The Prize, Chapter 26 Overview

The Prize, Chapter 26 Overview

In chapter 26, we see the further evolution of OPEC and the impact of Russia coming back into the game. Except Russia’s approach was not to restrict oil, but the opposite, flood the market and impact pricing and market share. Russia wanted to create dependency on their oil by making it almost “too easy” to get. More than one expert has stated that the current challenges in Western Europe today are rooted in over-dependency on Russian oil and gas.

It is an interesting approach, and a characteristic of the oil industry, in that providing too much oil can almost be as destabilizing as restricting it. This is why at time embargoes are put in place, but at other times, it is more about quotas. The quota issue is discussed in the context of Middle East oil vs Canada, Venezuela, and Mexico.

This chapter discusses the development of OPEC and the ill-fated approach that the oil companies and importing countries took by discounting and ignoring them. In later chapters, we will learn how OPEC single-handedly drove the energy crisis of the 70s. Although the OPEC countries were influential, during this period, Africa also comes into the picture. North Africa, especially Libya, and other countries such as Nigeria and Algeria become major producers.

On a larger scale, things were surely changing. The powerful consortium of oil companies was losing some of its influence as the exporting countries flexed some muscle. Iran was becoming a force to be reckoned with in its own right, but further compounded by appearances that it may align with Russia. And there was an overall growing dislike and distaste for the West. Ironically, the Persian Gulf area, typically seen as the volatile area, became the “stabilizer” of supply to dampen the effect of problems that were popping up elsewhere.

In their own way, countries and companies were realizing that the oil market was a complex thing that needed care and innovation to work properly. And simple cutthroat competition drives down profits and hurts everyone. They continued to look for ways to work as an integrated machine, while recognizing the differing priorities, cultures, and drivers between countries and regions. Sometimes, this meant setting quotas, which generally aggravated the impacted producing countries.

The conflicts in the Middle East and Africa spawned the growing discussion in the US about energy security and making sure we have enough for ourselves, while at the same encouraging and supporting global trade. The idea of a stockpile came up. Unfortunately, even to this day in the 2020s, balancing energy national energy security with participation in global commerce has proven challenging.