Two watershed years

OPEC Bulletin Commentary December 2018

This month’s special edition of the OPEC Bulletin has been devoted to commemorating the 2nd anniversary of the landmark ‘Declaration of Cooperation’ (DOC). A little over one year ago, in the November 2017 issue of this publication, we marked the overwhelming success of the DOC’s first year with a special issue entitled ‘Forging history.’

And indeed, at that key juncture, one year into the DOC, history had already been made on several fronts — it was a year of ‘firsts’: the first production adjustment since Oran 2008; the first time participating non-OPEC countries committed to join OPEC in its efforts to re-establish stability in the market through voluntary adjustments to production; the first time a Joint OPEC-non-OPEC Ministerial Monitoring Committee (JMMC) had ever been created to monitor implementation of a joint decision; and finally, the first time that a framework for sustained, structured and transparent cooperation between OPEC and non-OPEC nations had ever been established.

In the pages ahead, we now present a retrospective look at the historic achievements of the past two years as the DOC continued to blaze a path of stability, helping revitalize and transform the international oil industry, bringing it back from the brink of collapse.

In addition to our usual coverage of the Secretariat’s activities, this special edition features coverage of the two-year historical journey chronicling the JMMC’s crucial role in ensuring the successful implementation of the Declaration, as well as an in-depth look at how the landmark OPEC-non-OPEC cooperation has impacted the global oil market over the previous two years of the DOC.

Today, the oil industry, and, by extension, the global economy, is generally enjoying the calm after the storm and benefiting from a renewed sense of optimism and stability.

But the road to get to where we are today was complex and full of challenges and risks.

American civil rights icon Martin Luther King, Jr once said “the ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”

And, indeed, when the chips were down, it was OPEC, along with ten non-OPEC participating countries, that rose to the occasion and had the courage and willpower to take action and come to the rescue of an oil market that in mid-2014 had suffered one of its most severe oil price cycle downturns in history. The OPEC Reference Basket had plummeted by a drastic 80 per cent between June 2014 and January 2016, paralyzing the industry with frozen and cancelled projects, hundreds of thousands of lost jobs and drastic drops in investment. The mood pervading the industry was at an all-time low.

When the news of this unprecedented OPEC-non-OPEC cooperation was first announced at the end of 2016, it was initially greeted with a chorus of naysayers who claimed that the Declaration’s goals of rebalancing the global oil market could never be achieved. But, low and behold, as the months progressed, success steadily prevailed as stocks came down and balance was restored.

Stakeholders across the entire value chain, in the end, were won over and overwhelmingly lauded the proactive efforts that brought the industry back to life.

The events of the last two years centred on meeting an immediate and urgent need involving the nuts and bolts of market fundamentals — the balance of supply and demand — and, of course, restoring the stability that is so crucial to future growth.

However, when one steps back for a moment and observes these developments from a wider perspective, it becomes clear that this is about a lot more than just market dynamics and outlooks.

The historic DOC has virtually changed the way business is done, ushering in a new era of international dialogue and cooperation in the global energy industry.

What was before a go-it-alone, winner-takes-all mentality has now evolved into an approach more akin to ‘how can we work together to achieve our common goals’. And this has made all the difference. It has helped knock down barriers and build new bridges of understanding, paving the way for new avenues of dialogue and collaboration.

Thus, what started as a rescue operation for an oil market under siege has evolved into much, much more. The Declaration’s 24 signatories never imagined in December 2016 how far and wide the impact of their joint decision would reach.

Now, the concrete has been poured and the foundation is firmly set for this global cooperation to evolve and expand, enabling current and future participants to more effectively meet future challenges and foster market stability, economic growth and future prosperity.

The wise words of ancient Latin writer and intellectual Publilius Syrus sum it up well: “Where there is unity, there is always victory.”

OPEC Bulletin December 2018

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