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Why the World Can’t Afford an Oil War

Public Policy

It wouldn’t be an oil meeting without brinkmanship, but the stakes are high for the world economy as OPEC+ ministers resume talks today on an output agreement.

Until a last-minute objection by the United Arab Emirates, the oil cartel and its allies thought they had a deal to boost monthly supplies by 400,000 barrels a day between August and December to ease crude prices amid a revival in global demand.

As Salma El WardanyGrant SmithDina Khrennikova and Javier Blas report, that sparked bitter infighting and raised the specter of last year’s output war between Saudi Arabia and Russia, which combined with slumping demand during Covid-19 lockdowns to briefly turn crude prices negative.

Failure to reach agreement would mean OPEC+ continues with existing output terms until April, adding to pressures that have already pushed prices up around 50% this year.

That risks stoking inflationary concerns in the global economy and may trigger a backlash toward the cartel from the U.S. and other major oil consumers fearful of the impact on the recovery.

There are other unpredictable factors. A deal to revive the Iranian nuclear pact may bring new oil supplies into the market if the U.S. lifts sanctions. The spread of the delta variant of Covid-19 is sending some nations back into lockdowns that may dampen demand.

As diplomatic channels buzz between the key players, the 23-nation alliance is facing a test with ramifications far beyond its members. It may take high-level political intervention to break the deadlock. — Anthony Halpin


8 Comments on "Why the World Can’t Afford an Oil War"

  1. DT on Fri, 2nd Jul 2021 4:25 pm 

    LOL oil wars have been going on since the beginning of the oil age. Oil is what drives our collective society in the global north and beyond.

  2. makati1 on Fri, 2nd Jul 2021 5:32 pm 

    The Middle East is an oil war.
    The South China Sea is about oil.
    The Eastern Mediterranean Sea is about oil.
    The Russia/Crimea thingy is about oil.
    The Arctic is about oil.
    The Chinese thingy is about oil.
    The Venezuela thingy is about oil.
    The African thingy is about oil.
    The US wants to control it all, but is failing big time.

    WW3…about oil? Hmm.

  3. Cloggie on Sat, 3rd Jul 2021 12:01 am 

    It was the US mastering oil first, that enabled the US empire. Everybody has carched up since. Traffic jams in Holland are back again and I presume everywhere else. Petrol prices are on the rise accordingly, now that Covid is retreating in the Summer season, just like it did in the previous Summer. I expect Delta-Covid back with a vengeance in the Autumn, which will dampen demand again.

    Peak oil 2026-2030, this time for real.

  4. Duncan Idaho on Sat, 3rd Jul 2021 11:13 am 

    World C+C peak at 84,631 mbpd Nov 2018

    Could we pass it?
    Don’t hold your breath

  5. Biden's hairplug on Sat, 3rd Jul 2021 12:03 pm 

    “Former head of Germany’s spy agency slams Angela Merkel’s immigration policies as ‘fatal’ and says country is ‘declining politically and economically'”

    Merkel will be gone in September. After that, Germany will sing a different immigration tune.

  6. Duncan Idaho on Sat, 3rd Jul 2021 12:24 pm 

    “When Ronald Reagan took office in 1981, for example, the US national debt stood at a mere $908 billion–
    To deal with the loss of revenue, we essentially stopped maintaining the country while Reagan and the first President Bush subsidized the wealthy by more than tripling the national debt to $2.6 trillion in their 12 years.”

    Our repug friends do know how to increase debt!

  7. Duncan Idaho on Sat, 3rd Jul 2021 3:53 pm 

    “They voted for him because he’s wealthy, lying, a racist and they admire him for it. “That makes him smart.”

    He’s everything they aspire to be.”

    Our wingnut repug friends know who to support–

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