179 - Is OPEC a cartel? with Jeff Colgan

Energy Week

Oil prices are finally falling. Thank China and Joe Biden
https://www.cnn.com/2021/11/18/investing/premarket-stocks-trading/index.html
- Is it really China and Biden? Or was it news of lockdowns in Europe?
- Who knows more? the big banks or OPEC/IEA
- Monthly OPEC meetings a plus?
U.S. asks Japan, China, others to consider tapping oil reserves
https://www.reuters.com/business/energy/exclusive-us-asks-big-countries-coordinate-releases-oil-reserves-sources-2021-11-17/
- Will an SPR release have enough of an impact to help Biden's political ratings?
‘Climate Funds’: Who’s Driving the Increased Demand
https://www.wsj.com/articles/climate-funds-whos-driving-growing-demand-11637165424
- who invests in these funds? Mostly women, millennials and high-net worth investors
- are the funds actually helping the climate? the jury is still out.
Dr. Jeff Colgan - New book, "Partial Hegemony: Oil Politics and International Order"
- Is OPEC really a cartel? - is it a group of producers that can actually control market to a certain degree or enough to move prices?
- Argues that OPEC is not actually a cartel - HQ in Vienna, meetings all the time but can't really change what its members do
- Saudi Arabia has market power but it doesn't need OPEC to do that.
- Are the members of OPEC actually greater than the sum of their parts?
- OPEC isn't amplifying their power in any way.
- How do we know this? OPEC members cheat on their quotas 96% of the time (since 1982)
- Has this changed with addition of Russia and creation of OPEC+? But that's a producer to producer relationship. There are 3 really big producers in the world (Saudi Arabia, Russia and US). It matters when they fight, but that will happen without OPEC+ existing at all.
- OPEC used to be a collective bargaining unit and acted as such through its founding until 1973.
- OPEC's announcements and monthly meetings matter because they shape perceptions. But don't impact fundamentals over a period of 3-6 months. Media tends to overreact to OPEC.
- OPEC is constantly being sued in Europe and US for being a cartel. Antitrust suites all the time. OPEC general council doesn't want OPEC to call itself a cartel to avoid legal repercussions.
- Politicians in US also love to have OPEC to blame when prices go up and down as well.
- Information sharing within OPEC is a very valuable part of what OPEC does, especially for poor countries that don't have the money to shell out for data. Though joining OPEC does cost several million dollars a year
- Biden is trying to walk a difficult line with oil - green agenda vs. more oil from OPEC?
- BIden memo to FTC is political theater as well.
- Coordinated SPR release to change market fundamentals and/or perceptions but India and China aren't members of the IEA.
- Original purpose of SPRs were for emergency situations, not just because gasoline is a little more expensive. Bad habit to use it this way. Most of the time these kinds of releases don't move prices much at all - other than after a natural disaster or state of emergency.
- Find him on twitter @JeffDColgan
https://www.amazon.com/Partial-Hegemony-Politics-International-Order/dp/0197546382/
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