The last meeting of the OPEC oil cartel ended in disarray. But the collapse will not affect the finances of the group. The earnings of the members of the cartel, from Saudi Arabia to Iran, are set to break above the $1-trillion (U.S.) mark this year for the first time, beating the $965-billion peak set in 2008, according to the U.S. government.
The forecast of earnings of $1.034-trillion this year represents a hefty 32.5-per-cent increase from the nearly $780-million that OPEC earned last year. Even in real terms, adjusted by inflation, OPEC earnings would also hit a record this year and nearly double the earnings level set in 1980 during the second oil crisis.
The U.S. Energy Information Administration, the statistical arm of the U.S. Department of Energy, on Tuesday published the new estimate, which takes into account higher oil prices for the rest of the year and extra production.
The new forecast is the latest sign of the windfall that the members of the cartel, which control 40 per cent of global oil supplies, are enjoying on the back of oil prices above $100 a barrel. Only five years ago, OPEC countries earned just above $500-million. Yet the surge in earnings is offset by the large increase in population over the past few years. As such, real per capita income is below the levels set in the 1980s. In real terms, OPEC per capita income peaked at $3,500 a year in 1980. This year, the cartel's per capita income in real terms is set to reach a high of $2,306.
OPEC nations desperately need higher revenues, however. Take Saudi Arabia, a traditional price dove. Riyadh has boosted public spending hugely in an effort to forestall the political unrest sweeping the Middle East. Jadwa, a Riyadh-based investment firm, estimates that Saudi Arabia would require oil prices at nearly $80 a barrel to balance its budget, up from less than $40 five years ago.
Worse, the Institute of International Finance, an association of top banks, estimates that Saudi Arabia might need oil prices to average $110 a barrel by 2015 to balance its budget. Only a decade ago, Riyadh was able to break even with oil prices at $20-$25.
The forecast of revenues topping the $1-trillion barrier comes only days after the meeting of the OPEC cartel collapse as Saudi Arabia was unable to convince fellow members such as Algeria, Iran and Venezuela to boost production to bring down prices. Riyadh is, however, boosting its own output unilaterally. Last year, Saudi Arabia took nearly a third of all the revenues of the OPEC cartel, the EIA said.