Oil prices tumble to five-year low: Opec's failure to agree to output reduction weakens its clout and pushes rate below psychological barrier of dollars 15 a barrel Oil prices tumble to five-year low

OIL PRICES tumbled around a dollar yesterday to their lowest level for nearly five years. Oil producers, who met to discuss a cut in production in a bid to shore up prices, failed to agree on restricting output.

Yesterday, the price of the benchmark North Sea Brent fell through the pyschological barrier of dollars 15 a barrel to trade at between dollars 14.25 and dollars 14.35. The previous lows were dollars 10-dollars 11 a barrel at the end of 1988 and dollars 8.50 a barrel in mid-1986. In real terms, taking account of inflation, prices are scarcely higher than they were at the time of the 1973 Arab oil embargo, which put the Organisation of Petroleum Exporting Countries (Opec) on the map.

The tumbling prices are further signs of how far Opec has fallen from its pedestal as the key arbiter of oil prices. The 1973 oil price rises were the greatest and most dramatic of the oil shocks to hit Western industries and motorists grown used to cheap energy. The Arab oil producers -and other non-Arab Opec members -were able, in effect, to hold an oil-dependent world to ransom. But the rise in prices also sowed the seeds of Opec's eventual demise. It made economical the exploitation of oil fields that had, until then, been too expensive - not least in the North Sea. Once these other sources came on stream, Opec's primacy was challenged.

In recent years, two other factors have also weakened Opec's bargaining strength: the collapse of the Soviet Union, and the keenness of ex- Soviet republics to sell their oil; and the lack of discipline of Opec members, who have exceeded their agreed quotas.

The lower prices will squeeze the economies of the oil states, already stretched by falling incomes. Some, such as Kuwait, have long since derived more income from investment than oil revenues. Others, such as Iran, are almost entirely dependent on exports of oil.

Over time, the world will become, once more, increasingly dependent on the Gulf for its oil requirements. The Gulf contains two- thirds of the world's proven oil reserves, nearly 98 per cent of which are in five countries: Iran, Iraq, Kuwait, Saudi Arabia and the United Arab Emirates.

Opec ministers meeting in Vienna on Tuesday and Wednesday were unable to make even a token cut in production quotas. Because of continuing recession in the industrialised world, demand is low, forcing prices down. Oil prices are down about 20 per cent on the year, as non-Opec producers, such as Norway and Britain, have been pumping oil at unprecedented levels. Prices are expected to fall further for a few days as US traders are inactive because of Thanksgiving. However, the decision not to cut production appears a calculated gamble that demand will pick up as winter sets in. Oil analysts did not expect prices to enter a freefall. 'It'll recover,' said Leo Drollas, chief economist at the Centre for Global Energy Studies.

Saudi Arabia, the largest producer with a quota of 8 million barrels a day, was keen to maintain a steady line. Iran, the second largest supplier, with 3.6 million barrels a day, has always been unhappy with the arrangements. Iran is having difficulty paying for imports and needs to increase income rapidly.

The ministers decided to do nothing because they were uncertain a trim in oil production would do much to help prices. Gholamreza Aqazadeh, Iran's Oil Minister, said the Opec countries would have had to cut by a minimum of 1 million barrels a day to have a substantial impact. But he said such a deep cut would not be 'easy to divide among the countries'.

Once again, Opec called on non- members to steady the market. Opec's communique at the end of its session stated: 'The Conference does not consider that Opec alone should continue to bear the burden of balancing supply and demand.'

The market fears a glut if Iraq is allowed by the United Nations to resume sales of oil, restricted as part of the Gulf war ceasefire resolutions. However, Western diplomats doubt if those restrictions will be eased in the near future.

Business, page 34

(Photograph and graph omitted)

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
Young Winstone: His ‘tough-guy’ image is a misconception
people
Sport
Adnan Januzaj and Gareth Bale
footballManchester United set to loan out Januzaj to make room for Bale - if a move for the Welshman firms up
Arts and Entertainment
Ellie Levenson’s The Election book demystifies politics for children
bookNew children's book primes the next generation for politics
News
Outspoken: Alexander Fury, John Rentoul, Ellen E Jones and Katy Guest
newsFrom the Scottish referendum to the Ice Bucket Challenge, our writers voice their opinions
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Lena Headey as Cersei Lannister in Game of Thrones
film
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
Sport
Tim Sherwood raises his hand after the 1-0 victory over Stoke
footballFormer Tottenham boss leads list of candidates to replace Neil Warnock
Voices
Strictly Come Dancing was watched by 6.9m viewers
voicesIt has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Arts and Entertainment
Roffey says: 'All of us carry shame and taboo around about our sexuality. But I was determined not to let shame stop me writing my memoir.'
books
News
Danielle George is both science professor and presenter
people
News
i100
News
Caplan says of Jacobs: 'She is a very collaborative director, and gives actors a lot of freedom. She makes things happen.'
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Ashdown Group: Senior Marketing Executive- City of London, Old Street

£40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...

Ashdown Group: Marketing Manager

£40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...

Ashdown Group: Internal Recruiter -Rugby, Warwickshire

£25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...

Day In a Page

War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?
Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

Finally, a diet that works

Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
Say it with... lyrics: The power of song was never greater, according to our internet searches

Say it with... lyrics

The power of song was never greater, according to our internet searches
Professor Danielle George: On a mission to bring back the art of 'thinkering'

The joys of 'thinkering'

Professor Danielle George on why we have to nurture tomorrow's scientists today
Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

Monique Roffey interview

The author on father figures, the nation's narcissism and New Year reflections
Introducing my anti-heroes of 2014

Introducing my anti-heroes of 2014

Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
DJ Taylor: Good taste? It's all a matter of timing...

Good taste? It's all a matter of timing...

It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

How we met

Olivia Jacobs and Ben Caplan
Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

Bill Granger's healthy breakfasts

Our chef's healthy recipes are perfect if you've overindulged during the festive season
Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

Who does your club need in the transfer window?

Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

Michael Calvin's Last Word

From aliens at FA to yak’s milk in the Tour, here’s to 2015