Last week, the Ministerial Council of OPEC decided to maintain the policy on oil production that was agreed upon in the Algerian city of Oran in the autumn of 2008, with the beginning of the global financial crisis. This policy specified a production cut of nearly 4 million barrels per day, lowering the production ceiling of OPEC member states (with the exception of Iraq) to 24.8 million barrels per day. OPEC's ministers expressed their satisfaction with the price level, which ranges between 75 and 85 dollars for the barrel, as this benefits both producers and consumers.
The price level is high enough for the budgets of most oil producing countries. The stability of the implies a decrease of a big negative impact that otherwise harms public budgets as has happened in the past. The present price level is also suitable for consuming nations, as these would need a relatively high price of oil to justify investments in the otherwise expensive alternative energy sector.
So why [is OPEC] a lifeboat? Through its policy on oil production, the organization has succeeded in maintaining oil prices at a reasonable level. It has also succeeded, through production cuts, in credibly and sincerely defending prices, in the wake of their collapse at the start of the global financial crisis (falling to nearly 30 dollars per barrel), all without dealing any blows to the global economy. In addition, the majority of OPEC’s member states have since injected the necessary funds for investments and new projects, particularly in the petroleum sector, in contrast to the deflationary policies of the industrialized nations which, first and foremost, attempted to rescue their crumbling financial institutions, while approving spending cuts in their budgets.
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