Source: www.oxfordenergy.org
Topic: Production & Operations Management
Sort Desciption: Paper presented at the OPEC International Seminar Vienna September 17 2004. The author is Chairman of the Oxford Institute for Energy Studies and a Senior Fellow in the Kennedy School of Government ...
Content Inside: Paper presented at the OPEC International Seminar Vienna September 17 2004. The author is Chairman of the Oxford Institute for Energy Studies and a Senior Fellow in the Kennedy School of Government at Harvard University. He is a former CEO of Pemex the Mexican national oil company. Production management security of demand and market stability by Adrian Lajous 1. The prevalence of spare capacity in the global crude oil market as well as the willingness and ability to make effective use of the flexibility it provides have been key instruments of supply management and a central feature of the current oil price regime. Historically excess capacity was highly concentrated in a small group of Gulf oil producers led by Saudi Arabia. The existence of this core group of countries provided the needed leadership and the possibility of enforcing collective decisions at critical junctures when production discipline was essential. Distributing the burden of unused capacity among OPEC members was never a simple task. The evolving quota mechanism faced complex allocation and compliance issues. Only the risk of lower prices and ultimately the fear of a price collapse proved to be compelling restraints. Supply coordination with other key exporters was focused on crisis management. At other times even when their support was mostly symbolic informal consultation proved useful. In recent years OPEC has formally revealed its price preferences by establishing a price range target linked to a semi-automatic volumetric adjustment mechanism. This has been effective as a signalling device for a number of years. Previously imp ...
