U.S. loses control of the global oil sector

Oil prices are falling again. OPEC+ is taking countermeasures and trying to stop this trend by reducing production quotas. It is not yet clear whether the measures will be successful in the long term. However, it is clear that the US seems to be losing its control over the global oil sector.

In the struggle for the new global order between the United States and the great powers China and Russia, the attention of world politics has recently turned to the situation in the oil sector, which has often decisively determined developments in the world. The main focus is on oil prices, which have a major impact on the state of both Western and other economies.

In view of this, a lot basically depends on who regulates prices or can influence pricing. In 1960, the oil producers Iran, Iraq, Kuwait, Saudi Arabia and Venezuela were also decisive in forming a cartel that would become known as the "Organization of the Petroleum Exporting Countries OPEC". At that time, in view of the surplus of oil on the world market, these states wanted to prevent the fall in oil prices by reducing the production of this raw material – with success.

Even today, OPEC, which has now grown to 13 members, is confronted with falling (and also unstable) oil prices and is fighting together with its partner states within the framework of OPEC+ to stabilize market prices. The tried-and-tested instrument of funding limitation is being used for this purpose, and there is a good chance that the strategy will work out in the long term. Because the balance of power in the global oil sector seems to be changing in favor of OPEC+. For this reason, presumably, the cartel no longer believes that it could lose market share to competition from the United States if oil production is lower.

End of the "fracking boom" and the consequences of the sanctions

Not so long ago, however, there was precisely this fear within OPEC, as US producers were able to reorganize the oil market in their favor thanks to their so-called "fracking revolution" in the 2010s and significantly limit the influence of other oil-exporting countries on the shaping of the oil price, among other things. In fact, the United States, which at the time became both the world's largest consumer and the largest producer of oil, has been able to virtually control oil prices for a long period of time.

However, the end of the fracking era is slowly but surely emerging. According to US media, US shale oil producers have apparently largely exhausted their growth potential and seem to be unable to meet the growing global demand for resources with their production capacity. As a result, the total volume of oil production in the United States is not increasing strongly enough for the Americans to live up to their previous role.

For many analysts, the current weakening US oil industry is also one of the main reasons for assuming that the US will lose its influence in the global oil sector in the long term and that OPEC countries could gradually regain their status as a major "regulator" in return.

But there are other aspects that are driving this development, as Russian experts analyzed. These include Western trade and economic restrictions on Russia and its oil companies, as well as the associated uncertainties for other oil producers. These have contributed significantly to the current trend, which is why OPEC and its partner states are now realigning their own strategy. While the previous approach was mainly aimed at expanding and securing the markets, the focus is now apparently to be on oil pricing. This is also linked to OPEC+'s decision a few weeks ago to consistently reduce future production. Production is to be cut by more than 1.5 million barrels per day from May onwards in order to keep oil prices above the $80 mark.

Interests of OPEC+

The driving force behind this policy is Saudi Arabia, which is currently the world's largest oil producer and virtually leads OPEC. His motivation with regard to the planned measures, which are also supported by other influential producing countries such as the United Arab Emirates or Kuwait, can be explained by the fact that the embargo against Russia initiated by the USA and the so-called price limit for Russian oil supplies are also associated with certain problems for other oil producers or are even considered a possible danger.

These include, in particular, the fact that the sanctions have caused the oil market to fluctuate considerably, which is subject to increasingly unpredictable and dynamic price fluctuations as a result. In addition, when one takes into account the unclear prospects for China's economic recovery or the threat of a possible recession in Europe or the US, it is even more difficult to assess how these factors correlate and how they will affect the market.

Many oil-producing countries, which have been able to predict the benefits of their investments in the oil industry so far, are suddenly confronted with very large risks. Therefore, they are now trying to better protect their own interests and take appropriate measures to keep prices stable and at a high level. Moreover, this fits perfectly into the financial plans of Saudi Arabia or Russia, which are susceptible to price fluctuations and whose national budgets are largely based on oil export revenues.

For the US, on the other hand, this situation is likely to be more problematic because, on the one hand, it fuels inflation in the country and, on the other hand, prevents the US government from exerting even more financial pressure on Moscow through low oil prices. Washington is likely to have no choice but to continue releasing large amounts of crude oil from its own reserves in order to curb rising prices and inflation. However, such a move is always considered uncertain for the US oil sector and not exactly promising in view of the summer, as global fuel consumption will soon increase significantly. In this respect, there are many indications that the US has hardly any options left to have a say in OPEC+ in terms of price formation.

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