Media outlets concerned with reporting not only the what and when but also the why of market gyrations sometimes miss the forest for the trees. So the 160 journalists in Vienna covering the 156th meeting of Opec, the oil cartel, dutifully linked yesterday’s rise in oil prices to the group’s decision to keep quotas flat.
Though it was not that long ago that offhand comments from an Opec delegate between bites of sachertorte were enough to send traders scrambling, the only words that mattered this week were the Fed’s “extended period” in the US. Rumblings from Beijing about cooling growth might have had the opposite effect. Memories of supply shocks in the 1970s give Opec too much credit for a market now driven by oil’s status as a store of value and the impact of marginal demand from developing countries.
After spare capacity shrivelled and prices surged from 2005 to 2008, oil ministers acknowledged their powerlessness to stem price rises. Now, producing 2m barrels a day over its 26.8m barrel quota, Opec is nearly as toothless. Between cheating by some members and struggles to meet quotas by others, only pragmatic Saudi Arabia is a true swing producer. Opec is also less fearsome as developed countries generate twice as much output from each barrel of crude as in the 1970s.
Another reason why Opec has lost clout are technological developments that price shocks have helped spur. Unconventional sources such as oil sands or biofuels now provide a safety valve for the market if oil companies believe prices will be sustained above $65 a barrel. Go a bit higher and other technologies such as gas or coal-to-liquids become feasible. Sitting on three-quarters of conventional reserves, Opec today resembles the elderly denizens of a posh gentleman’s club – rich but largely irrelevant.
英国《金融时报》 Lex专栏 2010-03-18