Tweet
OPEC
The Organization of the Petroleum Exporting Countries (OPEC) is an international organization made up of Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Since 1965 its international headquarters have been in Vienna, Austria. It is considered to be a cartel by some observers [1][2].
The principal aim of the Organization, according to its Statute, is the determination of the best means for safeguarding their interests, individually and collectively; devising ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations; giving due regard at all times to the interests of the producing nations and to the necessity of securing a steady income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations, and a fair return on their capital to those investing in the petroleum industry."[1]
OPEC's influence on the market has not always been a stabilizing one, however. It alarmed the world and triggered high inflation across both the developing and developed world through its use of the oil weapon in the 1973 oil crisis. Its ability to control the price of oil has diminished greatly since its heyday, following the much-expanded development of the Gulf of Mexico, the North Sea, and the growing fluidity of the market. However, OPEC still has considerable impact on the price of oil. It is still commonly used as a textbook example of a cartel.
The Organization now has 11 member states. They are listed below with their affiliation dates.
Africa
* Nigeria (July 1971)
Middle East
* Algeria (July 1969)
* Libya (December 1962)
* Iran (September 1960)
* Iraq (September 1960)
* Kuwait (September, 1960)
* Qatar (December 1961)
* Saudi Arabia (September 1960)
* United Arab Emirates (November 1967)
South America
* Venezuela (September 1960)
Southeast Asia
* Indonesia (December 1962. Membership currently under review as Indonesia is no longer considered by OPEC as a net oil exporter. See also current acting OPEC secretaries general.)
Former Members
* Gabon (Full member from 1975 to 1995)
* Ecuador (Full member from 1963 to 1993)
OPEC's official language is English, although the official language of a majority of OPEC member-states is Arabic, as seven current members are Arab states. Only one member nation (Nigeria) has English as an official language.
History
Venezuela was the first country to move towards the establishment of OPEC by approaching Iran, Iraq, Kuwait and Saudi Arabia in 1949, suggesting that they exchange views and explore avenues for regular and closer communications between them. In September 1960, the governments of Iraq invited Iran, Kuwait, Saudi Arabia and Venezuela met in Baghdad to discuss the reduction in price of crude oil produced by their respective countries. As a result, OPEC was founded to unify and coordinate members' petroleum policies. Original OPEC members include Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Between 1960 and 1975, the organization expanded to include Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), and Nigeria (1971). Ecuador and Gabon were members of OPEC, but Ecuador withdrew in December 1992, and Gabon followed suit in January 1995. Although Iraq remains a member of OPEC, Iraqi production has not been a part of any OPEC quota agreements since March 1998. EIA estimates that the current eleven OPEC members account for about 40% of world oil production, and about 2/3 of the world's proven oil reserves.
The Yom Kippur War
The persistence of the Arab-Israeli conflict finally triggered a response that transformed OPEC from a mere cartel into a formidable political force. After the Six Day War of 1967, the Arab members of OPEC formed a separate, overlapping group, the Organization of Arab Petroleum Exporting Countries, for the purpose of centering policy and exerting pressure on the West over its support of Israel. Egypt and Syria, though not major oil-exporting countries, joined the latter grouping to help articulate its objectives. Later, the Yom Kippur War of 1973 galvanized Arab opinion. Furious at the emergency re-supply effort that had enabled Israel to withstand Egyptian and Syrian forces, the Arab world imposed the 1973 oil embargo against the United States and Western Europe. In the 1970s, the great Western oil conglomerates suddenly faced a unified block of producers.
This Arab-Israeli conflict triggered a crisis already in the making. The West could not continue to increase its energy use 5% annually, pay low oil prices, yet sell inflation-priced goods to the petroleum producers in the Third World. This was stressed by the Shah of Iran, whose nation was the world's second-largest exporter of oil, and the closest ally of the United States in the Middle East at the time. "Of course [the world price of oil] is going to rise," the Shah told the New York Times in 1973. "Certainly! And how...; You [Western nations] increased the price of wheat you sell us by 300%, and the same for sugar and cement...; You buy our crude oil and sell it back to us, redefined as petrochemicals, at a hundred times the price you've paid to us...; It's only fair that, from now on, you should pay more for oil. Let's say 10 times more."
Comment