Sunday, April 17, was the designated moment. The world’s leading oil producers were expected to bring fresh discipline to the chaotic petroleum market and spark a return to high prices. Meeting in Doha, the glittering capital of petroleum-rich Qatar, the oil ministers of the Organization of the Petroleum Exporting Countries (OPEC), along with such key non-OPEC producers as Russia and Mexico, were scheduled to ratify a draft agreement obliging them to freeze their oil output at current levels. In anticipation of such a deal, oil prices had begun to creep inexorably upward, from $30 per barrel in mid-January to $43 on the eve of the gathering. But far from restoring the old oil order, the meeting ended in discord, driving prices down again and revealing deep cracks in the ranks of global energy producers.
It is hard to overstate the significance of the Doha debacle. At the very least, it will perpetuate the low oil prices that have plagued the industry for the past two years, forcing smaller firms into bankruptcy and erasing hundreds of billions of dollars of investments in new production capacity. It may also have obliterated any future prospects for cooperation between OPEC and non-OPEC producers in regulating the market. Most of all, however, it demonstrated that the petroleum-fueled world we’ve known these last decades—with oil demand always thrusting ahead of supply, ensuring steady profits for all major producers—is no more. Replacing it is an anemic, possibly even declining, demand for oil that is likely to force suppliers to fight one another for ever-diminishing market shares.
The Road to Doha
Before the Doha gathering, the leaders of the major producing countries expressed confidence that a production freeze would finally halt the devastating slump in oil prices that began in mid-2014. Most of them are heavily dependent on petroleum exports to finance their governments and keep restiveness among their populaces at bay. Both Russia and Venezuela, for instance, rely on energy exports for approximately 50 percent of government income, while for Nigeria it’s more like 75 percent. So the plunge in prices had already cut deep into government spending around the world, causing civil unrest and even in some cases political turmoil.
No one expected the April 17 meeting to result in an immediate, dramatic price upturn, but everyone hoped that it would lay the foundation for a steady rise in the coming months. The leaders of these countries were well aware of one thing: To achieve such progress, unity was crucial. Otherwise they were not likely to overcome the various factors that had caused the price collapsein the first place. Some of these were structural and embedded deep in the way the industry had been organized; some were the product of their own feckless responses to the crisis.