BackThe end of oil power
Global crude oil prices have fallen sharply after a decision on Thursday by Opec not to cut production
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Global crude oil prices have fallen sharply after a decision on Thursday by the cartel of oil producing countries, Opec, not to cut production.
The price of Brent crude, a benchmark for global prices, hovered around $72 per barrel on Friday after falling by $5 on Thursday. This is the lowest since 2010.
At one level, Opec’s decision was dictated by its internal divisions, with the big force in the group, Saudi Arabia, ruling out production cutbacks. Supply cuts have been the favoured tool of the group to bump up prices.
What makes higher prices unsustainable is the shape of the global economy. With weak demand being almost structural, any supply cuts to boost prices will prove futile. Higher prices now will only depress demand further, not increase prices. It is a moot point if the Saudi decision was dictated by economic realism or political factors.
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