According to a report published by the Bloomberg agency, the Organization of the Petroleum Exporting Countries may have its days numbered. The renunciation of cutting production, thus allowing crude oil prices to slide towards the lows of the last six years, would risk accelerating the fall of OPEC, even if the decision taken at the end of November aimed above all at repelling the growing competition from more expensive productions , such as those from US shales and Canadian oil sands.
The move, heavily sponsored by Saudi Arabia, should favor prolonged reductions, capable of forcing the closure of economically less advantageous production sites. But some historical reference highlighted by the World Bank highlights the risks of the current situation. In essence, the report states, the strength of a commodity cartel can be unraveled by market forces and technological innovations.
After the Second World War many agreements were launched for the stabilization of products such as wheat, coffee, sugar or tin. But in the end all the mechanisms developed by the negotiations between producers and consumers foundered. 55 years after its creation, only OPEC has remained alive and influential, probably thanks to the fact that it is a cartel of producers, which has not signed any agreements with consumer countries.
In other cases the shipwreck was traumatic. The International Tin Council, which managed the international tin deal, burned through a lot of money trying to secure revenues for producers of the metal, which was used notably in food packaging. But in 1985, after thirty years marked by a fragile balance, the pact crumbled, leaving a financial hole that engulfed several trading houses. The fault of the attempt to defend prices that are too high, but above all the fault of the explosive competition from aluminium, which has supplanted the more expensive tinplate in the production of cans.
In the case of natural rubber, the agreement between the three most important producers, Thailand, Indonesia and Malaysia, was put on the corner after 1997 by the financial crisis in South East Asia: the dollar quotations of rubber decreased, but did not have led to a reduction in production. In fact, prices in local currency have seen a substantial improvement, such as to trigger excess production. Hence the growing difficulty in defending prices, causing the conditions for the failure of the attempt.
Opec, on the other hand, has experienced some ups and downs, but has always maintained a strong influence on the dynamics of the oil market. Unlike the previous examples, the Organization does not envisage a formal agreement with importing countries, nor precise economic clauses to defend price levels. Furthermore, the oil market dominates all other commodity sectors in importance. However, some crunching is felt, and adds to the similarities with other international pacts: the entry of new techniques, new producers and alternative fuels has undermined the role of OPEC in stabilizing the market, while political and social unrest in various Member countries subtract a little of their ability to maneuver.
But the de profundis for the pact born in 1960 is in all probability premature: the verification of the health of the oil cartel can be done when demand and quotations rise, giving back to Opec a role that is decidedly tarnished at the moment, but which it manages still 40% of world exports of crude oil.
