OPEC Plus, which is a group led by Saudi Arabia and include Russia and other oil exporters in the “Plus” or expanded version, has now announced its decision to cut crude oil production to the extent of 2 billion barrel per day.OPEC Plus claims that such a cut in oil production is necessary, as the global crude oil price has dropped to about 90 USD per barrel from around 120 USD per barrel three months ago.
It is necessary to remind OPEC Plus countries that the price of 90 USD per barrel is not a low price and several buyers of crude oil in a number of developing countries already find it extremely difficult to pay the purchase price of 90 USD per barrel.
The attitude of OPEC Plus countries clearly highlights their arrogance that their cartelization of crude oil production, will leave the world with no choice other than succumbing to their price pressure.
Obviously, such a decision to cut crude oil production by OPEC Plus countries should be condemned as a reflection of the exploitative mindset of these oil-producing countries, with the least concern for the problems of the buyers and importers of crude oil. Such an approach of OPEC Plus is nothing but a crude and exploitative trading outlook, with the least sense of responsibility towards the global cause and plight of the crude oil importers.
The world economy, particularly that of the developing countries, is just slowly recovering from the negative impact of the COVID-19 crisis and there is a real threat of a global recession happening in the next few months due to the slowing down of the global economy. Certainly, the oil cut move of OPEC Plus countries is not good for the global economy.
It is surprising that OPEC Plus countries do not realise that when the global economy suffers, they too cannot escape from the consequences.
It is astonishing that the OPEC Plus countries have not been able to visualize that there would be consumer resistance for their exploitative method of cutting crude oil production and forcing short supply in the global market.
In August 2022, OPEC Plus countries are said to have missed their production target by 3.58 billion barrels per day, as several countries were already buying well below the existing quotas. This has been largely due to their inability to pay high prices in the global crude oil market. In such a situation, if the global crude oil market would shrink due to consumer resistance, it would upset the economy of the OPEC-plus countries, whose major share of income has been only due to the sale of crude oil.
Already, there is a huge global campaign against the use of fossil fuels produced from crude oil and natural gas, due to global warming impact. Many countries in the world including high crude oil-consuming countries like India and China have pledged that they would target zero emissions at a specified time in the coming years.
Already, huge global efforts are seen to develop alternate fuel and feedstock such as green hydrogen, apart from a high focus on boosting the production of renewable energy such as solar and wind power. Alternative eco-friendly fuels such as algae biofuel are also receiving considerable attention by the scientific community and technology initiatives to optimize the production of biofuel are now being carried out at a feverish pace. With the growth of biotechnology and fermentation technology, new process routes are being developed to produce biochemicals that would not involve the use of petroleum feedstock. The immediate example is the efforts to produce methanol from municipal solid waste in Canada and other countries.
While curtailing crude oil consumption in a big way is a pre-condition for achieving zero emission in the world, the OPEC Plus countries are unwittingly accelerating the process of curtailing consumption of crude oil in the world by cutting down the production of crude oil that would lead to high price in the global market. After the announcement of oil production cuts by OPEC Plus countries, the price of crude oil in the global market has already started showing an upward trend.
It is necessary that OPEC Plus countries should read the writing on the wall and reverse their decision to cut their crude oil production. Otherwise, in the long run, it would be seen that OPEC Plus countries could be the real losers.
It appears that OPEC Plus oil countries have bitten off more than what they can chew.