By Joe Petrowski

The dilemma OPEC faces as petroleum prices fall to $43/bbl on WTI and $48/bbl on Brent centers around four overwhelming factors:

  • World petroleum demand is peaking but not production. We could easily see today’s demand of 90 million bbl/day fall to 75 million/barrels/day within 5 years for a host of reasons.
  • Non-OPEC supplies are increasing and OPEC’s current share of 33% (30 million bbl/day) will fall to under 25%. That will reduce the call on OPEC from 30 million bbl/day to under 20 million bbl/day.
  • That 10 million bbl/day decline at today’s prices takes $175 billion/year out of OPEC countries if prices do not decline even further.
  • It must be remembered that OPEC’s current proven reserves are just under 2 billion barrels and increasing.

With a declining demand base, serious global competition for market share, an uncertain political environment for hydrocarbon demand, huge reserves and significant government deficits the last thing you can do is leave your wealth in the ground. The future is always uncertain but especially so for OPEC.

 

Joe Petrowski has had a long career in international commodity trading, energy and retail management and public policy development. He currently serves as the fuel director of Yesway convenience stores and an adviser to their Chairman on Operations and Merchandising, as well as a director of Xebec, a Canadian manufacturer of Clean technology and Green Print, a carbon mitigation firm. Petrowski previously served as the president and CEO of Gulf Oil LP and was elected to the Gulf Oil LP Board of Directors and then as CEO of the now combined Gulf Oil and Cumberland Farms. He is Managing Director of Mercantor Partners, a private equity firm investing in convenience and energy distribution.