OPEC Fights with Recession- New Policies Opted for to Challenge Other Foreign Rivals
OPEC has held a number of conferences and clandestine or close door meetings to take the decision in resetting the oil prices. Abrupt and unprecedented drop in oil prices has tilted the global economy nurturing the onset of long lasting recession in the world. OPEC is one of the major oil production and exporting organization formed by Saudi Arab, Iran, Venezuela and Iraq. It produces 40 % oil to boost up the global economy. However, OPEC nations have to sit once again to analyze the current crisis in the global oil industry. In Vienna, OPEC members completed important conferences to decide whether they will cut down the crude oil production to tackle the temporary crisis. Oil prices are going far down below even $50 comparing to previous years.
OPEC Opts for Innovative Strategies to Combat Recession
OPEC has taken more initiatives to fight with the global crisis. Geopolitical issues are also coming to front to compel experts to do effective studies, surveys and comparison to evaluate the present condition. OPEC wants to play tricks by using the oil industry. It is plotting to weaken the American shale oil output projects by either reducing oil prices or restricting the oil production. Shale oil production in Texas must be a turning point to American oil companies to fight back. These American oil companies extract natural underground crude oil from difficult niches/shale where drilling is not smooth. Using sophisticated machinery, American upstream sectors collect or pull up shale oil from underground reserves. Extra 4 million barrels of oil are added to the total global oil production. So it is naturally a significant contribution from the part of America. However, owing to nosedive in the prices of oil in the open market, these American companies will not be able to get more profits. Many American upstream and downstream companies have had to close their production units to reduce over expenditure. OPEC is masterminding the plan to give severe jolt to American oil industry. At Vienna conference, Iran and Venezuela were agreed to reduce the oil production for the sake of creating a demand in the market. It will add the speed to the price rise in the oil and gas. However, this theory was not accepted by Saudi Arab. This country has no desire to cut oil production. Saudi Arab is now the largest oil producer and it doesn’t want to hamper the production of crude oil. It waits for much cheaper in oil prices. It has huge stored oil and it has the strength to be resilient even in tough competition. In this connection, OPEC Secretary-General Abdalla El-Badri declared at Vienna conference on November last that right now OPEC would produce 30 million barrels of oil regularly for six months. Saudi Arab has confirmed that its national oil industry can compromise with maximum $80 per barrel of crude oil.
Gulf Countries Plan How to Tackle Recession in Oil Industry
After lifting the embargo from the head of Iran, this Gulf country is redecorating its oil industry. However, tension is not totally wiped out due to geopolitical disturbance. Iran is right now trying to fight back outperforming Saudi Arab by cutting prices of crude oil. It wants to supersede Saudi in the oil field by selling oil at cheaper prices. Iraq is now at topsy-turvy how to tackle this recession in the oil industry. Due to price drop in selling oil, the government of Iraq has imposed heavy duty/taxes on goods imported from foreign countries. Abadi, Prime Minister of Iraq has requested top brass of the government to concentrate on the economic crisis for solution. Saudi Arab is one of the largest oil exporters but it has had mild side effect of the abrupt drop in the global oil prices.
Saudi Aramco Can Be Privatized - Saudi Government Wants to Sell Few Shares
Saudi Aramco is a well-known oil company in Saudi Arab but it is also facing the trouble when the global recession hits the market. This company has stored 15 percent crude oil of the global oil reserves. Therefore, it is a big challenger in the oil industry. However, the management of this world famous company is planning to sell few shares to collect proceeds. If the company is placed at the auction for sale, around $1 trillion will be earned by the owner of Saudi Aramco. Aramco is the government controlled oil company which produces around 10 million barrels of oil regularly. The government has had taken decision to sell its share for the privatization of the company to combat the severe recession. It will help the government of Saudi Arab to gather few more billion dollars to opt for the financial patchwork.
OPEC is waiting for the price hike of the crude oil. It has sufficient reserved or stored crude oil. It will have strength to supply stored oil to various foreign countries at cheap rates. However, if the slowdown continues for over a year or more, OPEC will have discomfiture. Therefore, new strategies should be opted for to find the best way to overtake the recession boldly. However, one thing is clear that there must be a higher demand to buy crude oil. These oil producers should play supportive roles with unanimity to expand the oil industry boosting up the demand in the market.