OPEC is an oil producer’s association founded in 1960 by Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela and curently consisting of 14 members, including the organisators and Qatar, Libya, the UAE, Algeria, Nigeria, Ecuador and Angola(OPEC Statute, 2012). According to the OPEC Statute, the main objective of the organisation is «the coordination and unification of the petroleum policies of Member Countries and the determination of the best means for safeguarding their interests, individually and collectively»(p1, 2012). The organisation is frequently classified as a cartel(Bobrow&Kudrle, 1976; ) and therefore, its main aim can be simplified to the maintenance of the market price for oil at the level which would suit its members(Willet, 1979). The degree of the OPEC’s power in the oil market varied over time; it was regarded as the only significant player on the world oil market(Bobrow&Kudrle, 1976; Rewarding, 2004) and as an organisation «dissolving away»(Chopra, 1982) but even now - after 54 years from the creation date - collective production of all the members accounts to 45% of the global market share(Rose, 2004) and OPEC members hold 81% of the proven global oil reserves(OPEC webpage). The aim of this essay is to analyse the extent to which OPEC can be called an effective organisation. This will be done through the analysis of the OPEC’s ability to resist the main problems faced. In the first part of the essay OPEC will be analysed as a cartel with issues of price determination and possible cheating discussed. Also, the role of wealthy members in solving the problem of collective action will be overviewed. The second part of the essay will consider the threats that are posed by the conflicts inside the organ...
... middle of paper ...
..., American Political Science Review 82, 2 (1988): 445-66
James D. Fearon, «Bargaining, Enforcement and International Cooperation», International Organization 52, 2 (1998): 269-305
Davar Venouss, C.K. Walter and A. Frank Thompson, «OPEC’s Goal and Strategies», International Journal of Middle East Studies 16, 2 (1984): 199-206
Thomas D. Willet, «Conflict and Cooperation in OPEC: Some additional Economic Considerations», International Organisation 33, 4 (1979): 581-587
Dermot Gately, “What Oil Export Levels Should We Expect From OPEC?,” The Energy Journal 28, 2 (2007): 151-173
Dermot Gately, «OPEC’s Incentives for Faster Output Growth», The Energy Journal 25, 2 (2004): 75-96
OPEC : Home. 2014. OPEC : Home. [ONLINE] Available at: http://www.opec.org/opec_web/en/index.htm. [Accessed 24 March 2014]
OPEC Statute, Organization of the Petroleum Exporting Countries, 2012
OPEC is a clear example of economic nationalism, a conglomerate of countries agreeing to control their respective economies by limiting trade and export of oil. The 1973 oil crisis was caused by countries in OPEC imposing an embargo on the US and several other countries after the US resupplied Israel during the Yom Kippur ...
U.S. Energy Information Administration. Independent Statistics & Analysis: U.S. EIA. March 15, 2012. http://www.eia.gov/countries/index.cfm?view=consumption (accessed March 16, 2014).
Steffy, L. C. (2010). Drowning in Oil: BP and the Reckless Pursuit of Profit. McGraw Hill.
Pratt, Joseph A. “Exxon and the Control of Oil.” Journal of American History. 99.1 (2012): 145-154. Academic search elite. Web. 26. Jan. 2014.
In 2004, crude oil producers around the world expected a 1.5% growth in the world’s demand for crude oil. The actual growth rate was more than double the projections at 3.3%. This growth was due to rapidly industrializing of foreign countries such as, China and India. Therefore the lack of crude oil affected the supply of gasoline to consumers at the pump.
Organisation for Economic Co-operation and Development. (2010) Employment outlook 2010 – How does Australia compare? Retrieved August 19, 2010, from http://www.oecd.org/dataoecd/14/38/45603025.pdf.
"Oil Imports and Exports - Energy Explained, Your Guide To Understanding Energy." Web. 26 May 2011. .
Annual Report 2012 Costco Wholesale: Year Ended September 2, 2012 [PDF document]. 1-7. Retrieved from Costco Wholesale Financial Reports:
Sørli, Mirjam, Nils Gleditsch, and Håvard Strand. "Why Is There so Much Conflict in the Middle East? ." The Journal of Conflict Resolution 49.1 (2005): 141-165. JSTOR. Web. 8 June 2011.
In 1970 oil reserves became more scarce, leading to a decrease in production, while consumption continued to grow rapidly (Wright, R. T., & Boorse, D. F. 2011). In order to fill the gap between rising demand and falling supply of oil, the United States became more and more dependent on imported oil, primarily from Arab countries in the Middle East. (Wright, R. T., & Boorse, D. F. 2011). As the U.S and many other countries became highly industrialized nations, they became even more dependent on oil imports. With demand being higher than the actual amount of supply, prices kept rising reaching a peak of $140 a barrel in 2008. (Wright, R. T., & Boorse, D. F. 2011).
In conclusion, OPEC's monopoly of the petroleum industry has been a strong one since the 1960's since its members enjoy economies of scale. Its decisions concerning the output of petrol have always been strong affecting the rest of the world. This monopoly is socially inefficient due to the output and the deadweight loss that results. Interestingly enough, to break this monopoly, the new Iraq has the potential to turn the market power around.
Mingst, K. (2011). Essentials of international relations. (5th ed., p. 70-1). New York, NY: W.W. Norton & Company
...n. "Twenty Years after the Embargo US Oil Import Dependence and How It Can Be Reduced." Energy Policy 22.6 (1994): 471-85. Print.
Currency Fluctuation, What is Currency Fluctuation, 2014. Available at: http://www.wisegeek.org/what-are-currency-fluctuations.htm Retrieved at 6th April 2014
...g the Energy Revolution." Foreign Affairs. Nov/Dec 2010: 111. SIRS Issues Researcher. Web. 21 Nov 2011.