OPEC has long been Saudi Arabia reducing output, and everyone else selling everything they can. They haven't had much power since the 1970s, but that they exist means they are a threat that if everyone else actually stuck to the agreement for a change.
This is the common problem for cartels: everyone has inventive to cheat on the deals made. By selling a little more than your share you get more money, while because everyone else is following along the prices are higher. (see also prisoners dilemma)
Repeated PD is very different. The whole point of a cartel is that everyone inside is incentivized not to cheat, and it works as long as they agree on what's fair. The problem for cartels is people not in the cartel.
It’s well known that some OPEC members cheat nonetheless.
I'm not fully informed about the secret meetings of OPEC, but I would read things not so much as cheating as that everyone agrees that Saudi Arabia will reduce output - anyone else reducing output is reducing by the amount that will happen anyway because of wells drying up.
https://en.wikipedia.org/wiki/Tragedy_of_the_commons
Tangent but: this is also why reducing greenhouse gas emissions is hard.
As long as fossil fuels remain one of the cheapest easiest to scale ways to make power, there’s a similar incentive to cheat. If everyone else cuts emissions and you don’t, your margins are higher and you can undercut them. Global reductions require an all-cooperate scenario.
Developing nations have the strongest incentive to cheat since they need those margins to catch up.
Which is why I think little progress will be made until other sources are actually cheaper. Until then it’s beyond us politically. We can’t get all nations across the world to simultaneously cooperate at that scale.
> As long as fossil fuels remain one of the cheapest easiest to scale ways to make power, there’s a similar incentive to cheat. If everyone else cuts emissions and you don’t, your margins are higher and you can undercut them. Global reductions require an all-cooperate scenario.
IMO economics always wins. You're never going to see an all-cooperate scenario.
You will see an all-compete scenario, so constantly reducing costs for alternatives is key but you also have to find a way to ensure that the producers can win economically too. This is the conundrum.
If solar panels get cheap enough to create high demand, then that demand has to carry through the process of manufacturing, installing and maintenance. Every time I read that solar has gotten even cheaper, I start calling for quotes to install them at my house and the prices are borderline obscene. Same for geothermal last time I needed to update my HVAC.
I want solar and geothermal to work but the economics are a challenge.
Keep in mind if you are in the US, your prices have been artificially raised by tariffs. 30% starting in 2018, then declining each year for a while to 15%. Those tariffs recently expired but when I searched I saw this article about new tariffs on certain countries solar as high as 123%.
All this to say, you calling a local company and getting quotes captures your price but that’s not quite the same as the global price.
https://esgnews.com/us-imposes-solar-tariffs-up-to-123-on-im...
EDIT: I was wrong - tariffs on eg Chinese made solar panels are more like 65% right now - there’s multiple tariffs. https://pv-magazine-usa.com/2025/02/04/u-s-raises-solar-poly...
Point being the US government is making them expensive for US consumers but that’s not true for global markets where they want to have energy independence. Solar is in fact very cheap these days.
Tariffs have little to do with install costs in the US. They were horrible before Trump, and aren't much worse today.
The equipment is nearly free compared to the labor to install it. At least the last time I checked. I could do my own DIY system for about 1/4th the cost of one "professionally" installed - and I use the scare quotes for good reason. Most of the installation companies for residential solar exist to sell financing, the solar bit is just an unfortunate tertiary (behind grifting on the green energy credits/tax rebates) concern for most of them.
Panels costing an extra 65% is a rounding error for me. I'd need a whole lot more real estate to put them on for it to become a significant fraction of the total system cost.
And that might even STILL be okay if the quality of engineering and workmanship was decent and available. I'd pay the going rate tomorrow if I could find a highly competent electrician/company to do the over-engineered setup I want today. I'm not interested in saving money - I could care less if it ever pencils out. I'm interested in having a system that can survive a lengthy grid outage situation that is fully redundant and properly engineered to industrial level standards. This is effectively impossible in the US, but friends in other areas of the world have had similar setups installed for years.
In Europe you get about 1000kWh a year from 1000kW of solar panel
A plug in solar panel and microinverter at the local supermarket is about €1k/kW. 9kW of solar for €9k/£8k/$10.5k to power an average US car and an average US house.
Avearge US car does 13,000 miles a year needs about 4,500kWh, so €4500
An average US home uses 11kWh a day, or 4,000 kWh a year, that would be another €4000
US electric price is an average 17c per kWh. That's a 15% ROI.
I suspect the costs your quoting are mainly things like scaffolding and labour, and that's not going to get cheaper.
The panels themselves - ignoring inverter, install, etc, are $100 for a 400W panel [0]. To generate a whopping 16,000kWh a year -- 70% more than the average -- you'd need to spend $4k on panels. Even if panels were free, your quotes would still be obscene because tradesmen charge obscene amounts (or rather roofing work is just expensive)
[0] https://www.solartradesales.co.uk/aiko-neostar-2s-460w-n-typ...
Your US home consumption is off. EIA puts the average at 10,500 kWh per year, 875/month, 29/day.
https://www.eia.gov/energyexplained/use-of-energy/electricit...
> In Europe you get about 1000kWh a year from 1000kW of solar panel
Typo, 1000kWh from 1kW of solar panel.
I got my 4x 455W panels for 70€ each from BayWa (random vendor in Germany), plus delivery. Microinverter ~200€. Aluminium etc for installation ~400€ or so. I installed them together with a friend. Total cost ~900€ or so. At 30ct/kWh in Germany, break even is in 3 years. Would be earlier if I had a better roof to put them on, mine has some shadow.
> Developing nations have the strongest incentive to cheat since they need those margins to catch up
This isn't really how it works, since greenhouse gas output is pretty much corellated to income level, and even that's an understatement, since people in rich countries buy stuff made in poor countries, and manufacturing causes emissions.
The real problem is carbon credits - rich countries can both pollute, and absolve themselves of moral responsibility by buying carbon credits - and said carbon credits are fungible, so countries' compete for the lowest selling price.
So what ends up happening is poor countries sell carbon credits by offering programs and promises, but can't/won't bear the cost, as that would mean they'd have to raise credit prices, and buyers would go elsewhere.
It's a system designed to encourage cheating while absolving moral responsibility.
The difference is rich nations are not cheating, they are setting the rules which are what they plan to do anyway. (though this is a form of cheating)
Agreed - the good news is, in many circumstances renewable energy is cheaper for new energy capacity. As long as regulations move in the right direction, we are likely to see the global energy mix move towards renewable sources over time
Not only is the renewable energy cheaper, it also raises energy independence, which turns out to be quite relevant in today's world.
Furthermore, it also reduces the drain on the (often very fragile, for thirld world countries) foreign reserves, especially relevant when the oil prices fluctuate wildly.
If your solar panels are old and you don't have money to replace them, you get slightly less electricity. If you are out of gasoline/diesel and you have no money to buy it, you have a big, big, problem.
This is exactly why I don't think it's a huge risk to be reliant on China for solar panels. If relations between your country and China go bad, it can't be that much of an emergency when they stop exporting them to you. All the panels you already bought still work!
Unless there is some hidden cybersecurity risk of them shutting off panels remotely?
I would be more concerned for remotely triggered inverter spikes tbh. These could sabotage the whole grid if I'm not mistaken.
Yes, exactly. The panel's control system is connected to the Internet and there's an app that an attacker could take advantage of to interfere with critical infrastructure at an inopportune time.
If you are doing grid-scale installation, surely you would want your own control system (perhaps also on your own network, separated from the general internet), precisely in order to protect the grid.
This is no different - either way you are buying a system that includes controls. While separating this from the internet sounds great, in practice internet control is too useful to run without. Maybe you put in a few firewall rules to protect things, but these often are lose enough that a hacker and bypass them (by looking like a legitimate access - since the people who need to access this will want to work from their cell phone)
There’s always the issue that it might be hard to find competent people that can implement a control network isolated from the internet if it has an internet connection by default.
it doesn't have to be cheaper to be a problem, as long as somebody still makes money on it and corruption still exists.
And corruption is one of those annoying problems that dont go away easy
I think right now, the vast majority of oil use is not because of corrupt officials using oil energy despite the fact that cheaper energy sources are available. Maybe that problem will eventually be a sticking point in removing all carbon-emitting energy sources, but right now the barrier is mostly production capacity and the scale of capital investment required to roll out renewables at scale. But if (as seems to be the case now) rolling out renewables is more profitable than rolling out additional fossil fuel use, the capital should become increasingly available. That's why I'm optimistic, even though of course there are a lot of challenges ahead in terms of creating a truly sustainable future.
There are economic mechanisms for this (e.g. https://en.wikipedia.org/wiki/EU_Carbon_Border_Adjustment_Me...) but broadly, yes, it is difficult.
So little political will is needed at this point as the economics now favor renewables. Unfortunately most of the political will seems to be leaning towards protecting the more expensive fossil fuel sources of energy.
Renewables (particularly solar) already are cheaper [1].
It's political will not economics that keeps us addicted to fossil fuels. Nobody gets rich from solar panels. You build them. They produce power. Oil wells like any mine are huge wealth concentrators. That's the real problem.
If anything, a bunch of countries (particularly those who are net oil importers) are re-evaluting their energy dependence given that the compact that the US will guarantee maritime transport has essentially been broken.
[1]: https://www.iea.org/reports/projected-costs-of-generating-el...
Isn’t solar already cheaper?
Saudi are staying and UAE is leaving because they want to pump more.
They want to pump more than they can hide, so they're leaving.
I don't know where this idea that OPEC is toothless came from but it's objectively incorrect. Counter example: OPEC was the single largest factor in the inflation shock of 2020-2022. And nobody talks about it.
In March 2020 at the start of the pandemic, it looked like the world economy would come to a standstill. Oil futures went into extreme contango, briefly going negative as nobody was taking delivery. So in April 2020 the Trump administration went and browbeat all the OPEC+ members to massively slash production [1][2][3]. Art of the deal. This culminated in a 2 year deal to cut production by initially 9.7Mbpd (million barrels per day) and then reducing over the 2 year period [4]. This was a disaster.
For context, OPEC does this sort of thing by themselves without any kind of prompting when necessary. They meet every 3 months and project demand and then set production targets to maintain a floor and ceiling for oil prices. Individual members can and do cheat, producing more than their allocation and lying about production cuts but all in all the system mostly works.
Trump loses the election. Biden comes in and demand rockets back in 2021 and crude oil prices skyrocket, as do gas prices as a result. The Biden admin quietly went to MBS to ask him to end the deal. He refused. You can overlay this 2 year deal with global inflation and it pretty much matches up exactly.
So Republicans blamed inflation on Biden even though it was a Trump deal. The Democrats didn't abandon US foreign policy and publicly hang out an ally to dry so instead just blamed greedy oil companies for price gouging. And nobody at all mentioned the 2020 OPEC deal. Not in mainstream politics anyway.
That was a 10% cut in global supply and look what it did to inflation. Closing the Strait cuts global supply by 20%. In 1973 with the Arab oil embargo, the major recessionary effects took 6 months to really hit. This is a ticking time bomb that will likely explode leading into the midterms.
Anyway, the point is OPEC+ did that.
[1]: https://www.reuters.com/article/economy/special-report-trump...
[2]: https://www.reuters.com/article/business/opec-russia-approve...
[3]: https://www.reuters.com/business/energy/opec-would-miss-frie...
[4]: https://www.reuters.com/article/us-global-oil-saudi-cuts-idU...
[4]:
Ah, didn't know this, thanks. Republicans always lie, this isn't surprising.
This is interesting and under-reported. But it doesn't mean that oil would've spiked a lot less without the OPEC cuts, and that's not the same as gasoline costs which depend on refineries too.
Um, how do you figure? You realize that was a 10% cut in global oil supply, right? Of course it's going to spike crude oil prices. It's almost like the US completely stopped producing oil for 2 year (13M vs 9.7M).
There are a number of elements that go into gas prices like additives, refining margin (called the "crack spread") and distribution but crude oil prices are a huge part of that. Also, like anything demand plays a huge role and that means the market's expectation for future supply.
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Isn't the solution in game theory when there are multiple turns to just repeat the move the previous person made.
So if the other side overpumped by x1 amount then you pump an extra x1 the next turn / year (maybe multiplied some reference production factor as they don't all have the same absolute limits).
Simple game theory doesn't work in the real world. In the short term most OPEC+ members other than Saudi Arabia have very limited technical ability to significantly increase or decrease production. It's not like they have a big valve that they can open or close at will. For many oil wells, restricting flow would actually damage the geologic substrate. And drilling new wells (including all of the supporting infrastructure) can take years.
Tit for tat (start by cooperating, and for each subsequent choice do what your opponent did last turn) is the optimal for repeated 2-party prisoners' dilemma.
The real world is much more complex. OPEC is a multi-party game, for starters. For another thing, there are cascades of social/political problems that get in the way of optimal strategy at the level of nations. I.e. that only works if politicians are more interested in solving problems than controlling narratives or maintaining power. Unfortunately, an ineffective leader can be sustained by controlling the narrative, while an effective leader can be destroyed by lack of control over the narrative. And one of the best ways to control a narrative (especially if you aren't a very good leader to begin with) is to create so much chaos that it distracts from your shortcomings, and blame the chaos on enemies.
Yeah also the softer tit-for-tat that offers a second chance performs better if miscommunication is added.
Not always. In a simple game yes, but sometimes the game is more complex and so it is to your advantage to play even when you know others will defect.
Then they all pump more every year