OPEC is trying to keep the price of oil from falling, but Russia – which is not a member of OPEC – is not playing along. While the end result so far means lower oil prices and thus lower fuel prices for truckers, the long-term consequences of this oil production battle could be severe, experts are warning.
Currently, the price of a barrel of crude oil is hovering at about $19.28 – far lower than the $35 a barrel that forced diesel fuel prices through the roof in late 2000 and early 2001. OPEC wants to steady the price of oil between $22 and $28 a barrel and has been trying to cut oil production among both its members and non-members alike to get prices higher, but Russia has stymied those efforts. OPEC wanted Russia to cut production by 150,000 barrels a day, but Russia said it will only cut production by 50,000 barrels a day for the rest of the year.
OPEC wants its 11 member nations to cut production by 1.5 million barrels a day and non-members, such as Russia, Norway and Mexico, to cut oil production by 500,000 barrels a day. Russia’s refusal to cooperate with OPEC’s plan has resulted in threats of a production war by OPEC, which would drive the price of oil even lower – to $12 or $10 a barrel, some experts think.
Overproduction of oil, however, would hurt countries like Russia that rely on tax revenues from oil sales to stay solvent. For Russia, 20% of its government budget is funded by oil tax revenue.
While in the short term such a production war would lower fuel prices for truckers, in the long term it would force oil producers to shut down production because it would be unprofitable. Hardest hit would be U.S. oil companies, which would be the first to reduce oil drilling and production efforts, OPEC ministers said.