OPEC: Systems thinking on low oil price situation

Peter Y. Jang, Mario G. Beruvides

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

2 Scopus citations

Abstract

The Organization of Petroleum Exporting Countries (OPEC) was founded in 1960, and ever since, its fourteen members have enjoyed its dominant supplier position with 43% of global production and 80% of the oil reserves. The oil price reached a peak in mid-2008 when the West Texas Intermediate (WTI) futures price was skyrocketing to $150 per barrel, among fears of the supply shortages due to stunning growth rates of China and India. The OPEC members and other producers benefited the most from such high price states. The high price did not sustain, and the dynamics of the market shifted. In mid-2014, the WTI oil price plummeted to $40s per barrel, followed by a further drop to the mid-$20s in early 2016. OPEC has been complacent with its production capability and price setting roles. Now, both OPEC and non-OPEC oil producers find themselves in a series of downward price spirals, resulting in government budget deficits and heavy layoff situations in the global oil industry. This paper analyzes historical data for crude oil production, demand and prices over the period of 2000 to 2018. This analysis examines how global oil producers could use systems thinking approaches in a response to the growing shale oil production and cost structures of all the global producers. An examination of the behavior over time and the subsequent causal loop diagram of the dynamics underlying the structures of the global system are presented. Potential impacts and implications of the current state of the global oil market are explored.

Original languageEnglish
Title of host publication2019 International Annual Conference Proceedings of the American Society for Engineering Management and 40th Meeting Celebration
Subtitle of host publicationA Systems Approach to Engineering Management Solutions, ASEM 2019
EditorsE. Schott, H. Keathley, C. Krejci
PublisherAmerican Society for Engineering Management
ISBN (Electronic)9780997519563
StatePublished - 2019
Event2019 International Annual Conference of the American Society for Engineering Management and 40th Meeting Celebration: A Systems Approach to Engineering Management Solutions, ASEM 2019 - Philadelphia, United States
Duration: Oct 23 2019Oct 26 2019

Publication series

Name2019 International Annual Conference Proceedings of the American Society for Engineering Management and 40th Meeting Celebration: A Systems Approach to Engineering Management Solutions, ASEM 2019

Conference

Conference2019 International Annual Conference of the American Society for Engineering Management and 40th Meeting Celebration: A Systems Approach to Engineering Management Solutions, ASEM 2019
Country/TerritoryUnited States
CityPhiladelphia
Period10/23/1910/26/19

Keywords

  • Oil price
  • Opec
  • Systems theory
  • Systems thinking

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