OPEC's Fall

Forty years ago, OPEC's control over oil supply and hence prices was an important consideration in economic and international political calculus.  OPEC countries could use their leverage over oil prices for political ends. Two things have changed. First the world's demand for oil hasn't grown as quickly as was once forecast. Since oil fields take decades to develop and exploit, tat has led to some over capacity. That would not be so bad were OPEC still able to coordinate supply; but on the supply side, the shale revolution has put paid to that.

First, the small shale drillers provide flexible supply that comes online whenever prices rise. That serves to bring supply up to meet demand and keeps in prices from spiking were OPEC to turn down the taps. The Saudi's role as the world's marginal producer has been usurped.

The second effect is to put a spanner in the works of the OPEC "bargain", a bargain that is the only way it was able to persuade its members to abide by agreements to restrict output. When only OPEC countries were producing, the fall in revenue from reduced output was offset by the rise in prices. Whether this was "revenue neutral" I don't know but it clearly would have mattered. Now, when OPEC cuts production prices may not rise nearly as much since the shale driller will come on stream to help fill the gap between demand and supply. So OPEC members will see a fall in revenue from lower output that is no longer balanced by a rise in price. That makes it almost reaching a collusive equilibrium in this repeated PD game almost impossible.