The US Energy Information Administration said on Monday that oil revenue for the Organization of Petroleum Exporting Countries (OPEC), which reached a record $982 billion from exports last year, should be expected to drop significantly over the next two years.
Created in September 1960 after the Baghdad Conference, and after some 10 or so years of negotiations between various non-Western oil producing nations, the original founding members included Iraq, Kuwait, Iran, Saudi Arabia and Venezuela, countries whose socio-political configurations have for the most part changed drastically since OPEC was founded, but who remain members of the organization all the same.
The list has since grown, adding members here such as Nigeria, and shedding others there, such as Indonesia, but the organization has traditionally been a major player in oil economics and politics over the past decades. Perhaps one of the most salient and dramatic examples of this took place in 1973, when OPEC, responding to US and Western support of Israel in its war against the sort-of united armies of Syria, Egypt, and Jordan, declared an embargo that sent prices soaring from $3 to $12 per barrel, setting off a global economic recession.
While not likely exit the stage anytime soon, however, the potential for OPEC to have such a disruptive effect on the global economy is probably receding further and further into the past. The major reason for this, of course, has to do with technological advances such as hydraulic fracturing and deep-water drilling that have allowed energy exploration firms to access previously unthinkable reserves of oil and natural gas captured deep within shale-rock formations, or miles under the seabed right here in the United States.
And so it is that the US is set to become the world’s biggest energy producer and exporter over the next decade, at most. For its part OPEC, now a 12 member organization, should see sales dropping to $940 billion in 2013, and further to $903 billion in 2014, according to the EIA. The report also draws a direct link between the drop in OPEC revenues and the increases in North American production, considering that US and Canadian crude output as of April was up 17 percent from the year earlier.
It should be noted that the report did not include data from Iranian output, as the sanctions placed on the country’s oil economy have made it difficult to track exactly how much is made from illicit sales, as well as sales to its friendlier neighbors such as India, whose domestic energy needs have inured it to Western protests.
Either way, increasing production from North America could have serious consequences not only for OPEC as an organization, but perhaps even more so for some of OPEC’s individual members. Countries such as Saudi Arabia, who rakes in a third of total OPEC revenues, as well as Algeria, Qatar, and the United Arab Emirates, all have repressive and authoritarian governments whose hold on power comes from a mixture of brutal surveillance and repression, in conjunction with vast social welfare programs that are intended to maintain a quiescent and obedient populace, all of which is funded by massive oil and natural gas revenues.
It follows that any change in this decades-old structure could cause the sort of disruption to the energy economy, to say nothing of the global economy as a whole, that would make investors’ fears about Egyptian unrest or the so-called “Arab-Spring” seem like a mere trifle. Such a scenario is by no means guaranteed, but one can only hope that all countries involved have taken a moment to reflect on Monday’s EIA report.
[Image: OPEC Headquarters in Vienna, Austria, via Wikimedia Commons]