Following the 2014 price crash, which was driven by a massive supply glut and the US shale revolution, OPEC realized that it no longer held a monopoly on swing production. Therefore, they pivoted from confrontation to cooperation—bringing Russia and a cohort of other non-OPEC producers, like Kazakhstan and Mexico, into a formal, coordinated framework. The historic Algiers Accord in November 2016 was the birth of OPEC+, and it fundamentally altered the alliance’s power. Instead of OPEC adjusting alone, this expanded group now jointly manages about 40-45% of global crude supply and over 90% of proven reserves. Today, OPEC+ meetings are the primary catalyst for oil price volatility, because the market knows that real supply management now requires a handshake between Saudi Arabia and Russia, not just Saudi Arabia and Iran.

Oil Central Bank

The most useful way to understand OPEC+, is to stop thinking of it as a price setting body, and start thinking of it as the Federal Reserve for crude oil—but without the sovereign currency or lender-of-last-resort powers. Like a central bank, OPEC+ tries to manage a key macroeconomic variable: the supply of the world’s most important commodity. They do this through two primary monetary-policy analogs. First, quota adjustments function like interest rate changes—when they cut supply, they are essentially tightening “oil liquidity” to manage prices; when they add barrels; they are easing to cool the market. Second, their forward guidance, particularly the Joint Ministerial Monitoring Committee (JMMC) meetings. OPEC+ even has its own version of quantitative easing: the 2020 “whatever it takes” moment when they slashed nearly 10 mb/d to rescue a collapsing market. However, the analogy breaks down in two critical ways. A real central bank controls the money supply exogenously; OPEC+ competes with U.S. shale, which responds endogenously to price signals. More importantly, central banks have unlimited capacity to print money; OPEC+ cannot “print” oil—they can only defer or accelerate what underground geology has already provided. So think of them as a central bank with negative reserves: their only tool is supply management, and that is a very constrained mandate.

OPEC+: From Rivalry to Collective Interests

The establishment of OPEC+ in late 2016 was not merely a tactical response to the 2014–2016 price crash. It was a fundamental philosophical shift away from the “competitive equilibrium model of oil markets—where each producer maximizes volume—toward a managed stability” model based on collective interests.

Three core philosophical pillars are as follows:

1. The Recognition of “Shared Destiny”
Since its establishment, OPEC has been involved in supply management, and coordination of oil policies of the OPEC member states. In this regard, for long it was assumed that non-OPEC producers are free riders benefitting from the OPEC policies and efforts without taking any measures. Therefore, the OPEC thought of getting involved non-OPEC producers in decision- makings on the oil global market conditions.

By 2015, it became evident that the collapse in prices (below $30/b) was harming everyone—from Saudi Aramco to the Russian federal budget to even Texas shale drillers. The philosophy shifted from “market share warfare” to the understanding that low prices destroy all producers’ asset values, regardless of affiliation. OPEC+ thus embodied the idea that producers are not rivals but co-dependent insurers of a global price floor.

2. OPEC+ Spare Capacity
Spare capacity is the OPEC+’s single most powerful tool to manage oil market—it is essentially their strategic petroleum reserve, but held underground. Moreover, they manage it with an almost central bank-like obsession. Spare capacity is their strategic deterrent. By keeping a significant cushion offline, they deliberately compress global supply margins, making the market perpetually sensitive to any disruption, which puts a floor under prices.

Economists had long noted that OPEC spare capacity acts as a global insurance policy against supply shocks and/or disruptions. However, the burden of holding that capacity fell almost exclusively on the Persian Gulf states. The philosophy of OPEC+ was to institutionalize burden sharing by bringing non-OPEC giants (notably Russia) into the quota framework. The coalition formalized that all major producers should contribute to supply adjustments, not just the traditional swing producer. This transformed spare capacity from a unilateral and voluntary charity into a co-managed tool to prevent undesirable fluctuations.

3. The Ineffectiveness of Short-Term Maximization
The pre-OPEC+ era was characterized by the “prisoner’s dilemma”—each producer had an incentive to violate commitments on cuts to gain short-term revenue. The 2014 Saudi decision to flood the market (aimed at neutralizing the impact of shale) backfired spectacularly, proving that no single producer, not even Saudi Arabia, could impose its will unilaterally. The philosophical breakthrough was accepting that long-run price stability generates higher cumulative revenue than episodic price spikes or crashes.

In essence, the philosophy of OPEC+ is a pragmatic fusion of OPEC’s old swing-producer theory and modern behavioral economics: create a sufficiently large coalition (covering ~40-45% of global supply) such that coordinated supply management becomes a dominant strategy, transforming the oil market from a chaotic commodity auction into a quasi-regulated utility. Whether that philosophy embraces, depends on trust—but in 2016, it was the only rational choice left on the table.

OPEC+ Performance

From a pure market management perspective, OPEC+ has been remarkably effective—though not without significant costs and contradictions. Since its 2016 formation, the alliance has relatively prevented a repeat of the 2014-2016 price collapse by building a robust mechanism for rapid, coordinated supply adjustments. The true stress test came in 2020: when COVID-19 destroyed demand, OPEC+ engineered the deepest production cuts in history—roughly 10% of global supply—which independently pulled oil prices from negative territory back above $40 per barrel within months. That demonstrated operational discipline unprecedented in coalition history. However, the performance assessment becomes more mixed in post-2021. While OPEC+ has enjoyed high compliance rates and maintained prices generally favorable to producers ($70–$90/b for most of 2022–2024), they consistently underestimated non-OPEC+ supply growth—particularly from the US, Guyana, and Brazil—which now repeatedly blindsides their production models. Moreover, their 2022 decision to cut output despite tight markets drew sharp political backlash from consuming countries and accelerated Western SPR drawdowns, weakening their long-term price leverage. In general, OPEC+ is considered a masterclass in short-term crisis management but increasingly struggles to reconcile the divergent interests of Saudi Arabia (which needs $80+ oil for its Vision 2030 budget) and Russia (which prioritizes volume and wartime revenue), leaving long-run price stability an open question.

OPEC+ Challenges

Looking at the current landscape, OPEC+ is navigating a threesome of existential challenges that go far beyond simply balancing a spreadsheet of supply and demand. First and most immediately, there is the free-rider problem and eroding cohesion: members like Iraq, Kazakhstan, and even some major members have violated the determined quotas, forcing Saudi Arabia to shoulder a disproportionate share of the cuts—a dynamic that is politically and economically unsustainable for Saudi in the long term. Second, they face a profound demand-side uncertainty. While China’s economic slowdown is a known challenge, the structural threat is the accelerating global energy transition; peak oil demand is no longer a distant hypothetical but a near-term reality, which means OPEC+, is essentially managing a shrinking market share while trying to prop up prices. Finally, and most critically, there is the loss of monetary policy control. In the past, OPEC+ could cut supply and reliably raise prices. Today, if they cut, the Federal Reserve or ECB might tighten interest rates to fight inflation, which strengthens the dollar and depresses oil prices anyway—their lever has been decoupled. Between internal violating commitments, external substitution by renewables, and the macroeconomic veto power of central banks, OPEC+ is fighting a three-front war with declining ammunition.

OPEC+ Strong Points

Despite its internal frictions, OPEC+ possesses several formidable structural strengths that continue to make it the most influential force in global energy markets. Foremost is its sheer market heft: the alliance controls roughly 40–45% of global crude supply and over 90% of proven conventional reserves, giving it an unrivaled ability to shift the supply curve in ways no single producer—not even the United States—can match. Second and critically underestimated by outsiders, is the learning curve effect. Since 2016, OPEC+ has evolved from a loose, reactive coalition into a highly disciplined, data-driven mechanism, complete with the Joint Ministerial Monitoring Committee (JMMC) and sophisticated secondary-source production estimates that have dramatically improved compliance transparency. Third, there is the strategic patience of its de facto leader, Saudi Arabia, which has repeatedly demonstrated a willingness to cut unilaterally—as it did in mid-2023—to administer price floors, an act that builds internal credibility and deters defection. Finally, OPEC+ benefits from what is called the “no better alternative” dynamic: non-OPEC+ producers lack the coordination infrastructure, and consuming nations just rely on the IEA policies. For all the talk of peak oil, as long as the world needs a price-responsive swing producer, OPEC+ to some extent remains the only game in town.

OPEC+ Weak Points

If you strip away the headlines about production cuts and price stability, OPEC+ has several structural weak points that fundamentally undermine its long-term credibility. The most glaring is enforcement asymmetry—the alliance has no binding legal authority or independent monitoring mechanism with real power. When members like Russia, Nigeria, etc. do not comply with the quotas—, which happens persistently—the group’s only recourse is moral suasion or “voluntary” compensation cuts, which are rarely honored. This creates a classic “non-compliance” dilemma, where non-compliant members reap the benefits of price support while free riding on Saudi and some other members sacrifice. Second, OPEC+ remains a reactive, not proactive, institution. They consistently lag market realities by several months, as their infrequent, consensus-driven meetings cannot keep up with the speed of U.S. shale adjustments or algorithmic trading. Third, and perhaps most damning, is their lack of a credible exit strategy. The entire framework depends on continuous production management, but as the energy transition accelerates, OPEC+ will face the “stranded assets” problem: the temptation to pump as much as possible before demand collapses will trigger a classic prisoner’s dilemma, likely causing the alliance to split from inside. In short, OPEC+ is a body held together by a shared fear of low prices—and fear, as we know, is a weak glue for long-term cooperation.

OPEC+ Evolving Role

Taken into consideration the recent developments, it could be argued that OPEC+’s power is undergoing a critical test in the three below areas:

• From Supply Manager to Sentiment Manager: With physical supply chains broken by conflict, OPEC+’s production increase announcements (e.g., 188,000 b/d) are increasingly viewed as symbolic gestures aimed at managing market sentiment rather than representing real barrels that can reach consumers. OPEC+ is managing expectations, not supply.
• New Market Dynamics: The global oil market has changed. The United States has become a major exporter, providing a buffer against supply shocks, benefiting from the battle in Strait of Hormuz. On the demand side, China’s reduced appetite for oil—driven by economic factors and a strategic transition to renewables and electric vehicles—has acted as a powerful counterbalance to supply disruptions.  These new dynamics limit OPEC+’s ability to single-handedly dictate prices.
• Internal and External Pressures: Internally, the loss of the UAE as a member could encourage others to leave, threatening the alliance’s existence. Externally, fluctuations in sanctions policy (e.g., on Iran and Russia) add more unpredictable supply variables that OPEC+ cannot control. Add to this the recent developments in Venezuela.

• Conclusion

Given its formation in 2016, its crisis-management performance during COVID-19 pandemic, its structural weaknesses like enforcement asymmetry, its genuine strengths including market heft and Saudi patience, its role as a quasi-central bank, and its strategic use of spare capacity, it could be argued that OPEC+ is the most effective yet most fragile supply-management mechanism the oil market has ever seen. It works brilliantly in the short term when facing an immediate, consensus-driven crisis, as witnessed in 2020. However, over the long term, it is fighting a rear guard action against three irreversible trends: internal non-compliance that erodes Saudi goodwill, external competition from a relentlessly growing U.S. shale sector, and the ultimate existential threat—the global energy transition. The spare capacity that gives OPEC+ its power is also its greatest vulnerability, concentrated in just one fatigued champion, Saudi. For now, the alliance remains the indispensable swing producer, the only institution that can prevent price volatility, which might discourage investors. However, I would caution against assuming that this model is permanent. OPEC+ is a masterpiece of tactical coordination, but it is not a strategic solution to energy market volatility. Moreover, as the world slowly moves away from fossil fuels, the cohesion that holds the OPEC+ nations together—shared fear of low prices—will inevitably fray. The question is not whether OPEC+ will face an existential crisis, but whether that crisis comes in five years or fifteen. To my understanding, is closer to five.

In conclusion, while OPEC+ is expected to act as the central bank for oil by providing stability and managing supply, its ability to meet some expectations in the future is severely constrained. The alliance is navigating a complex landscape of geopolitical crises, eroding internal cohesion, and a shifting global energy order where its traditional tools are losing potency.

Ehsan Jenabi

Senior Energy Analyst

Source: Iran Petroleum