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OPEC Leadership

OPEC Leadership

Underpinning Saudi Arabia’s dominant role in the oil cartel is its massive infrastructure. No other producer in the cartel approaches the Saudi production capacity, which effectively gives Saudi Arabia the ability to manipulate the global crude oil markets (see Figure 3 for comparison of spare capacity). As mentioned in the introduction to this section, the Kingdom has gone to great lengths to portray its role as market stabilizer rather than cartel leader. Such an interpretation is euphemistic, as the objective of Saudi policy, as of any cartel, is to manipulate prices in the cartel’s favour and throttle competition. The cartel’s objectives have, at times, prompted its leading producer to shock markets or increase oil production to offset price increases that might adversely affect longer term supply .

The intricacies of Saudi production policy are discussed in the section of the Saudi response to the US light tight oil (LTO) surge.

Figure 4 shows that OPEC production constitutes 39.4% of daily world oil supply. Saudi Arabia is the largest producer in OPEC. Furthermore, Iran has been under sanction, Iraq has not been part of the quota system, Libya has experienced severe outages in the post-revolution period, Nigeria has been a victim of sabotage and Venezuela has experienced fiscal problems. This has effectively left the UAE, Kuwait and Saudi Arabia to play the dominant role in the cartel, with Saudi Arabia in the lead.

OPEC spare capacity
Figure 3. OPEC spare capacity. Click to enlarge.
OPEC output.
Figure 4. OPEC output. Click to enlarge.

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