(5) Production, or “lifting” costs are far lower in OPEC countries than in most non-OPEC countries. Prolonged periods of low oil prices make the world more reliant on cheaper-to-produce OPEC oil.
In contrast to OPEC countries, non-OPEC countries share the following characteristics:
(1) Most non-OPEC countries are net oil importers. Of the 96 non-OPEC countries for which data was available (from the Energy Information Administration), 67 (71%) were net oil importers in 2001. Even large producers can also be large importers. The seven largest non-OPEC producers in 2001 had net average exports of 15% of total oil production.
(2) Most major non-OPEC countries have private oil sectors (Mexico is one
notable exception); the political establishment generally has very little
control over production levels. Companies react to international price expectations,
exploring and drilling more and in higher cost areas when prices are high,
and focusing on lower-cost production when prices are low.
(3) Private companies keep very little spare production capacity. Hence, in
the case of a significant world oil production disruption, OPEC (rather than
private oil companies) would be the primary immediate source of additional
oil to displace the loss.
(4) Non-OPEC lifting costs tend to be higher than OPEC lifting costs, which
makes non-OPEC production more vulnerable to price collapses. Prolonged periods
of low prices can drive higher cost producers out of business, and make major
oil companies focus less on higher cost areas.
WORLD OIL PRODUCTION
World Oil production by region, 2001:
In the year 2001, the Middle East was the largest producing region with 29%
of total world production. North America accounted for 20%, with the remaining
51% dispersed fairly evenly throughout the world.
PROVEN CRUDE OIL RESERVES
The location of proven world crude oil reserves is far more concentrated in
OPEC countries than current world oil production. Of the world's 1.03 trillion
barrels of proven reserves, 819 billion barrels (80%) are held by OPEC. Because
non-OPEC countries 'smaller reserves are being depleted more rapidly than
OPEC reserves, their overall reserves-to-production ratio -- an indicator
of how long proven reserves would last at current production rates -- is much
lower (about 15 years for non-OPEC and 80 years for OPEC). This implies increased
OPEC production as a proportion of world production over the long term.
