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OPEC

(Redirected from Organization of the Petroleum Exporting Countries)

OPEC Logo

The 'Organization of the Petroleum Exporting Countries' ('OPEC') is an international cartel[1][2] made up of Iraq, Indonesia, Iran, Kuwait, Libya, Angola, Algeria, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. The Vienna-based organization has maintained its headquarters there since 1965, hosting regular meetings between the oil ministers of its member states.
The principle 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."[3]
OPEC's influence on the market has been called into question. Several members of OPEC alarmed the world and triggered high inflation across both the developing and developed world when they used oil embargoes in the 1973 oil crisis. OPEC's ability to control the price of oil has diminished somewhat since then, due to the subsequent discovery and development of large oil reserves in the Gulf of Mexico and the North Sea, the opening up of Russia, and market modernization. OPEC nations still account for two-thirds of the world's oil reserves, and, in 2005, 41.7% of the world's oil production, affording them considerable control over the global market. The next largest group of producers, members of the OECD and the Post-Soviet states produced only 23.8% and 14.8%, respectively, of the world's total oil production.[4] However, in August 2004, OPEC began communicating that its members had little excess pumping capacity, indicating that the cartel was losing influence over crude oil prices.

Contents
Membership
History
The oil weapon
Responding to war and low prices
Economics
Current quotas
See also
Petroleum industry writers/commentators
Articles from the Secretary Generals of OPEC
Books covering aspects of the subject
Notes
External links

Membership


OPEC countries

Chart of Oil Trading Nations

The Organization now has twelve member states. They are listed below with their affiliation dates. Note that although the official language of a 7-nation majority of OPEC member-states is Arabic, OPEC's official language is English. Only one member nation (Nigeria) has English as an official language.
;Africa:

★ (January 1, 2007)

★ (December 1962)

★ (July 1971)
;Middle East:

★ (September 1960)

★ (September 1960) (Excluded from OPEC production quotas since 1998)

★ (September, 1960)

★ (December 1961)

★ (September 1960)

★ (November 1967)
;South America:

★ (September 1960)
;Southeast Asia:

★ (December 1962; membership under review as Indonesia is no longer considered a net oil exporter by OPEC)

★ (July 1969)
;Former Members:

★ (full member from 1975 to 1995)

★ (full member from 1963 to 1993), expressed interest in rejoining (November 2006) [1]
;Prospective Members:

★ , , and have been invited by OPEC to join.[5]

★ and are currently seeking membership.[5]

History


OPEC headquarters in Vienna

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, 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 on December 31st, 1992[7] because they were unwilling or unable to pay a $2 million dollar membership fee and felt that they needed to produce more oil than they were allowed to under the OPEC quota. [8] Similar concerns prompted Gabon to follow suit in January 1995 [2].
Angola joined on the first day of 2007. [9]) Indonesia is reconsidering its membership having become a net importer and being unable to meet its production quota. The United States was a member during its formal occupation of Iraq via the Coalition Provisional Authority.[10] Indicating that OPEC is not averse to further expansion, Mohammed Barkindo, OPEC's Secretary General, recently asked Sudan to join.Angola, Sudan to ask for OPEC membership Houston Chronicle Iraq remains a member of OPEC, though Iraqi production has not been a part of any OPEC quota agreements since March 1998.
The oil weapon

Main articles: 1973 oil crisis

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, refined 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."[11]
The threat and use of embargo as a weapon, however, triggered a decline in OPEC's power. Western nations developed closer ties to the Soviet Union and rapidly built up their offshore drilling in the North Sea and the Gulf of Mexico, greatly lessening the potential impact of future price shocks induced by OPEC. The effect was not immediate, however. When the Shah of Iran fell in 1979, another oil crisis ensued.
Responding to war and low prices

Main articles: 1990 spike in the price of oil, Oil price increases of 2004 and 2005

Leading up to the 1990-91 Gulf War, Iraqi President Saddam Hussein advocated that OPEC push world oil prices up, thereby helping Iraq, and other member states, service debts. But the division of OPEC countries occasioned by the Iraq-Iran War and the Iraqi invasion of Kuwait marked a low point in the cohesion of OPEC. Once supply disruption fears that accompanied these conflicts dissipated, oil prices began to slide dramatically.
After oil prices slumped at around $10 a barrel in the late 1990s, concerted diplomacy, sometimes attributed to Venezuela’s president Hugo Chávez, achieved a coordinated scaling back of oil production beginning in 1998. In 2000, Chávez hosted the first summit of heads of state of OPEC in 25 years. The next year, however, the September 11, 2001 attacks attacks against the United States and the subsequent invasions of Afghanistan and 2003 invasion of Iraq and subsequent occupation prompted a surge in oil prices to levels far higher than those targeted by OPEC during the preceding period.

Economics


Since currently worldwide oil sales are denominated in U.S. dollars, changes in the value of the dollar against other world currencies affect OPEC's decisions on how much oil to produce. For example, when the dollar falls relative to the other currencies, OPEC-member states receive smaller revenues in other currencies for their oil, causing substantial cuts in their purchasing power. After the introduction of the euro, Iraq decided it wanted to be paid for its oil in euros instead of US dollars causing OPEC to consider changing its oil exchange currency to euros.[12] This idea has been backed by Iran and Venezuela who have also chosen to sell oil in euros.
OPEC decisions have considerable influence on international oil prices. For example, in the 1973 energy crisis OPEC refused to ship oil to western countries that had supported Israel in the Yom Kippur War or October War, which they fought against Egypt and Syria. This refusal caused a fourfold increase in the price of oil, which lasted five months, starting on October 17, 1973, and ending on March 18, 1974. OPEC nations then agreed, on January 7, 1975, to raise crude oil prices by 10%. At that time, OPEC nations — including many who had recently nationalized their oil industries — joined the call for a new international economic order to be initiated by coalitions of primary producers. Concluding the First OPEC Summit in Algiers they called for stable and just commodity prices, an international food and agriculture program, technology transfer from North to South, and the democratization of the economic system.

Current quotas


OPEC Quotas and Production in thousands of barrels per day [13]
CountryQuota (7/1/05)Production (1/07)Capacity
Algeria 894 1,3601,430
Angola N/A 1,4901,490
Indonesia1,451860 860
Iran 4,1103,7003,750
Iraq 1,481
Kuwait 2,2472,5002,600
Libya 1,5001,6501,700
Nigeria 2,3062,2502,250
Qatar 726 810 850
Saudi Arabia10,0998,80010,500
United Arab Emirates2,4442,5002,600
Venezuela3,2232,3402,450
Total28,00031,98132,230

See also



★ List of Secretaries General of OPEC

★ Chart of exports and production of oil by nation

★ List of oil-producing states

★ Energy crisis

★ 1973 energy crisis

★ 1979 energy crisis

★ Ehrlich-Simon bet

★ Hubbert peak

★ International Energy Agency: a rival body founded during the 1973 crisis by the OECD

★ Petrol

★ Power outage

★ Renewable energy

★ Manucher Mirza Farman Farmaian

★ Strategic Petroleum Reserve

★ Petrocurrency

★ Organization of Arab Petroleum Exporting Countries (OAPEC)

★ Price fixing

★ Petrodollar Warfare
Petroleum industry writers/commentators


★ Colin J. Campbell

★ Kenneth S. Deffeyes

★ Mustafa

★ Daniel Yergin

★ Dee Terhune
Articles from the Secretary Generals of OPEC


★ Find Articles from Dr. Rilwanu Lukman (1999-200), Dr. Alí Rodríguez-Araque (Jan 2001 – 30 Jun 2002), and Adnan Shihab-Eldin (Kuwait), (acting for Al Sabah): (1 Jan 2005 – present)
Books covering aspects of the subject


★ '' (1993), by Daniel Yergin

★ ''The Politics of Oil-Producer Cooperation'' (2001)

★ ''The Coming Oil Crisis'' (2004)

★ '' (2004)

★ ''It's The Crude Dude'' (2004)

★ ''Confessions of an Economic Hit Man'' (2005), by John Perkins

Notes



1. http://news.bbc.co.uk/1/hi/business/689609.stm
2. http://www.econlib.org/library/enc/OPEC.html
3. Chapter I, Article 2 of The Statute of the organization of the Petroleum Exporting Countries (as amended)
4. BP plc. "British Petroleum table of world oil production". Retrieved June 18, 2007.
5. http://www.kommersant.com/p726525/
6. http://www.kommersant.com/p726525/
7. http://www.econlib.org/library/enc/OPEC.html
8. http://query.nytimes.com/gst/fullpage.html?res=9E0CE4DF1F3AF93BA2575AC0A964958260
9. http://www.fin24.co.za/articles/companies/display_article.aspx?Nav=ns&lvl2=comp&ArticleID=1518-1783_2045086
10. Go NOPEC! Congress takes on the biggest, baddest cartel of all
11. Quoted in Walter LaFeber, ''Russia, America, and the Cold War'' (New York, 2002), p. 292.
12. Iraq: Baghdad Moves To Euro
13. Quotas as reported by the United States Department of Energy

External links



★ OPEC official site

★ http://www.eia.doe.gov/emeu/cabs/opec.html

★ Concise Encyclopedia of Economics: OPEC

★ OPEC Timeline by Nicolas Sarkis, from ''Le Monde diplomatique'', May 2006

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