Publications: Notes at the Margin

Dominating the Energy Dominator; OPEC+'s Next Step (December 2, 2019)


OPEC will meet next week. The meeting could be contentious as Russia seeks a change in the production allocation formula that would disadvantage other oil exporters. The request creates a dilemma for these exporters that could be difficult to solve. We suggest that OPEC needs to rethink its strategy. Given growing pressures to reduce emissions, the "club" needs to stop playing nice. Many of its competitors are at the cliff edge. It is time to give them a hard shove.


The OPEC meeting coincides with the United Nations Climate Change Conference that will convene in Madrid Monday and end December 13. Good news will not be forthcoming from Madrid. The report issued in advance of the gathering began by warning of "bleak" findings. The annual UN assessment pointed to emissions increases, particularly from China and the United States.


One topic that will almost certainly arise at the climate meeting will be Europe’s proposal to establish a "carbon border tax" or CBT. The European Union's new leadership is pushing the concept to maintain the competitiveness of European firms forced to pay higher prices for fossil fuel energy than firms in countries not addressing global warming, such as the United States, India, and China.


China has announced its opposition to the idea. One explanation for this response can be found in the strategy it has taken to combat firms proposing to export increased natural gas volumes to the country at high prices, especially firms from the United States seeking to participate in their country’s "energy dominance."


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