Looking for Stranded Oil? Start With OPEC - Bloomberg

Looking for Stranded Oil? Start With OPEC - Bloomberg:

The oil market is weird.

 Imagine two widget-makers, WidgetKing and Standard Widgets. Their product is generic as can be. Standard Widgets, however, is lucky enough to have its factory built next to a major port and rail terminal, keeping distribution costs low, while WidgetKing’s founder loved the mountains and thought trains would never catch on. Thus, Standard Widgets can undercut its rival on price every time. We all know who ends up controlling the widget market and who goes belly-up.

Oil doesn’t work like that. More than 70 percent of the world’s proved oil reserves are held by OPEC countries, according to BP’s statistical review. By and large, those are also the lowest-cost barrels to produce in the world (due to geology rather than logistics). And yet roughly 60 percent of the world’s oil comes from outside OPEC, produced in countries where costs are often much higher.