Word: opec
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...process that has sharply reduced OPEC oil production since 1979 can also cause it to rise quickly again-leading to a tight world market in which prices can once again jump substantially. The driving force behind this process is a phenomenon best described as the "OPEC multiplier...
...OPEC is the residual or marginal source of supply to the world energy regime. It is the only after indigenous energy resources (i.e., hydro, coal, nuclear, oil, and natural gas) are produced at capacity levels that countries turn to foreign suppliers to meet additional needs. Most countries first turn to such non-OPEC suppliers as Mexico, Norway, and even the Soviet Union, either because of consideration relating to price or security of supply or both. Only then do buyers finally turn to OPEC as the supplier of last resort. Conversely as oil demand begins to decline, OPEC...
...numbers illustrate this phenomenon. OPEC currently accounts for just over 10 percent of world energy consumption. If, during a period of declining energy demand (say, in part due to recession). OPEC oil were treated like any other fuel, then a 5 percent decline in world energy consumption would result in a five percent decline in OPEC production. But, if all the decline is borne by OPEC as the residual supplier, then a 5 percent decline in the total leads to a 50 percent drop in OPEC oil. The actual drop in OPEC oil production since 1979 is somewhat more pronounced...
...significance of this multiplier effect is that it not only works, but works in reverse as well. Thus even a small percentage increase in total energy consumption could lead to an explosion in demand for OPEC oil-one far greater than most analysts consider possible today. If so, the market would be simply repeating what was a pattern of the 1970s...
...example, the global recession had basically run its course and real oil prices were falling. The world economy and world energy demand grew by just over 5 percent each. The impact on OPEC oil was much more pronounced; after a 12 percent drop in 1975, OPEC oil surged 13 percent...