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CHAPTER 05LESSON 042 MIN READ

Non-OPEC supply

The rest of the world's production, and why it behaves differently.

WHY IT MATTERS

Projects outside OPEC follow different investment cycles. Their output cannot be treated as one producer responding to one price signal.

Most world oil production is not managed by any group. It comes from thousands of fields operated by companies whose decisions are driven by project economics, and in aggregate it behaves very differently from a coordinated producer.

The defining feature is that conventional non-OPEC supply is largely price-inelastic in the short run. A deepwater project sanctioned five years ago will produce this year regardless of the price, because the capital is spent and the marginal cost of continuing to produce is far below any plausible price. Investment decisions respond to price; current production mostly does not.

That creates a long and awkward lag structure. A price collapse cuts investment now and cuts supply four to six years from now, by which time the price that caused it is history. This is the standard mechanism behind commodity cycles, and it is why the industry chronically over- and under-invests rather than settling at a level.

A few sources are worth naming because they have accounted for most of the recent growth outside OPEC. Brazil's pre-salt fields, Guyana's Stabroek development, Norwegian North Sea projects, and Canadian oil sands each add volume on long project timelines, which makes their contribution forecastable years ahead in a way that shale is not. Their production profiles are close to known once sanctioned; the uncertainty is in start-up timing rather than in whether the barrels arrive.

PRDWorld ProductionLIVE FROM THE DESKOpen on the desk
Liquid fuels supply by country, with the sourcing shown per series.