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.
- Delegations are usually led by the oil ministers of each member country, and a secretary-general appointed by the bloc is entrusted with the day-to-day management of the organization.
- 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.
- Current OPEC members are[ref] Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela.
- In response, OPEC members—particularly Saudi Arabia and Kuwait—reduced their production levels in the early 1980s in what proved to be a futile effort to defend their posted prices.
In 1960, five OPEC countries allied to regulate the supply and price of oil. If they competed with each other, the price of oil would drop too far. They would run out of the finite commodity sooner than they would if oil prices were higher. Saudi Arabia is by far the largest producer, contributing almost one-third of total OPEC oil production. It is the only member that produces enough on its own materially impact the world’s supply.
In recent years, the group has sought to improve its image in the U.S., with limited results. In practice, OPEC tries to prevent crude prices from getting too low and too high. Most OPEC members rely heavily on oil sales to fill government coffers, and low prices can put their budgets in the red. Daniel H. Yergin’s books The Prize and The Quest look at the modern history of the oil and gas industries and their intersection with international politics. Others were spurred by differences in opinion over strategy and target prices for the cartel. Countries that left OPEC include Ecuador, which withdrew from the organization in 2020, Qatar, which terminated its membership in 2019, and Indonesia, which suspended its membership in 2016.
Russia, not an OPEC member, voluntarily agreed to cut production. The organization is committed to finding ways to ensure that oil prices are stabilized in the international market without any major fluctuations. Doing this helps keep the interests of member nations while ensuring they receive a regular stream of income from an uninterrupted supply of crude oil to other countries. In practice, Saudia Arabia has historically enjoyed an outsized role in OPEC decision-making because it is by far the organization’s top producer and exporter, with an even larger share of aggregate spare production capacity within the group.
Understanding the Organization of the Petroleum Exporting Countries (OPEC)
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 python linear programming membership in the 1970s. Gabon, which had joined in 1975, withdrew in January 1995 but rejoined in 2016. Exploration and reserves, storage, imports and exports, production, prices, sales. As a group of national producers often described as a cartel and concentrated in the Middle East, a region long perceived as hostile to U.S. interests, OPEC has been an easy target.
Instead, OPEC members agree to produce only enough to keep the price high for all members. OPEC’s main goal is to maintain oil prices at a profitable level for its members while keeping the market as free as possible from restrictions. The organization ensures its members receive a steady stream of income from an uninterrupted supply of oil. While Russia’s crude oil production rivals Saudi Arabia’s, it has much less spare production capacity.
OPEC’s Three Goals
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. 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. As U.S. domestic output rebounded amid rapid development of shale resources starting in 2011, the rivalry with OPEC revived as a competition between producers.
For this reason, it has more authority and influence than other countries. OPEC’s third goal is to become the world’s oil supply swing producer. This would involve responding to shortages or surpluses by increasing or decreasing supply as needed—effectually achieving its first two goals of controlling price stability and volatility. For example, it replaced the oil lost during the Gulf Crisis in 1990. Several million barrels of oil per day were cut off when Saddam Hussein’s armies destroyed refineries in Kuwait.
OPEC Member Countries
Qatar’s departure means the country is aligning itself more with the United States than with Saudi Arabia. U.S. officials stopped Saudi Arabia from invading Qatar in 2017, investigative website The Intercept reported. That same year the Saudis and the United Arab Emirates imposed an embargo on Qatar due to border disputes. For maximum efficiency, oil extraction must run 24 hours a day, seven days a week.
As one area in which OPEC members have been able to cooperate productively over the decades, the organisation has significantly improved the quality and quantity of information available about the international oil market. This is especially helpful for a natural-resource industry whose smooth functioning requires months and years of careful planning. Under the agreement, seven groups will withdraw from Tripoli after the holy month of Ramadan, Interior Minister Imad Trabelsi said Wednesday in a briefing.
Five years earlier, a consortium of U.S. oil companies gained control of Iran’s crude production after a Western-backed coup. In fact, the U.S. has already surpassed Saudi production and recently overtook Russia to become the world’s largest oil producer for the first time since the 1970s. Qatar left in January 2019 to focus on natural gas instead of oil.
Since oil contracts are priced in dollars, the revenues of oil exporters fell when the dollar fell. In response to the embargo, the United States created the Strategic Petroleum Reserve. It wants to make sure its members get a reasonable price for their oil. 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 cartel toughed it out until many of the shale companies went bankrupt. There are several advantages of having a cartel like OPEC operating in the crude oil industry. First, it promotes cooperation among member nations, helping them alleviate some degree of political hostilities. https://forexhero.info/ 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’s worst-ever crisis, according to energy expert Daniel H. Yergin, was Iraq’s 1990 invasion of Kuwait.
These cooperating non-OPEC members are Mexico, Norway, Oman, and Russia. For countries that export petroleum at relatively low volume, their limited negotiating power as OPEC members would not necessarily justify the burdens imposed by OPEC production quotas and membership costs. Still, oil prices are set by global markets, meaning OPEC will remain relevant in a post-shale revolution world. Officially, OPEC says its role “is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers.”
They believed higher U.S. supplies would flood the market with supply at the same time slowing global growth would cut into demand. OPEC faces considerable challenges from innovation and new, green technology. High oil prices are causing some oil-importing countries to look to unconventional—and cleaner—sources of energy. These alternatives, such as shale production as an alternative energy source, and hybrid and electric cars that reduce the dependence on petroleum products, continue to put pressure on the organization.
