I really appreciate this piece as there's a lot of the world of oil I don't understand. One thing I don't understand is, why is it favorable for OPEC not to cut supply? Is it they want to crush all non OPEC based producers? Or are their buyers forced to buy at a particular price so they don't care if they keep producing?
It's a much more complicated prisoner's dilemma.
Many of the oil producing countries are nearly entirely reliant on oil sales for their economies and national budgets. Something like, yes, you could optimize month to month prices with high cooperation cutting equitable amounts. But.
For some states it's like agreeing to starvation, no matter what they do prices are too low to pay the bills. Many of them only maintain their power because of oil money. And for some, losing money now means they can bankrupt or seriously disrupt their competition meaning they will make more money over a longer period.
So if you're starving there's a strong motivation do cheat. Everybody else cuts production, prices go up, and you sell everything you can to take advantage.
And remember we're talking about price fixing cartels here. Illegal in much of the world. Opec cuts would mean North American profits, because we obviously don't participate.
It is, as the author writes, now much more likely for some of these oil states to fail completely. Revolutions, civil wars, regional wars. States which had leverage over the US because of oil are seeing that evaporate with this oversupply and price crash.
And longer term, but not that far out is both some of these countries running out of oil and oil demand worldwide tending much much much lower as oil is phased out as an energy source. These oil countries see the impending permanent decline in oil demand and the immediate future is their chance to extract as much as they can out of their natural resource which each year will become less valuable and less relevant.