After days of disagreement, the Organization of the Petroleum Exporting Countries (OPEC) and a group of Russian oil producers have finally agreed to increase production by 500,000 barrels per day next month, the Wall Street Journal reported on Thursday – a modest upward trend that is expected to help support oil prices as producers and investors expect demand to rise, fueled by messages of positive vaccinations. The authorisation of a new Member State requires the agreement of three quarters of the current OPEC members, including the five founders.  In October 2015, Sudan formally applied for membership, but is not yet a member. Prior to the U.S. invasion of Iraq in 2003, international sanctions had severely limited Iraq`s oil industry. Oil production was 1.4 million barrels per day (b/d). The refining industry in Iraq was forced to pump excess heavy oil into the oil tanks, because there was nowhere else to put. Iraq`s oil industry has been weakened by years of war and sanctions. It took billions of dollars of foreign direct investment and more than twelve years to restore production to its capacity of more than 4 million b/d before the 1979 revolution.
The disintegration of the former Soviet Union tells a similar story. Russian oil production slowly declined from 11.3 million.b/d in 1989 to a low of 6 million .b/d in 1996. It was not until 2018 that it returned to its pre-collapse level of 11.3 million .b/d. These lessons of history are important because they highlight the serious and significant consequences that can result from mismanagement of oil sectors in the midst of turbulence caused by endogenous or exogenous forces. The COVID 19 pandemic has already shown that it could cause unprecedented shocks, both due to health crises within petrostats and external forces such as the sudden loss of oil demand and the resulting logistical and operational problems due to volatile oil prices. Under the agreement, members of the Organization of Petroleum Exporting Countries, along with Russia and other countries, will increase production by 500,000 barrels per day in January and possibly a similar amount in the following months.