Corralling the Cartel: OPEC and Oil Prices

Since oil prices plummeted in the last quarter of 2014, oil-producing countries have struggled to adapt to the new low-price environment. From reforms to slashed budgets, producers have found ways to cope and yet, for years, they failed to reach an agreement to reduce production, which could boost flagging oil prices. However, this September, the Organization of Petroleum Exporting Countries (OPEC), in conjunction with major non-OPEC producers, finally agreed to reduce global oil supplies.

Following informal OPEC talks in Algiers, members announced that they would work out a plan to reduce collective production by approximately 200 to 700 thousand barrels per day (bpd) during their next official meeting in November. However, the actual details of who will cut and by how much remain hazy. As Founder and President of SVB Energy International, Sara Vakhshouri writes, “the main challenge after this agreement will be its implementation, the details of the agreement, and how the supply will actually be reduced.”