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ROME — A little more than a year ago, Saudi Arabia, the effective leader of OPEC, the 13-country cartel that pumps about a third of the world’s oil, decided that enough was enough.
The global market was drowning in oil, thanks to the American shale-oil miracle, and the Saudis were losing market share. They went on the offensive.
Production cuts by the Organization of Petroleum Exporting Countries (OPEC) to keep the price up would be ruled out; the market would find its own level.
Not even the Saudis could have foreseen the damage the decision would inflict. In the past year, Brent crude, the global benchmark, has fallen 37 per cent to $44 (U.S.) a barrel. As late as June, 2014, Brent was trading at $110. The International Energy Agency (IEA) estimates that the oil plunge has reduced OPEC’s annual oil revenues to $550-billion from $1-trillion.
The value obliteration has divided OPEC as never before, to the point that the organization’s summit in Vienna resembled a slugfest on Friday. OPEC’s weakest countries, led by Venezuela, begged the Saudis to endorse a 5-per-cent production cut to prop up the price.
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