Publications: Notes at the Margin

OPEC+'s Unforced Errors (August 7, 2023)


Tennis commentators often tabulate unforced errors during a match, that is, shots a player hits out of bounds or into the net. Someone who does this too often is almost guaranteed to lose.


OPEC+ and Saudi Arabia, in particular, have made many unforced errors. Other market participants are responding to these mistakes by changing their behavior. Oil refiners and marketers are cashing in on them, almost doubling what they receive when crude oil prices are above $80 per barrel. The income gains of downstream participants result from their minimizing inventories to avoid being victimized by another Saudi “price tantrum.” The subsequent boost in petroleum product prices will only accelerate the decline in global oil use, which will strand more reserves in the large oil-exporting countries. This situation has been brought on by the producers’ unforced errors.


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