The global energy market has undergone significant and rapid developments, particularly since the outbreak of the Russian-Ukrainian war. In light of these changes, the organization known as “OPEC” aims to bolster its influence by welcoming new members. This move not only provides additional support for OPEC’s share of global oil production but also allows the organization to adapt to shifts in the global economy. Moreover, it underscores the growing significance and appeal of oil as a crucial energy source in the forthcoming decades, while also highlighting the reinforcement of roles played by regional and international blocs.
During the OPEC International Conference held in Austria on July 5, 2023, Haytham Al-Ghaith, the Secretary-General of the Organization of the Petroleum Exporting Countries (OPEC), unveiled the organization’s ambition to expand its membership. He disclosed ongoing consultations with Azerbaijan, Malaysia, Brunei, and Mexico, considering their potential membership as a means to reinforce OPEC’s position. Al-Ghaith emphasized that OPEC’s goal is not to set a specific number of countries to join but rather to focus on nations sharing a common strategic orientation toward safeguarding oil markets and ensuring their stability.
Additionally, he highlighted that the aforementioned countries have been collaborating with the organization since 2017, and together, they confronted significant challenges during the market collapse and the COVID-19 pandemic in 2020. As a result, these nations share a common goal focused on ensuring the stability of the oil market.
Furthermore, it’s worth mentioning that the ministers of energy and oil from the member countries of the Organization of the Petroleum Exporting Countries (OPEC) held a preparatory meeting before the OPEC International Conference. They reached an agreement to continue consultations with their counterparts from outside OPEC through established mechanisms, including the meetings of the Joint Ministerial Monitoring Committee and the ministerial meeting involving countries both within and outside OPEC. The primary objective of these consultations is to support the stability of the global oil market.
The Motives behind the Action
The expansion of OPEC membership is well-received by the member countries of the organization, as confirmed by the UAE Minister of Energy, Suhail Al Mazrouei, and the Iraqi Minister of Oil, Hian Abdul Ghani. They stated that the inclusion of other countries would lead to the stability of oil markets, especially with increased control over production. In this context, the organization’s move aims to reflect the following:
- Supporting OPEC’s Share of Global Production: The “OPEC+” group, comprised of 23 countries (13 OPEC member countries and 10 others), has effectively boosted OPEC’s daily production share to approximately 32% of the total global production, with a nearly 50% share within the OPEC+ group (see Table 1). Thus, the addition of new members, even if in smaller proportions, is likely to have a similar impact.
However, the current commitment of non-OPEC members within the “OPEC+” group (excluding Russia) might not be sustainable. Therefore, the inclusion of some of these countries into OPEC would enhance adherence to the organization’s decisions and carry significant implications for increasing OPEC’s influence in the global oil market. Notably, the four countries under consultation could provide OPEC with the potential to control an additional 2% of global oil production (see Table 2). While this percentage may appear modest, the possibility of including other countries beyond the four in the future could further strengthen OPEC’s control over global oil prices.
The inclusion of the mentioned four countries has the potential to increase OPEC’s share of daily oil production from approximately 33% of the total global production (based on 2021 data) to 35.85%. This move would enhance the organization’s cohesiveness and significantly impact the global oil market, particularly considering the current uncertainty in the global economic landscape.
OPEC has encountered various challenges in mitigating the impact of its decisions. For instance, the production cuts implemented by “OPEC+” to stabilize the market have led other countries to ramp up their production, aiming to expand their market share at the expense of the countries adhering to the production cuts.
- Adapting to Global Economic Shifts: The endeavor to expand OPEC’s membership aligns with prevailing global trends, which emphasize the need to bolster the influence of regional and international blocs, particularly in light of a potential slowdown or retreat in globalization following the “COVID-19” pandemic. This trend is evident in the pursuit of maximizing self-sufficiency and relying on regional supply chains within defined geographical scopes. Many blocs have expanded their memberships to solidify their positions, as seen with Iran recently joining the Shanghai Cooperation Organization, several countries seeking NATO membership like Sweden (following Finland’s membership in April 2023), and the BRICS group’s intention to welcome new members in the future. Such actions strengthen the roles of these blocs while offering benefits to the countries that join them.
Conversely, the dynamics in the global energy market have prompted numerous energy-exporting and consuming countries to forge deals aimed at securing energy sources or supporting energy production to augment global supply. A standout example is Mexico, which has witnessed significant developments in this context. In March 2023, the Italian company “Eni” announced the discovery of a new oil field with reserves of 200 million barrels in the “Sureste Basin” off the Mexican coast. Similarly, in June 2023, the Australian company “Woodside” approved the development of the “Trion” field in the Gulf of Mexico, with an estimated investment cost of 7.2 billion dollars. The company anticipates its spending share to be 4.8 billion dollars, with the remaining funding provided by the Mexican state-owned company “Pemex.”
Based on the above, it is evident that the addition of oil-producing countries to the OPEC group has the potential to formalize exploration and new oil production processes. This would be achieved through the establishment of specific production quotas by the organization, ensuring that oil prices do not experience significant declines in the global market due to supply increases. Such an expansion could act as the first line of defense against efforts by Western countries to gain more influence in the global oil market.
Notably, the countries under consideration for membership possess relatively large oil reserves compared to smaller oil producers (see Table 3). As a result, their oil could serve as a supportive reserve for the oil market in the event of price increases.
- Emphasizing the Attractiveness of Oil as an Energy Source: The inclusion of multiple countries in OPEC serves as a strong affirmation of oil’s continued significance as a primary energy source, countering attempts to marginalize it in the coming decades due to environmental concerns. OPEC’s expansion of membership also underscores its commitment to ensuring a sustainable oil supply through its members, considering their anticipation that oil demand will remain steady or even experience modest growth (see Figure 1).
Western countries, represented by the International Energy Agency, advocate for reducing oil consumption and transitioning to renewable energy in both power generation and fuel use as part of their roadmap to achieve net-zero carbon emissions by 2050. To reach this ambitious goal, they propose reducing oil consumption by more than half (see Figure 2). In this context, the addition of new oil-producing countries to OPEC will play a crucial role in preserving the appeal of oil as an energy source and sustaining associated activities. This stands in contrast to the perceived impracticality of the movements by Western countries.
Active Maneuvers
OPEC’s pursuit of expanding its membership brings attention to the close connection between oil and the global energy market, emphasizing its crucial role in supporting development across all economic activities. This objective, even if achieved by adding smaller oil producers and exporters, depends on the interests of the targeted new members. They might have concerns about potential restrictions on their future production due to OPEC’s decisions. Moreover, there could be anticipated pressures from Western countries, urging them not to join OPEC. For these countries, joining OPEC could be perceived as a setback in their energy policies, which aim to diminish the role of the “OPEC+” group in the global oil market.
In this context, OPEC’s current maneuver is likely to have an impact on the global energy market, even without any new countries joining the organization. It may lead to future changes in the map of international interactions, resulting in new alignments, as oil-producing and consuming countries endeavor to address threats to their energy security, each with different interests and objectives.