The 166th Opec Ministerial Conference ended on November 27, with the expected decision to keep the production ceiling at 30 million barrels a day (mbd) in spite of the fact that oil prices have fallen drastically since June.

The decision was expected because Opec — or some of its members — were openly in favour of defending market share irrespective of declining oil prices. Not even an attempt to talk the market up or to slow down the decline in prices was visible.

It is true that the required Opec production has been, and would have continued to be, stagnant for at least another five years due to the huge increase in non-OPEC production, especially with respect to the US tight oil production and to a lesser extent that from other high-cost regions. But it was portrayed in the media that Saudi Arabia, on behalf of Opec, is practically at war with US oil production as the Reuters headline on November 28 that stated, “Inside Opec room, Naimi declares price war on US shale oil”, clearly shows.

At the prices that were ruling in the last few years of between $100-$110 a barrel, there was no way to stop the expansion of shale oil and even other high-cost oils. But at the same time there is no guarantee that allowing the price to erode so much is a cure to stopping this and allowing Opec to regain market share.

To start with, tight oil production is varied and its cost curve is relatively flat. And only 4 per cent of the current US shale oil production is at a cost of higher than $80 a barrel as observed by the IEA. Therefore, to make a dent in shale oil ascendancy, international oil prices would have to go much lower, indeed knowing that shale oil could in some fields still be produced even at $30 a barrel.

Similarly, there is so much investment already committed and investors are unlikely to pack up quickly just because the price has declined. No one expects drilling levels to show declines for at least another six months if oil prices stay at between $65 and $70 a barrel or fall further.

The problem is can Opec countries stand so much revenue loss pain, revised budgets and curtailed social and development programmes? Some of them can only by spending their hard earned reserves, which is a pity. Others may have to borrow and reduce government expenditure to a large extent, and some are thinking of eliminating fuels subsidies, a very touchy subject which have in the past brought about instability.

I call this the second battle for market share, because I remember very well what happened in the first market share battle in 1986 when oil prices collapsed from $28 a barrel to less than $10 in just a few months. We were told that Opec would gain market share from non-OPEC producers. One of the advocates of that policy told me, “We will bring non-Opec producers to their knees” and force them to reduce their high-cost oil.

It did not work and most Opec members were seriously hurt and delegation after delegation started congregating to Saudi Arabia in the hope of stopping this approach. Opec reversed course and started setting production ceiling and quotas to defend prices. But damage was done and prices remained low for almost two decades.

History may repeat itself this time around, but falling oil prices have a momentum and they are unlikely to recover as quickly as they fell. Sure enough, production increase of tight oil may eventually be arrested or slowed down. But let us not forget that the system is now well established and as soon as prices rise again, drilling will pick up and production will come back again.

As Harold Hamm, the champion of US tight oil production, recently said about the slow down: “Nobody’s going to go out there and drill areas, exploration areas and other areas at a loss. They’ll pull back and won’t drill it until the price recovers. That’s the way it ought to be.”

I know that market share is important for Opec to maintain some control on the stability of the oil market, but so is the price of oil to maintain steady revenue for the development of its member countries and the oil industry itself.

Optimisation here is important instead of swinging between polices of either defending prices or defending market share. Let us not make some commentators happy such as Will Hutton, who in the Guardian of November 30, said “Saudi Arabia, eat your heart out”.