Since its creation more than a half-century ago, OPEC has been jolting the world. The 14-member club of oil exporters is the textbook case of a successful cartel, wielding immense control over the world’s most critical commodity. As waves of new technologies and petroleum discoveries have upended the global energy trade, OPEC’s obituary has been written many times. Yet the Organization of the Petroleum Exporting Countries has just as often defied its critics. Now it’s facing another challenge for long-term survival as the U.S., once its biggest customer, unleashes record supplies of shale oil and the planet turns to renewable energy. So OPEC is again deploying its most trusted tool: cutting output to push up prices. But whether such a tactic can still succeed is unclear.
Battered by an oil glut in late 2016, Saudi Arabia and fellow OPEC members launched their first intervention in eight years with a pact to cut production. They even joined forces with Russia, for years a fierce competitor. By mid-2018 the gamble seemed to have paid off: The surplus was eliminated, and oil soon touched a four-year high of more than $85 a barrel. But the victory in some ways proved self-defeating. OPEC's support for prices re-invigorated “fracking” by American shale drillers, propelling the U.S. to overtake Saudi Arabia and Russia as the world's No. 1 crude producer. The rally also elicited the ire of President Donald Trump, who continues to put pressure on his allies in Riyadh to stop prices surging again. As a result, oil slipped in late 2018 and remained down from its peak in 2019, even as political crises and U.S. sanctions slashed output from OPEC members Venezuela and Iran. That leaves the cartel walking a tight-rope, seeking prices that are high enough to finance their economies without provoking a backlash.