OPEC: Definition, Members, History, Goals

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I received a less than calm call from Kissinger, then in Paris negotiating with the Vietnamese to seek an end to the Vietnam War, asking “What the hell is going on.” I was tasked with finding out and reporting back to him immediately. I was also peppered with questions from officials of other governments, including several foreign ministers who could not reach Henry while he was in negotiations with the Vietnamese. Fortunately, I was able to get a fairly detailed readout from Volker and Treasury lawyer Mike Bradfield. Several oil companies are getting a jump start on the transition to renewable energy. There is a balance, however, as cutting the supply of oil too much would reduce revenues for OPEC members. 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.

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. Qatar terminated its membership on Jan. 1, 2019, and Indonesia suspended its membership on Nov. 30, 2016, so as of 2020 the organization consists of 13 states. It is headquartered in Vienna, Austria, where the OPEC Secretariat, the executive organ, carries out OPEC’s day-to-day business. OPEC was established in Baghdad in September 1960 by founding members Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, and now has 13 member countries. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader.

This boosted oil prices – but made fracking more economically viable. Recent events at the COP28 summit in Dubai have brought OPEC’s position into focus. https://bigbostrade.com/ The organisation, led by its Secretary-General Haitham Al-Ghais, has been criticised for actively opposing global efforts to phase out fossil fuels.

1. Concerns over supply, and OPEC members (such as Libya) threatening to cut oil production, caused oil prices to rise from $25 per barrel in September 2003 to $147.02 in July 2008.
2. And although its members are trying to stay neutral on the conflict, Rafiq Latta and Amena Bakr of Energy Intelligence, tell us that the organization is no stranger to geopolitics.
3. He thought that even giving in partially to Arab demands would merely generate more demands and strengthen the most uncompromising producers.
4. 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.
5. OPEC was established as a collective bargaining unit for petroleum-exporting countries.

Previously, Russia and Eastern Europe could purchase certain American products that were banned from purchase by China. This move lifted the ban, putting China on an equal footing with these nations. My recollection is that we received no reaction from Beijing even then, which was a significant disappointment since I had hoped that even a small American gesture at this point would be reciprocated. Subsequently, we concluded that this would be the last unilateral economic gesture we would make to China. Months later, we received signals that what we saw as small gestures had a bigger impact than we had imagined. Needless to say, his announcement set off a huge political firestorm amongst America’s friends and allies around the world.

Origin of OPEC

I began to compile a list of possible steps the U.S. could take gradually to begin increasing economic ties. Most of these, at the outset, would be small steps designed not so much because they would have a significant impact on the value or amount of trade, but rather because they would be signals of our desire for closer ties. Economics was only a small portion of the issues discussed by the president and Kissinger in the early stages of establishing and building Sino-American relations. At the time, there had been no trade or mutual investment between the two countries for several decades. China was hardly seen as a significant market for American products and had little to sell to the U.S.

Current member countries

This prevents the US from having the same power over international markets as OPEC. Oil production in Russia remained above 10 million b/d in 2022 despite sanctions in response to its full-scale invasion of Ukraine. Russia’s oil output and effect on the market is significantly greater than that of other OPEC+ countries, such as Mexico and Kazakhstan, so the actions of the OPEC+ agreement are largely driven by coordination between OPEC and Russia.

Total Energy

The bloc has adapted by forming the so-called OPEC+ coalition with Russia and other countries, but disruptions caused by the COVID-19 pandemic have undermined those efforts. In 2022, Russia’s war in Ukraine and the resulting surge in global oil prices refocused attention on OPEC. The Organization of the Petroleum Exporting Countries (OPEC) is a bloc of thirteen oil-rich member states spanning the Middle East, Africa, and South America. Combined, the group controls close to forty percent of world oil production. This dominant market position has at times allowed OPEC to act as a cartel, coordinating production levels among members to manipulate global oil prices. 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.

What Does OPEC Stand For?

OPEC+ members have worked to coordinate their oil production policies in recent years to help stabilize global supplies and prices. OPEC’s strategy relies on its ability to adjust these production quotas in response to global economic conditions. When the oil market experiences an oversupply, leading to a drop in prices, OPEC members can agree to reduce production quotas, thereby tightening video game stocks supply and supporting higher prices. The financial crisis had a significant impact on global demand for oil, leading to a sharp decline in prices. OPEC responded by agreeing to a substantial production cut to stabilise prices, showcasing its ability to adapt to changing global economic conditions. To stabilise the fluctuating oil market, OPEC introduced a price band mechanism in 2000.

In 2019, 79.1% of the world’s oil reserves were located in OPEC-member countries. OPEC’s decisions have a significant impact on future oil prices, so it’s important to learn how it works. Critics have questioned this approach as self-serving for fossil fuel producers, which have been raking in immense profits since Western sanctions cut off access to Russian seaborne crude and oil products after Moscow’s invasion of Ukraine. The group will reduce its collective supplies when demand is weak or if non-members are producing too much oil to stabilize prices.

By changing how much oil is going to enter circulation, OPEC can keep the price of oil high – assuming demand remains constant – to maximise the group’s profits. OPEC was also created to prevent the United States from dominating the oil market. Up until 1960, the US was the largest producer and consumer of oil, which meant that prices were generally set by the country’s oil companies. By combining forces, OPEC members could limit US interference in global markets and position itself as a rival. There are several advantages of having a cartel like OPEC operating in the crude oil industry.

The group cut its production by 9.7 million barrels per day in May 2020. It steadily brought supplies back online in the months that followed as demand improved and excess inventories burned off. OPEC’s actions helped stabilize the global oil market following significant volatility in the early days of the COVID-19 pandemic. OPEC was established in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela; its membership has expanded and contracted over the years. OPEC’s founding members not only set out to negotiate higher global posted prices for oil but also pursued greater control over their own resources through the nationalization of international oil company concessions. 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.

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. If Riyadh continues to pursue a more assertive foreign policy, it could be a challenge for the cartel to remain cohesive.

Oil prices can drop significantly if they decide to supply more 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. 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. For this reason, it has more authority and influence than other countries. The period that I have been discussing represents a time when geoeconomic and geopolitical issues were rapidly merging and becoming intertwined.