WASHINGTON (Sputnik) — The Organization of the Petroleum Exporting Countries (OPEC) is proving to be a dysfunctional sham that has been exposed by its members’ inability to cooperate on production levels to stem falling oil prices, experts told Sputnik on Thursday.
“OPEC is a farce, there is no real cooperation there, and the latest round of acrimony within OPEC is just more evidence of that,” Brown University Professor Jeff Colgan, author of “Petro-Aggression: When Oil Causes War,” told Sputnik.
Oversupply and high oil reserves levels amid low demand due to economic uncertainty in China and other world economies has contributed to the price decline.
The decision to maintain high levels of output was led by Saudi Arabia, which analysts have argued is trying to undermine higher cost US oil producers as the country overtook Saudi Arabia to become the world’s top oil producer.
The decision to keep the oil rigs pumping has led to friction within OPEC, with higher break even cost producers calling for production cuts to address the landslide in prices.
However, he noted, Saudi leaders must be nervous about the precipitous decline in world energy prices.
“They [Saudi Arabia] still have massive financial reserves that can keep them afloat for years, but they are running a deficit of more than $10 billion per month — about 20 percent of GDP,” Colgan explained.
Ball State University Professor of Economics Cecil Bohanon told Sputnik that OPEC members, especially Saudi Arabia, have shown obvious signs of dysfunction by failing to agree to reduce production targets.
“Clearly OPEC has not been able to get its act together in getting its members to reduce output… and particularly its largest producer, the Saudis, to restrain their production,” Bohanon claimed.
On Wednesday, a US energy consulting firm told Sputnik that Russia, Canada and Saudi Arabia alone have the capacity to raise world oil prices if their leaders agree to cooperate.
