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A city worker sprays disinfectant at a public gas station in Caracas, Venezuela A city worker sprays disinfectant at a public gas station in Caracas, Venezuela, April 11, 2020 (AP photo by Matias Delacroix).

How COVID-19’s Economic Crisis Could Slowly Break Up OPEC

Friday, April 17, 2020

Years from now, when historians and economists begin tallying the devastation wrought by COVID-19, it is likely only a few will focus much on world energy markets. Yet if there is one thing that has snapped into sharper view with the onset of this global pandemic, it is the extremely brittle state of OPEC and the autocratic governments that rely almost exclusively on the cartelization of oil markets to prop up their regimes. In September, OPEC will mark its 60-year anniversary as the world’s most preeminent price-fixing consortium. But it seems far from certain that the governments of the 13 states that currently make up the oil cartel will be able to survive a likely global recession, let alone the full-on, pandemic-induced depression that the International Monetary Fund is now predicting.

The warning by the IMF this week is a reminder that poet T.S. Eliot had it exactly right when he said, “April is the cruelest month.” If the IMF’s projections are accurate, the regions likely to suffer more than any other part of the world are the Middle East and Central Asia. The swath of territory spanning from Morocco to Pakistan is poised to potentially suffer a 4 percent downturn in GDP—a decline even sharper than in the rest of the world. Given that roughly half of OPEC’s member states sit within or are contiguous with those loose boundaries, it is almost as if an occult hand is poised to knock out nearly half of OPEC’s leadership. ...

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