Opec's glory days as an effective cartel are well and truly over

EXPECTATIONS were running high prior to the meeting of the Organization of the Petroleum Exporting Countries (Opec) held in Doha over the weekend. In the run-up to the gathering, oil prices had climbed from a 12-year low of under US$30 a barrel in January to around US$45 a barrel last week.

This was in anticipation that a long-elusive deal among the cartel's members to freeze oil production was finally at hand. But after six hours of negotiations, the Doha talks collapsed without any agreement being reached. Oil prices promptly corrected almost 5 per cent in a single day. Financial markets also took a hit.

Even at the best of times, agreements to cut or freeze production by Opec members are not easy to reach and are even more difficult to be fully honoured by its members - many of whom have historically resorted to "cheating" - that is producing more oil than they pledged, with a view to gaining market share. As a result, total production of Opec oil has often exceeded the cartel's agreed ceilings. Other problems have included the rise of non-Opec producers in recent decades, notably Russia and Norway and then more recently, the coming on stream of shale oil and gas, mainly from North America.