By all appearances, 2012 was a very good year for OPEC. The cartel’s net oil revenue rose to one trillion dollars this year, with average Brent oil barrel prices the highest they’ve ever been. In real terms, OPEC made more money this year than ever before, exceeding even the record highs reached during the oil crises of 1973-74 and 1979-81.
But appearances can be deceptive. Underneath these figures are some warning signs about the cartel’s future. OPEC members may be making more money from oil, but they becoming addicted to high prices and are likely to face serious problems in the not too distant future. According to the IMF, both the UAE and Saudi Arabia used to be able to balance their budgets with an oil price of twenty-five dollars per barrel; now anything under $80 per barrel leads to budget deficits. Other countries are in even worse shape.
OPEC’s grip on the energy market is loosening, just as a global energy revolution is starting to change the rules of the game. Rising production in North America and elsewhere threatens to cut prices even as rising spending and populations in countries like Saudi Arabia make OPEC members more dependent than ever on the oil price. It would not take much change in the balance of forces on the oil market to plunge many OPEC members into a serious economic and social crisis. Instead of being dazzled by the $1 trillion number, students of world politics should keep their eyes on the price OPEC members need for stability at home. It’s high and getting higher.