The Organization of the Petroleum Exporting Countries, OPEC, was formed in Baghdad, Iraq in 1960 to coordinate and unify the policies of petroleum exporting countries. According to OPEC, their main objective is to ensure the “stabilization of oil prices” and the securing of a steady income to oil producing nations. In order to achieve this objective, the OPEC member nations meet at least bi-annually to decide whether to raise or lower their collective oil production in order to maintain the prices they deem as “stable.” The main factors that are considered when formulating petroleum policy are the forecasts for economic growth rates and the projected demand for petroleum. (www.opec.org)
Exemplary of the importance of OPEC is that the 11 member countries, (with the main contributor being Saudi Arabia), produce about 40% of the world’s crude oil, and account for 55% of the world’s crude oil exports. At the end of 2001, OPEC had reserves of nearly 850 billion barrels of crude oil, which represents nearly 80% of the world total of over 1 trillion barrels. (www.platts.com/features/gasoline) As these numbers indicate, OPEC produces so much oil that they are in a position to exert considerable influence on petroleum supply levels and manipulate the price.
The means by which OPEC exerts its influence is through setting production quotas. OPEC sets individual production quotas for each member country that serve as “production targets” to ensure the level of petroleum supplied by OPEC does not exceed the demand for petroleum. These “production targets” for each country add up to a “ceiling” that OPEC desires not to exceed. In reality however, OPEC countries have traditionally exceeded the proposed ceiling. In October of 2002, OPEC set a ceiling of nearly 22 million barrels to be produced per day by the OPEC 10. However, nearly 25 million barrels were produced, 3 million more than the proposed ceiling. Iraq is not included in the quota system because their exports are controlled by the U.N. based on the “food for oil” program, hence the “OPEC 10” instead of “OPEC 11.” (http://www.eia.doe.gov)
With the majority of OPEC oil coming from Middle Eastern countries, the politics of the Middle East and in particular, the Persian Gulf, have played an important factor in the policies OPEC decides upon despite the fact that OP...
... middle of paper ...
...educe dependence on imported oil is to reduce dependence on petroleum altogether. And the best way to do this is to increase efficiency and reduce demand of oil.
OPEC still has considerable influence in determining the price per barrel of petroleum by setting quotas, but their best days are behind them. The emergence of non-OPEC exporters such as Canada, Russia, and Mexico have stripped the cartel of its power to single-handedly manipulate the petroleum market. The U.S. has benefited from the increased production of petroleum by non-OPEC nations and thus reduced their annual imports from the OPEC countries in recent years. However, the United States needs to address its obtuse energy policy and accept the fact that oil will not last forever and implement strategies that stress efficiency and will reduce the demand for fossil fuels in general.
(www.eia.doe.gov/mer)- Internet Website
(http://www.nrdc.org/air/energy/fensec.asp)- Internet Website
(www.opec.org)- Internet Website
(www.petroleumworld.com)- Internet Website
(www.platts.com/features/gasoline)- Internet Website
(www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM)- Internet Website
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- The selected key concept of the week is OPEC: the Organization of the Petroleum Exporting Countries was formed on September 14, 1960 in Baghdad, Iraq and registered with the United Nations Secretariat on November 6, 1962 ( Organization of the Petroleum Exporting Countries, 2013). OPEC defines themselves as “a permanent intergovernmental organization, currently consisting of 12 oil producing and exporting countries, spread across three continents America, Asia and Africa ( Organization of the Petroleum Exporting Countries, 2013, p.... [tags: Economy, Oil industry]
908 words (2.6 pages)
- Understanding OPEC: An Economic Analysis In the last few months, much has been said of Iraq’s invasion of Kuwait in 1990. Interestingly enough, one of Iraq’s motivating factors was economics. Kuwait provided Iraq with a pretext for war as it violated the economic policies of the Organization of Oil-Exporting Countries by exporting oil above its quotas. This is but one chapter in the complicated history of OPEC. OPEC is an international assembly of nations which co-ordinates and unifies the petroleum policies of eleven countries and has enjoyed the highs and weathered the lows of oil prices in the last few decades.... [tags: Oil Economics Economy OPEC Essays]
1338 words (3.8 pages)
- A Critique of “OPEC” – The Website OPEC stands for “Organization of Petroleum Exporting Countries” and is comprised of the largest oil-producing nations of the world. Through OPEC, these Member Countries work together to control the price and availability of oil--one of the most significant commodities in today’s worldwide economy. Founded in September of 1960 with headquarters in Vienna, the OPEC organization is currently comprised of twelve member countries (History of OPEC, 1). OPEC’s mission is defined in a formal organizational statute that identifies their role “to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order t... [tags: Website Review]
1784 words (5.1 pages)
- Monopoly of Petroleum: OPEC Images Not Included A monopoly is evident where a firm is the sole seller of its product and if its product does not have close substitutes, as discussed in (Gans J., King S. Mankiw A. 2003). This essay will discuss the monopoly of petroleum by The Organization Of Petroleum Exporting Countries (OPEC), particularly how it controls the price of petrol, threats to its monopoly and the social costs involved. OPEC was established in the 1960's and ever since, Saudi Arabia gained a reputation of being the major power of the organization.... [tags: Business Case Studies Oil Essays Petroleum]
1029 words (2.9 pages)
- 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).... [tags: iraq, kuwait, saudi arabia, venezuela]
1953 words (5.6 pages)
- In this paper, I am going to discuss how the oil cartel known as OPEC (Organization of Petroleum Exporting Countries) impacted the United States economy in the 1970’s, how the effects of this are still felt today, and how their power should continue to influence our thinking where foreign policy and energy policy are concerned. First I will explain what OPEC is, its history and how this concerns every citizen in the United States. Then I will discuss how leaders of the past dealt with the pressures concerning the further effects on the economy at the time, which brought to light the need for energy policy as well as pressing foreign policy issues that need to be addressed, as bot... [tags: essays research papers]
1686 words (4.8 pages)
- Oil is one of the most beneficial and harmful elements for humanity. It serves as fuel at our homes, transportation and also various petroleum products help us in our daily living. On the other hand, is an essential element for war, it is used as fuel for ships and airplanes, and lately is identified as something that can adversely affect the economy of those countries that produce it and those who depend on it. Oil is the most important source of energy recently used and is a raw material in a lot of the chemical industry processes.... [tags: Petroleum, Peak oil, OPEC, Supply and demand]
1816 words (5.2 pages)
- The Impact of OPEC on the World Economy The Organization of Petroleum exporting countries, better known as OPEC, is one of the most recognized cartels in the world. Yet, how many of those who can recognize the name really understand the cartel. I would venture to guess not many and even fewer know about the economic impact it has upon the world. To really get a feel for OPEC one has to delve deep into the heart of the cartel. This can be accomplished by looking at the economic definition of a cartel, the history of OPEC, OPEC today, OPEC and international trade, and the political questions that surround the cartel.... [tags: History OPEC Oil Cartel]
1869 words (5.3 pages)
- Economist has analyzed the causes of decline in world oil prices. Typically, the price of oil is determined by demand and supply of the world market and forecast advance to invest in which level of demand depends on the level of economic activity and behavioral use of energy from humans. The oil price decline has a benefit for oil importers like China, India, Japan, Europe but unfortunately for oil exporters such as: Kuwait, Venezuela, Nigeria, and Iraq. Crude oil prices fell steadily in the past seems to be a result of two main factors being the levels of demand declining and a level of increased supplies (Economic, 2015) Social In 2015, international energy agency estimated the average qu... [tags: Petroleum, Petroleum industry, Peak oil, OPEC]
736 words (2.1 pages)
- OPEC and Its Implication in the South In 1960, an association was formed that would change the face of international oil acquisition forever. In order to combat the actions taken by the multi-national oil corporations to cut the prices of crude oil, five of the leading oil-exporting countries formed the Organization of Petroleum Exporting Countries (OPEC). These five countries- Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela- were responsible for nearly 80% of all world oil exports at the time.... [tags: Papers]
1854 words (5.3 pages)