Opec is turning into the latter. Though its ranks have swelled in each of the last three years, its new members have done little to bolster its production potential.
The world has changed. Opec is no longer relevant in the way it once was. Though the group has never had more members in its 58 years of existence, the volume of crude it produces represents just a third of all the oil extracted in the world — the smallest share it has commanded in almost three decades. Not exactly the “monopoly” railed at by Trump.
The group’s ability to influence oil prices by either boosting or cutting output has also waned. Spare capacity available to lift production at short notice has become increasingly concentrated in the hands of a dwindling band of Persian Gulf Arab countries.
The inclusion of Russia in the group’s latest supply management push reflects its waning power. Alone, it was both unwilling and unable to agree to remove sufficient volumes of oil from the market in 2016 to balance supply and demand. But Russia made all the difference.
Now that Opec needs to boost output, its lack of power becomes even more obvious.
Only a small group of countries — led by Saudi Arabia — have the ability to lift production. For Venezuela and Angola, steep drops in output are involuntary and cannot be reversed. Libya and Nigeria were exempted from the deal and are already producing as much as they can. Iran’s exports are falling faster than most analysts anticipated, and Trump wants to drive them to zero by early November.
This is a recipe for oil prices to continue to rise.
Internally, the political and economic differences between Opec's founding members now outweigh the common ground that brought them together in 1960. Now, far from rallying around a fellow member facing an external threat, two Opec countries — perhaps Saudi Arabia and the United Arab Emirates — are seeking to damage the group and carry out “anti-Iranian policies” at the behest of the U.S., according to the nation’s oil minister, Bijan Namdar Zanganeh.