Saudi Arabia’s think-tank studying hypothetical world sans OPEC

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Washington | November 10, 2018 1:12 AM

The study is the second in a series, after an earlier report found that OPEC’s spare capacity reduces oil price volatility and generates as much as $200 bn of annual economic benefits for the world economy.

opec, saudi arabiaThe study is the second in a series, after an earlier report found that OPEC’s spare capacity reduces oil price volatility and generates as much as $200 billion of annual economic benefits for the world economy. (Reuters)

A Saudi think-tank is studying what happens to oil markets in a world without OPEC. “We’re looking at what happens if there’s no spare capacity,” said Adam Sieminski, who heads up the King Abdullah Petroleum Studies and Research Center in Riyadh. “One scenario to that is OPEC doesn’t exist.”

The study is the second in a series, after an earlier report found that OPEC’s spare capacity reduces oil price volatility and generates as much as $200 billion of annual economic benefits for the world economy. It comes at a fraught time for Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, given the widespread outrage over the death last month of the Saudi journalist Jamal Khashoggi. US President Donald Trump also has repeatedly attacked the oil cartel for keeping oil prices too high. Sieminski, who previously served as the head of the US Energy Information Administration, said he couldn’t say whether the study reflects Saudi government thinking. He said the report was “internally generated” at the research centre.

“We’re looking at this because we think it’s important. I would be incredibly surprised if there aren’t 10 other analysts or institutions trying to understand the same question,” Sieminski said by phone Thursday.

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