OPEC break even prices… WSJ

by Jim Colburn • Monday, July 31, 2017

The Wall Street Journal discusses OPEC’s problems in attaining an oil price that will cover public expenditures here…  And from the WSJ:

“Previously, low production costs meant OPEC members profited even when oil prices fell. These days, members have ramped up government spending to keep populations happy and cover military expenses, and don’t have a cushion to let oil revenues slip. Their strained budgets can be covered only through increasingly high prices per barrel, and if prices are low they need to produce more.”

“Several years of $100 a barrel oil prices lasting until 2014 coincided with big military, security and domestic spending to pacify restive populations during the Arab Spring, hold back the tide of Islamic State and influence the Syrian civil war. Those spending obligations meant OPEC was fundamentally unprepared for the oil-price crash that followed.

The U.A.E. spends only $12 to pump a barrel of oil but needs oil to sell at $67 to cover its government expenditures, according to the International Monetary Fund. Its national budget has quadrupled to over $114 billion over the past 15 years.”

This chart illustrates OPEC’s need for higher prices:



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