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Iraq and Iran vie to best Saudi as the world's leading producer of oil and it's China that looms as final arbiter.
ABU DHABI, United Arab Emirates — OPEC is a maddeningly opaque outfit; its public pronouncements frequently seem carefully crafted to conceal its private calculations.
The 12-member cartel controls about one-third of the world’s daily oil supply — not quite enough to give it absolute control over the price per barrel, but enough to allow it to consistently manipulate the price to its advantage.
Its imposing headquarters in Vienna and the refined (if somewhat oily) manners of its delegates are at odds with the corrupt, violent, repressive and often plain crazy political environment that is the norm for most of its member states.
And now the world watches as this highly effective but oddly dysfunctional gang deals with the elephant in the room.
The elephant, of course, is Iraq and the fistful of deals it has finalized over the last few months with some of the world’s largest oil companies.
Iraq anticipates that these deals will boost output over the next seven years from the current level of 2.4 million barrels per day (bpd) to something between 10 million or 12 million bpd. Along the way, Iraq would zoom past its meddlesome neighbor and rival Iran as the No. 2 producer in OPEC (4.1 million bpd) and eventually challenge the Saudis, currently producing about 10 million bpd, for the No. 1 spot.
If all of that happens — a very big “if” given the uncertain state of affairs in Iraq — it would not only upend the pecking order in OPEC, it also would cast the region’s geopolitical balance in an entirely new light.
“Iraq is a problem for everybody,” said Giacomo Luciani, an oil industry scholar with the Dubai-based Gulf Research Center. “But at the moment, this is all very speculative. We don’t know what demand will be in five years, 10 years, and we don’t know to what extent Iraqi production will increase.”
For its part, Iraq has been sending very mixed signals. On the one hand, there is all the talk of quadrupling production in seven years; but in March, ahead of OPEC’s most recent gathering in Vienna, Iraq’s Oil Minister Hussain Shahristani said Baghdad would be willing to discuss production quotas with its OPEC brethren once its own production hit the 4 million bpd level.
One of OPEC’s founding members, Iraq has been excused from the organization’s quota regime for many years. That’s because it has yet to recover from the sharp drop in production that followed the Iraq-Iran War and continued through two more wars and a decade of sanctions.
Historically, OPEC has set quotas for Iraq and Iran at approximately the same level — this based on their proven reserves. But Iraq now believes it should be treated as an equal to Saudi Arabia.