972?

  • avatar
    DearS

    The U.S. consumes more oil than India and China combined I believe.

    • 0 avatar
      Lorenzo

      The US uses 18 million barrels per day, out of 93 million barrels total for the world. Yes, it’s more than India and China combined, but the percentage of 19% is less than it has ever been. We WERE using almost 22 MBPD, but electric generation and much of industry has switched to natural gas.

      We’ve been the world’s largest user of oil since the 1920s, but also the world’s largest producer. In 1940, we used half the world’s production, but produced 2/3 of the world’s oil. With fracking and new technology, we can be self sufficient again, leaving more oil produced elsewhere for the rest of the world, and possibly have enough excess to export.

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