Assessing OPEC’s Performance in Global Energy

DOIhttp://doi.org/10.1111/j.1758-5899.2011.00122.x
AuthorJan Martin Witte,Andreas Goldthau
Date01 September 2011
Published date01 September 2011
Assessing OPEC’s Performance in
Global Energy
Andreas Goldthau
Central European University
Jan Martin Witte
Global Public Policy Institute
Abstract
This article examines OPEC’s performance in regulating output and prices in the global oil market during its 50 years
of existence. In addition, it discusses key trends that are likely to determine OPEC’s effectiveness in the years ahead,
particularly climate change policies. We f‌ind that OPEC’s ability to control the oil market singlehandedly has
historically been limited, as a result of both internal collective action problems and external factors such as the rise of
new producers. Furthermore, we f‌ind that climate change policies may negatively impact long-term planning security
for investment and hence OPEC’s ability to target price bands and smooth the oil market. We argue that OPEC will
need to become more proactive in low-carbon policies to remain part of the decision making on future energy
demand patterns that affects its main export product. We also submit that OPEC has a great role to play in f‌ighting
price volatility, a key concern for both producers and consumers, and that the best platform for enhanced efforts in
this regard would probably be the International Energy Forum.
Policy Implications
Much of the debate on OPEC is one-sided: the organization is mostly characterized as a cartel extracting monopoly
rents. Instead, emphasis should be put on OPEC’s potential to help in managing oil market risks.
From the perspective of global energy governance, a strong OPEC may be a very desirable partner for oil consumers
in order to combat price volatility, a key concern for both oil exporters and importers.
Coordination between producers and consumers would also stimulate the energy transition towards a low-carbon
future. The International Energy Forum may be the most appropriate for this.
OPEC needs to seriously join the world’s efforts towards a low-carbon energy transition in order to hedge its inter-
ests effectively and voice claims legitimately for burden sharing in the inevitable adjustment process that OPEC
members will undergo.
Since its creation in 1960, the Organization of Oil Export-
ing Countries (OPEC) has been widely regarded as the
linchpin of the global oil market. Given the signif‌icance
of oil to economic growth and development, the self-
proclaimed cartel of oil-producing states is widely
viewed as a key player in global energy. OPEC’s instru-
ments to push oil output levels upwards or downwards
and hence inf‌luence the price of the ‘black gold’ are
widely perceived as among the most powerful and effec-
tive mechanisms governing the oil market. Yet, what is
OPEC’s record in using its supply-side ‘toolbox’, and
what does its historical performance suggest for the
future? Is the oil cartel indeed a force to be reckoned
with in governing global oil in the 21st century, and in
global energy governance in general?
Drawing on lessons from the past, this article focuses
on the future of OPEC, and the factors that are likely to
determine its ability to inf‌luence the global oil market.
The analysis in this article is guided by two key ques-
tions. Can OPEC cope with major challenges ahead, in
particular the necessity to organize effective outreach
towards critical non-members such as Russia and Brazil,
as well as the drive towards a low- or no-carbon world
economy? And building on that, what role can OPEC
play in the context of new institutional players such as
the International Energy Forum (IEF), aimed at balancing
Global Policy Volume 2 . Special Issue . September 2011
Global Policy (2011) 2:SI doi: 10.1111/j.1758-5899.2011.00122.x ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd.
Research Article
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