What Is Organization of the Petroleum Exporting Countries OPEC?

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. It rejoined in January 2016 but left after the OPEC conference in November 2016. Qatar left in January 2019 to focus on natural gas instead of oil.

1. Oil prices continued to experience volatility, leading OPEC to adjust production levels to 7.2 million barrels per day as of January 2021.
2. In recent years, several challenges to OPEC’s influence have come to the fore, including divisions within its membership, the emergence of the United States as a major oil exporter, and the global shift to cleaner energy sources.
3. OPEC’s third goal is to become the world’s oil supply swing producer.
4. As a result, U.S. presidents from Gerald Ford to Donald Trump have railed against the oil cartel as a threat to the U.S. economy.

Many non-OPEC members also voluntarily adjust their oil production in response to OPEC’s decisions. In the 1990s, they increased production to take advantage of OPEC’s restraints. These cooperating non-OPEC members are Mexico, Norway, Oman, and Russia. 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.

Organization of the Petroleum Exporting Countries (OPEC)

The organization ensures its members receive a steady stream of income from an uninterrupted supply of oil. The percentage of crude oil reserves held by OPEC countries in 2021. In 2019, for example, Qatar officially withdrew from OPEC, signaling its disapproval of Saudi Arabia’s dominance over the organization and a Saudi-led blockade of the country. Though the blockade ended in 2021, Qatar has said it will not move to rejoin the bloc.

OPEC was founded in 1960 to coordinate the petroleum policies of its members and to provide member states with technical and economic aid. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries. 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.

OPEC Member Countries

Instead, it allowed prices to fall to maintain its own market share. The break-even price is much lower for most of its members. OPEC’s headquarters, first located in Geneva, was moved to Vienna in 1965. OPEC members coordinate policies on oil prices, production, and related matters at semiannual and special meetings of the OPEC Conference.

Saudi Arabia pushed for OPEC+ members to reduce production at a meeting in Vienna in early March. Russia, leery of a reduced market share and frustrated by U.S. sanctions targeting its flagship oil company Rosneft, refused. In response, Riyadh initiated a price war by ramping up production—a strategy it has employed successfully in the past—to force Moscow back to the table, Jaffe explains.

OPEC and Its Goals, Members, and History

During the 1990s OPEC continued to emphasize production quotas. 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. 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.

Russia, not an OPEC member, voluntarily agreed to cut production. 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. President Jimmy Carter tried to raise the specter of OPEC to encourage Americans to reduce fuel consumption. Trump was more explicit, calling OPEC a monopoly and demanding is etoro safe that the cartel reduce prices—a common refrain from presidents who view lower gasoline prices as a sort of tax cut for American drivers. Additionally, Congress has threatened to allow antitrust lawsuits against OPEC and its member states. President Biden has also blamed OPEC for not increasing production fast enough in response to surging oil prices that have contributed to record inflation in the United States.

Since 1973, OPEC has often had a rocky relationship with the United States. Every U.S. president since Nixon has advocated for energy independence, though economists continue to debate the merits of such a goal. Proponents say that less hotforex broker review reliance on OPEC oil reduces the trade deficit and makes the U.S. economy more resilient in the face of oil price swings. Some say that at the very least it will allow the United States to shift its focus away from the Middle East.

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. OPEC is forming a partnership with a 10-country oil alliance led by Russia. Iran opposes the deal because then Saudi Arabia and Russia will dominate the organization. Russia is the world’s second-largest oil exporter after Saudi Arabia. Some of the world’s greatest oil-producing countries, such as Russia, China, and the U.S., do not belong to OPEC.

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. The OPEC Special Fund was conceived etoro broker review in Algiers, Algeria, in March 1975, and was formally established the following January. 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.