OPEC Wikipedia
The invasion removed four million barrels of oil from the world market and caused prices to jump. Other member states feared that Iraq would soon invade Saudi Arabia and leapt into action, rather than remain neutral as they had during the Iran-Iraq War. As a military coalition came together, most of OPEC’s remaining members increased production to compensate for lost output from Kuwaiti and Iraqi oil fields. This group was established in 2016—a time when the economy was seeing significantly low oil prices. The purpose was to help bring stability to the global market.
- Qatar’s departure means the country is aligning itself more with the United States than with Saudi Arabia.
- For example, it replaced the oil lost during the Gulf Crisis in 1990.
- Combined, the group controls close to forty percent of world oil production.
- Prominent members of OPEC+ include Russia, Mexico, and Kazakhstan.
- The power of OPEC has waxed and waned since its creation in 1960 and is likely to continue to do so for as long as oil remains a viable energy resource.
The second of OPEC’s goals is to reduce oil price volatility, in the hope of making the production and supply of oil as profitable as possible for OPEC members. It also helps to stave off competition from the growing American fracking industry, itrader review as well as from non-OPEC and non-OPEC-affiliated countries. Qatar left in January 2019 to focus on natural gas instead of oil. Qatar’s departure means the country is aligning itself more with the United States than with Saudi Arabia.
This, along with a price war between Russia and Saudi Arabia, led to a drop in oil prices. As a result, the organization decided to cut production by 9.7 million barrels per day between May and July 2020. Oil prices continued to experience volatility, leading OPEC to adjust production levels to 7.2 million barrels per day as of January 2021. The decolonisation movement in the region, as well as the nationalisation of companies, notably starting with Iran, led to the need for an organisation that would represent the interests of sovereign producers. Indeed, friction between Russia and Saudi Arabia came to a head at the onset of the pandemic in 2020.
Since oil is a somewhat uniform commodity, most consumers base their buying decisions on nothing other than price. OPEC has traditionally said it was between $70 and $80 per barrel. If prices drop below that target, OPEC members agree to restrict supply to push prices higher. The Oil and Energy Ministers from the OPEC members meet at least twice a year to coordinate their oil production policies. Each member country abides by an honor system in which everyone agrees to produce a certain amount. If a nation winds up producing more, there is no sanction or penalty.
OPEC’s Three Goals
First, it promotes cooperation among member nations, helping them alleviate some degree of political hostilities. And because the organization’s main goal is to stabilize oil production and prices, it is able to exert some influence over production from other nations. OPEC waited to cut oil production because it didn’t want to see its market share drop further. The cartel toughed it out until many of the shale companies went bankrupt.
And as climate change concerns take center stage in the coming years, OPEC could take a hit. Others were spurred by differences in opinion over strategy and target prices for the cartel. Members admitted afterward include Qatar (1961), Indonesia (1962), Libya (1962), Abu Dhabi (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Equatorial Guinea (2017), and the Republic of the Congo (2018). The United Arab Emirates—which includes Abu Dhabi (the largest of the emirates), Dubai, ʿAjmān, Sharjah, Umm al-Qaywayn, Raʾs al-Khaymah, and Al-Fujayrah—assumed Abu Dhabi’s membership in the 1970s. Gabon, which had joined in 1975, withdrew in January 1995 but rejoined in 2016.
The influence of individual OPEC members on the organization and on the oil market usually depends on their levels of reserves and production. Saudi Arabia, which controls about one-third of OPEC’s total oil reserves, plays a leading role in the organization. Other important members are Iran, Iraq, Kuwait, and the United Arab Emirates, whose combined reserves are significantly greater than those of Saudi Arabia. Kuwait, which has a very small population, has shown a willingness to cut production relative to the size of its reserves, whereas Iran and Iraq, both with large and growing populations, have generally produced at high levels relative to reserves. Revolutions and wars have impaired the ability of some OPEC members to maintain high levels of production. Because OPEC has been beset by numerous conflicts throughout its history, some experts have concluded that it is not a cartel—or at least not an effective one—and that it has little, if any, influence over the amount of oil produced or its price.
OPEC-Russia Oil Alliance
Having reached record levels by 2008, prices collapsed again amid the global financial crisis and the Great Recession. Meanwhile, international efforts to reduce the burning of fossil fuels (which has contributed significantly to global warming; see greenhouse effect) made it likely that the world demand for oil would inevitably decline. In response, OPEC attempted to develop a coherent environmental policy.
1980: Special Fund, now the OPEC Fund for International Development
OPEC claims that its members collectively own about four-fifths of the world’s proven petroleum reserves, while they account for two-fifths of world oil production. Members differ in a variety of ways, including the size of oil reserves, geography, religion, and economic and political interests. Some members, such as Kuwait, Saudi Arabia, and the United Arab Emirates, have very large per capita oil reserves; they also are relatively strong financially and thus have considerable beaxy exchange review flexibility in adjusting their production. Saudi Arabia, which has the second largest reserves and a relatively small (but fast-growing) population, has traditionally played a dominant role in determining overall production and prices. Venezuela, on the other hand, has the largest reserves but produces only a fraction of what Saudi Arabia produces. Oil prices and OPEC’s role in the international petroleum market are subject to a number of different factors.
OPEC decided to maintain high production levels and consequently low prices as of mid-2016, in an attempt to push higher-cost producers out of the market and regain market share. However, starting in January 2019, OPEC reduced output by 1.2 million barrels a day for six months due to a concern that an economic slowdown would create a supply glut, extending the agreement for an additional nine months in July 2019. In 2022, Russia’s invasion of Ukraine and harsh sanctions imposed by the West in response have caused global oil prices to surge and renewed attention on OPEC’s role. That March, Biden announced a ban on Russian oil imports, while the European Union (EU) said it will work to reduce its dependence on Russian energy.
Working in coordination with additional oil-exporting countries makes the organization even more influential when it comes to international energy prices and the global economy. Having said this, it’s no surprise that any moves the group makes have a big impact on global energy prices. Oil prices can drop significantly if they decide to supply more xm group oil to the market. On the other hand, if OPEC member countries decide to cut production and curb supplies, prices are highly likely to shoot up. OPEC’s membership expanded to 10 countries in 1969 and was an organization that flew under the radar until Arab member countries cut production and banned exports to the United States and the Netherlands.
The power of OPEC has waxed and waned since its creation in 1960 and is likely to continue to do so for as long as oil remains a viable energy resource. The result throughout the West was severe oil shortages and spiraling inflation (see oil crisis). As OPEC continued to raise prices through the rest of the decade (prices increased 10-fold from 1973 to 1980), its political and economic power grew.
Angola, which became a member in 2007, announced its withdrawal in 2023. The Organization of the Petroleum Exporting Countries describes itself as a permanent intergovernmental organization. The organization is designed to “coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets.” This ensures that there is a steady supply for consumers and regular income for petroleum producers. This website is using a security service to protect itself from online attacks.
