Since 1973, much of global politics has been conducted in the long shadow of the Organisation of Petroleum Exporting Countries (Opec) cartel. That was the year Opec first set its stamp on global affairs by engineering an oil crisis in response to Western governments’ support for Israel in the Yom Kippur War. Prices quadrupled and exports to western Europe, the United States, and Japan were banned altogether. The result was a deep recession and spiralling inflation, the effects of which endured long after the oil embargo was lifted in 1974.
In the years since, the steady flow of petrodollars has propped up authoritarian regimes from Latin America to the Arabian Gulf. Most recently, Opec has played a crucial role in keeping Vladimir Putin’s creaking war economy afloat.
Half a century on from the oil crisis, some things haven’t changed. Relations between an embattled Israel and her Arab neighbours are once again deteriorating; Russia is throwing her weight around in her near-abroad. But where 1973 saw Opec first flex its muscles, there is growing evidence that 2024 will be the year its power is broken, once and for all.
Most obviously, its latest attempt to repeat the oil shock has been a damp squib. Despite announcing production cuts of over five million barrels per day (bpd) in November, the oil price is currently around a six-month low. Even the Houthi rebels in Yemen attacking Red Sea shipping lanes hasn’t managed to lift prices above $80 a barrel.
Opec is stuck in a two-pronged trap: global dependence on oil is waning. And, in the meantime, the cartel is losing its grip over world production. One of the most persuasive arguments for Net Zero is reducing our dependence on the oil barons – and this year’s annual report from the International Energy Agency (IEA) perfectly illustrates the case.