OPEC is two things - a significant force in global energy prices and simultaneously, a weakened force in global energy prices. On one hand, their control over most of the world’s oil production and reserves is impossible to ignore. When we are looking for someone to blame about high oil prices or when politicians ask ignorant questions about who is setting the price of oil, it is convenient to point the finger at OPEC. Let’s face it - a lot of that has to do with the geopolitical mess we are in. It’s easy for Americans to hate the stereotypical image of our supposed enemies - Iran, Venezuela, etc. When gas was near $3.00, OPEC was hated and feared. Now that I can drive past a gas station and see $1.99 per gallon, it feels like we are ignoring them.

Listening to financial media today, you get the sense that the reduction in oil prices has to do with global-warming induced weather patterns in New York and lately, a mocking of OPEC. How many times do we have to hear about NYMEX traders who “don’t believe what OPEC says about quotas?” It’s almost as if those nasty speculators that got blamed for pumping up oil prices last summer have found a new way to make money - beat down oil prices by criticising the realities of OPEC quotas. What kind of cartel is this anyway?

It’s all a game. OPEC has a history of not following through on its production quotas - that’s a fact. Repeatedly, it has been pointed out that only half of the October quota has been achieved. And if that is not enough, we get to hear how this is standard practice for OPEC’s history of quotas. For their part, OPEC plays the game also and they just seem to do it poorly these days. Whenever they want to see oil prices level off or head higher, a rumor is leaked that they are considering an “emergency meeting”. All this does is give oil traders and the pundits new ammunition to point out that OPEC quotas are a joke that don’t need to be worried about and oil prices head lower. If they actually have a meeting, the traders make it clear that they don’t care what OPEC says they are going to do - it only matters what they actually do. Each time they don’t deliver on promised cuts, it adds to the downward momentum of oil prices. Just remember all this the next time oil rises and people start pointing at OPEC. If we make such a big deal today about how OPEC lacks credibility, how will that affect our credibility to blame them in the future?

It’s almost impossible to argue that lower oil is a bad thing, but I am getting concerned. Clearly, there are divisions with the OPEC oil ministers and most of those disagreements have little to do with oil. Iran, Venezuela and their camp are happy to use oil as a weapon against the United States and the Saudi led group is not so willing to participate. If OPEC keeps losing whatever credibility they still have, I wonder how long it will be before the anti-US members like Venezuela and Iran go on their own. In that case, we could fear one “cartel” and ignore another all at the same time. I know that’s a highly unlikely scenario, but it’s one that pops into my head every once in a while.  Another scenario is that OPEC members finally get tired of looking like fools and actually stick to production cuts.   That might give them some credibility back and it would put a hurt on oil markets that keep ignoring them.