The Energy World is Flat: Opportunities from the End of Peak Oil

Chapter ThirteenFlattener #10 – Fiscal, Monetary, and Macroeconomic Flatteners

Christians had a better chance against the lions than the American consumer has against OPEC.

Ed Markey

I spent the last weeks of 2012 busy with the launch of a new fund and travelling, visiting some of the most significant discoveries of the last decade, from Moccasin in the Gulf of Mexico to Jubilee in Ghana, through oil shale assets in Texas, and culminating in the most important annual meeting of the global oil industry, the Oil & Money Conference. An exceptional event, with the participation of people like the Secretary General of OPEC, Abdalla Salem El-Badri, the Saudi Prince Turki Al Faisal, directors of the largest oil companies, major financial institutions, and some investors.

It was evident by then that the internal disagreements among OPEC members were very real. Saudi Arabia had firmly set itself as the Central Bank of Oil, defending a well-balanced market, while Iran and Venezuela were taking a hawkish position towards production. The meetings of OPEC in Vienna since then have shown that the disagreements have increased because the oil price needed to breakeven differs more and more among members.

The “OPEC put”

The market often refers to the “OPEC put” as a price floor that will be protected by OPEC through production cuts. The perception among some participants is that the cartel plays the role of the “Central Bank of Oil” and can defend the price of oil at the level and for as long ...