Before I begin, let me define what the acronym OPEC stands for… OPEC stands for “Organization of the Petroleum Exporting Countries” and represents mostly the middle eastern countries, but also outliers countries like Venezuela.
At the last OPEC meeting (11/27/2014), OPEC decided not to cut oil production and for many countries the decision was kind of like a stealth stimulus package. When oil is cheaper, that means goods are cheaper and people send more! I know personally with falling gas prices, I’m less worried about driving too much than I was a few months ago. Over the next few months, ideally goods (things we consume) should not have any near term prices increases since goods are cheaper to produce because of cheap energy. The biggest benefactor would be China in my opinion though.
How the OPEC non-cut affects the United States:
In my laymen logic, I think that with OPEC not cutting oil production,is a small stimulus like package for the United States too. Now the OPEC ideology of not cutting production is that such an action will destroy the United States shale oil business as the price of cheaper extraction oil from the middle east/gulf area will become cheaper than it cost to extract the oil from shale. Personally, I think there is some missing logic to consider. For one, even if many of the shale oil companies go belly-up, the shale oil resources will still be there! In fact, once oil prices return, I’m sure companies (the same or different) will start extracting new shale oil again in the future. Basically, the shale oil resources can pretty much create a somewhat permanent cap to future oil prices.
In the mean time, we the US consumers will benefit from the cheaper oil prices. Non-oil related companies should see margins increase as their cost of goods sold decreased correspondingly. That said, oil related companies may suffer a bit from the lower oil prices, but hopefully the benefits will outweigh the negatives.
Other country considerations:
Countries that are oil based should be adversely affected by the decreased prices of oil. So countries like Russia, Iran, Venezuela and others should feel a small ding in their economies.
Renewable energies will be affected because of cheap oil. But that too, should be a temporary ding I would hope. Solar Energy is the most interesting in my opinion because the efficiency of the solar panels continues to increase creating a scenario where the cost of solar energy continues to become cheaper with such an increase in the efficiency improvements of the solar cells.
Will Oil become obsolete?
Petroleum is used to make plastic good too, so more than likely petroleum will not because obsolete entirely, but as renewable energy continues to make an impact on fossil fuel energy consumption, the rate of consumption of oil should and could stall. So oil will not become obsolete, but maybe it will start to converge in the next 10 to 20 years to a static or declining consumption level.
The above is just me thinking out loud. Well see how the Saudi’s gamble turns out (Saudis are the primary pusher for not cutting oil production). I’m in no way an energy expert, but some of the topics I mention above seems both possible and logical, no?