7

Norway produces the fifth highest amount of oil per capita in the world, (and 15th unrelated to population) so why are they not a part of OPEC? What are the political reasons for this?

I don't really think it's surprising. I'm just curious why some oil producing countries are members while others aren't. I chose a specific country to make my question less broad. I guess one could also pose the same question regarding Russia, China, Brazil or Canada.

0

1 Answer 1

18

Short answer: Norway is a developed country.

Longer answer:

OPEC was developed as a way for under-developed economies with oil wealth to fight back against the power of multinational corporations mostly from Britain and the U.S. Norway didn't have that problem, and so wasn't really concerned with the same issues of OPEC.

Later, OPEC became a way for Middle Eastern countries to use the "oil weapon," which mostly targeted the U.S. The most notable attempt to use the oil weapon was in 1973, when OPEC tried to coerce the U.S. to abandon Israel. The economic pressure was tremendous, but since only the U.S. was targeted, the U.S. could seek relief through the international market, most notably through NATO allies like Norway. NATO held together, even though there was strong incentive to defect, because of the Soviet threat, and ultimately the oil weapon failed.

Finally, OPEC has ultimately been paralyzed by competition between Saudi Arabia and Iran. The Saudis are selling oil at or below cost to under-cut both U.S. fracking interests and Iran. Iran is the primary target, and is unwilling to cut back their oil production, leading to historically low oil prices. While this still hurts Norway, being a member of OPEC would do nothing to solve the problem, either for Norway or OPEC.

One technical note that influences all of this. What is important in the ability to influence oil prices is the ability to increase or decrease petroleum extraction cheaply. OPEC members (mostly) have it, with the Saudis being king, and Norway doesn't. Off-shore oil production, like fracking and deep drilling, is costly to start and costly to stop, meaning that even with enormous reserves, the U.S., Norway, and Russia can only slowly affect oil prices, where as the Saudis can turn the spigot on or off as they please.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .