The world faces “the greatest threat to energy security in history.” As warned by the International Energy Agency (IEA)Europe has aviation fuel reserves for only “about six weeks.” Along the same lines, countries like Pakistan or the Philippines are days away from running out of gasoline at their pumps.
The war and the blockade of the Strait of Hormuz have caused the largest oil supply disruption ever recorded in history. According to Maurizio Carulli, analyst at Quilter Cheviot in statements to Euronewsthe prolonged closure of this key corridor has removed about 12% of the world’s oil supply from the market, an impact far greater than that of the Yom Kippur War or the invasion of Kuwait.
For 65 years, the global dynamic has been immutable: the producing countries, grouped in OPEC, have dictated the volumes and the rules of the game. However, the magnitude of this crisis is prompting economists to propose a radical paradigm shift in which the balance of power changes sides.
“OPEC in reverse”
To address this market suffocation, University of Massachusetts Amherst economist Gregor Semieniuk and his colleague Isabella Weber propose a revolutionary idea: create an “OPEC in reverse.” As detailed Fortuneit would be a global coalition of oil-importing and consuming countries that would act as a bloc.
Instead of controlling production volumes as the traditional OPEC does, this consumer club would set a purchase ceiling or maximum price. As explained on the financial portal Reelfinancialthe primary objective is to stop a bidding war in which rich nations monopolize the energy supply, raising costs to the point of expelling lower-income countries from the market.
It is not an idea without historical foundations. The experts themselves remember that the IEA, founded in 1974, was born precisely as an institutional counterweight of the consuming nations against OPEC.
Since former US President Ronald Reagan removed oil price controls in 1981, the system has been governed almost exclusively by free trade. However, Eswar Prasad, a professor at Cornell University, explains in Fortune that the international economy has stagnated in a “zero-sum game.” Prasad compares the current energy crisis to the hoarding of vaccines and medical supplies by rich countries during the pandemic, leaving poorer nations with shortages.
The roadmap according to the experts
To materialize this plan, Semieniuk points out that the United States is in the ideal position to lead the new coalition of buyers. Being a net exporter and registering an energy trade surplus close to $100 billion in 2024, Washington has the financial and geopolitical muscle necessary to force change, explains Fortune.
In addition to coordinating price caps, economists advocate implementing taxes on windfall profits (windfall taxes) on giants like ExxonMobil or Chevron, companies that continue to profit considerably from the rise in crude oil prices.
The mechanics of this strong state intervention are justified by the seriousness of the situation. Faced with an unprecedented military blockade, governments must take a much more active role to ensure fair access to energy, making it clear that, in times of war, the free market cannot be the only response mechanism.
This consumer proposal comes at the exact moment when the historic producer cartel is collapsing. The United Arab Emirates (UAE) have made their departure from OPEC official prioritizing their “national interest.” The impact of this divorce is tectonic. In an opinion column published by Reutersanalyst Ron Bousso warns thatAfter the Gulf blockade, OPEC’s global market share had already plummeted to 26% in March. The cartel is rapidly losing its ability to dominate and stabilize the markets.
The OPEC crisis is not purely economic; Its roots are deeply political and territorial. Analyst Robin Mills explains that OPEC obliged the UAE to limit its production to 3.2 million barrels per day, despite the fact that the country had invested billions to reach a real capacity of 5 million.
Added to this quota tension is an evident diplomatic fracture in the Gulf. Emirates has felt betrayed and abandoned by its Arab allies after having to absorb the impact of almost 2,800 Iranian drone and missile attacks alone.
Consequently, the geopolitical chessboard is being rapidly redrawn. Joe DeLaura, energy specialist at Rabobank, underlines in the magazine Intelligencer that the world is heading towards fragmented blocks. The UAE is strategically pivoting toward the United States in exchange for protection for its shipping, and DeLaura anticipates that countries like Kazakhstan could be next to rebel against OPEC quotas.
In his opinion column for Le MondeStéphane Lauer summarizes the great historical irony of this collapse: OPEC, created in the 1960s out of an iron desire for national sovereignty against Western powers, is fracturing today “in the name of that same sovereignty”, with each state seeking its own salvation.
The dawn of a new era
OPEC, as we knew it for more than half a century, has fractured. As explained by Jorge León from Rystad EnergySaudi Arabia has been left practically alone to bear the enormous cost of stabilizing supply, which anticipates an era of extreme volatility.
While the old cartel is bleeding due to internal divisions and the weight of the war, an unprecedented window of opportunity opens for importing countries to finally take control of the market. History has already shown for 65 years that an organized coalition of nations can shape global energy markets. The big question now is whether the consumer world will have the courage and political will to do exactly the same.
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