Above all, the increasing extraction of shale oil by fracking in the USA has led to a drastic reduction in the influence that oil-exporting countries can exert on the world economy. As ecologically dubious as this innovative method of extracting shale oil may be, it has had a decidedly positive effect on the global economy in this respect. Since 2014, the fracking method has also been economically profitable and led to an oil boom in the USA. However, the modern extraction technology is associated with high costs, which make the exploitation of shale oil deposits profitable only above a certain price level. For this reason, increases in the price of crude oil in exness broker login due to a supply shortage on the part of OPEC prove ineffective: as soon as the price rises in the short term, production in the USA increases and the oil price falls again.
In addition, there is the disagreement that exists between the individual members of OPEC. This organization can only achieve the goals it has set if all participating countries adhere to the targets they have set themselves. The OPEC countries must adhere precisely to the production quotas that have been decided upon and allocated to them in each case in order to bring about the desired shortage of supply so that the targeted price increase can occur. Recently, the once so powerful organization has hardly succeeded in doing so: Countries in which civil war is raging or in which the political framework is losing stability due to other developments do not observe the targets for production volumes. These OPEC members include, for example, the African states of Libya and Nigeria. In the meantime, the two civil war countries have even been exempted from curbing production volumes from the outset.
Outlook
It is certain that the achievable quantities of shale oil in the USA will come to an end. Should Venezuela regain political stability and increase its production volumes, this could at least partially compensate. In contrast, enforcement of sanctions against Iran, as sought by U.S. President Donald Trump, could lead to further shortages. Currently, there are indications that exports of Iranian crude oil will be allowed to private companies in the future in order to circumvent impending U.S. sanctions. It is difficult to predict at this time how OPEC's power and the price of oil will continue to evolve.
Conclusion:
At present, OPEC has little ability to control the price of oil, so it has stabilized at a relatively low level
Fracking of shale oil in the USA is the main cause of this development
North American oil reserves are limited, so OPEC's power could increase again in the long term
What is your assessment of the situation? Feel free to share your opinion with other readers.