Macroeconomics and Global Petroleum Trends

The global economy has undergone major shocks and evolutions throughout the last year, from changes in tariffs and international petroleum prices to the creation and potential disbanding of trade blocs. One of these key dynamics affecting the global economy is the energy market, particularly as it relates to major oil producing and consuming countries such as Russia, the United States, and members of the Organization of Petroleum Exporting Countries (OPEC). Founded in 1960, the OPEC is currently composed of the Islamic Republic of Iran and five Middle Eastern countries as well as two South American countries (Venezuela and Ecuador) and seven African countries (Angola, Libya, Algeria, Nigeria, Gabon, Equatorial Guinea, and the Republic of Congo).

Macroeconomics and Global Petroleum Trends

After years of declining oil prices, from over US$120 a barrel in April of 2011 to a low point of less than US$30 per barrel in January of 2016, the OPEC alongside other non-OPEC oil-producing nations worked together on the implementation of the Vienna Agreement negotiated towards the end of 2016. This agreement, which has been in effect since January 2017, reduces the petroleum output of major OPEC and non-OPEC oil suppliers, notably Russia and Saudi Arabia. To the surprise of many, throughout the last year, the output reductions mandated by the 2016 Vienna Agreement have not only been respected, but surpassed.

The nations partaking in the 2016 Vienna Agreement have demonstrated a level of compliance with the terms of the agreement that many were skeptical of when it was first announced, reaching a 150% level of conformity in May 2018. This means that the OPEC and non-OPEC oil suppliers surpassed their own goal of reducing overall output by 1.2 million barrels per day. Thus far, it can be argued that the 2016 Vienna Agreement has yielded positive results, as the oil barrel price has increased to a valuation of over US$70 since May 2018. Given this scenario, during their most recent gathering in Vienna, OPEC and non-OPEC producers announced that they will deploy the Organization’s Joint Ministerial Monitoring Committee (JMMC) to ensure that the 2016 Vienna Agreement is only complied to at 100% and not in excess. Effectively, this means that oil-producers worldwide will be increasing their petroleum exports over the next several months. This move is expected to stabilize international oil prices, at least until the next OPEC meeting scheduled for December of this year.

Meanwhile, under the administration of President Trump, the United States has also increased its overall fossil fuels output. In turn, this trend has contributed slightly to the weakening of the power that major oil and gas producers hold over the global market. More specifically, the construction of new pipelines, the jumpstarting of the coal energy industry, new extractive techniques, such as fracking, and the use of shale gas in the United States have all contributed to keeping overall oil prices from skyrocketing.

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