How much oil do Opec countries really have?

World over, oil is a major source of energy. But naysayers predict it maybe not too long before we run out of this all-important fuel.

However, since the mid-80s, the Organisation of Petroleum Exporting Countries (Opec) has been acting as a swing oil producer of the world. Meaning, Opec produces only that much as to fill the gap between the global oil demand and production by non-Opec countries.

Over the years, the swing production arrangement resulted in Opec having a lot of idle capacity, which helped Opec to gain control over oil prices. Whenever the inventory level of oil stocks in industrialised nations, particularly the members of Organisation of Economic Cooperation and Development (OECD) went up, Opec reduced output.

This artificial scarcity that Opec manages to create did not allow oil prices to fall.
The same idle capacity has been used to pump extra oil into the market to prevent dramatic price rises during times of unexpected supply interventions. Most of this idle capacity is in Saudi Arabia, the largest member of the Opec.

“This encouraged the belief that Opec could always be relied upon to make up the difference between non-Opec supply and global demand, whatever the circumstances. Economists, oil analysts and government officials all succumbed to the reassuring view that the ‘call on Opec’ could expand almost indefinitely,” writes David Strahan in his book The Last Oil Shock — A Survival Guide to the Imminent Extinction of Petroleum Man.

DNA India