The Organization of the Petroleum Exporting Countries (OPEC) lost $76 billion in 2016 due to low oil prices caused by rising U.S. oil production, according to a report published Monday by the U.S. Energy Information Administration (EIA).
EIA’s report estimates that in 2016, OPEC earned about $433 billion in net oil export revenues. That’s 15 percent lower and $76 billion less than the $509 billion the cartel earned in 2015. This is the lowest earnings posted by OPEC since 2004.
EIA notes that OPEC’s relative losses were largely due to a decrease in the average annual crude oil prices during the year, and to falling net oil exports. New American oil production is the reason OPEC’s efforts to increase global prices have failed. OPEC wants the price of oil to be between $50 and $60 per barrel, but current prices are hovering around $47 a barrel. As recently as June 2014, the price of a barrel was almost $109.
As U.S. oil production increased in recent years, OPEC oil got edged out of the lucrative American oil market. America imported about 60 percent of its oil in 2007, but by 2014, the U.S. only imported 27 percent of its oil, according to government data. The rising U.S. oil production reduced demand for Saudi oil abroad too, keeping prices low.
OPEC de-facto leader, Saudi Arabia, is increasingly unable to control the global oil supply because of rising energy production in the U.S., Russia and Iran.
OPEC’s report published Friday blames the U.S. fracking, in particular for its losses. Fracking has greatly increased U.S. oil production, leading to a lengthy period of very low oil prices.
OPEC wants the U.S. to join it in decrease the global oil price, claiming that doing so will “require the collective efforts of all oil producers” and should be done “not only for the benefit of the individual countries, but also for the general prosperity of the world economy.”
The Saudis convinced OPEC to cut production to raise oil prices in November, but OPEC countries haven’t coped well with low crude prices and already appear to be cheating to balance their national budgets. Such cheating keeps oil from rising, further weakening Saudi control over OPEC.