Organization of the Petroleum Exporting Countries OPEC

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. U.S. oil companies acknowledge that the partnership, also known as the Vienna agreement or Vienna alliance, is here to stay. 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 reliance on OPEC oil reduces the trade deficit and makes the U.S. economy more resilient in the face of oil price swings.

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. 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.

  1. 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.
  2. But high oil prices can put downward pressure on demand and hurt sales.
  3. While OPEC’s objective is to maintain order in the oil market, that has not always been the case.
  4. But new technologies have allowed American producers to tap into previously trapped oil at decreasing cost, leading the United States to become the world’s largest oil producer in recent years.

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 fxopen review produced or its price. Other experts believe that OPEC is an effective cartel, though it has not been equally effective at all times. The debate largely centres on semantics and the definition of what constitutes a cartel.

What is OPEC?

During the 1970s the primary goal of OPEC members was to secure complete sovereignty over their petroleum resources. Accordingly, several OPEC members nationalized their oil reserves and altered their contracts with major oil companies. Following Saudi Arabia’s lead, other OPEC members soon decided to maintain production quotas. OPEC meetings and coordinated production targets have always affected global oil prices, and market participants closely follow them.

National security adviser Jake Sullivan said in a statement that OPEC’s current plans would “not fully offset previous production cuts,” that were made during the pandemic. The shale revolution that began in earnest last decade has unleashed a flood of oil on world markets, threatening OPEC’s influence. But Qatar said in December it plans to leave OPEC to focus on natural gas development, though analysts saw the move as motivated by its political dispute with Saudi Arabia and other Persian Gulf members. On August 11, 2021, the White House urged OPEC to boost oil productions for Covid-19 economic recovery. However, OPEC members are notorious for cheating on their quotas as there is no way to punish violators.

Share this Comment:

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, as well as from non-OPEC and non-OPEC-affiliated countries. 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. And OPEC accounts for 60% of total petroleum traded internationally, according to the U.S. OPEC data also show that it has over 80% of the world’s proven oil reserves. OPEC production averaged 32.9 million barrels per day in October 2018, accounting for about 40% of global output vs. 50% in the 1970s.

U.S. Energy Information Administration – EIA – Independent Statistics and Analysis

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.» Most of OPEC’s oil production comes from state-run oil companies, making it easier for officials to control output, unlike in the U.S. where companies are the dominant force and make independent production decisions. Opec stands for the Organisation of the Petroleum Exporting Countries. It was created in 1960 by the top sovereign oil producers at that time – Iran, Iraq, Kuwait, Saudi Arabia and Venezuela – during a conference in Baghdad.

It is a project that Exxon, Shell, and Total likely would not have pursued if they did not expect OPEC to keep oil prices stable over the long term. For the past few years, OPEC has been working with nonmembers like Russia to coordinate production to help support oil prices. Bahrain, which was first GCC country to strike oil, is not part of Opec as its reserves matured quickly and production remains low. Oman, which also has one of the region’s highest break-even points for oil production, is also not a member. However, both countries take part in controlling their output as part of the broader Opec+ alliance.


But when combined with OPEC+ partner Russia, which reportedly produced around 11.4 million bpd, that share goes even higher. OPEC’s Annual Statistical Bulletin contains over a hundred pages of tables, charts, and graphs on all things oil and gas. Russia is now exporting more crude to countries such as India and China, which are not imposing the Western sanctions against Moscow. Following Russia’s invasion of Ukraine, the price of Brent crude soared to more than $130 a barrel.

UK to test nuke missile with sub firing Trident 2 for first time in 8yrs

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. Vast reserves of U.S. shale oil have not completely insulated American consumers from OPEC-induced price swings. Changes in U.S. production levels are the result of dozens of private energy companies’ independent decisions, and it can take months before consumers feel any adjustments.

Others were spurred by differences in opinion over strategy and target prices for the cartel. However, the G7 group of nations is trying to keep Russia’s oil revenues low by imposing a price cap of $60 a barrel on the oil that it exports. It follows a cut of 1.16 million barrels a day in April, which was voluntarily undertaken by eight members of Opec+, and a group-wide cut of two million barrels a day in October 2022. It responded to a sudden drop in the U.S. dollar’s value after President Nixon abandoned the gold standard. 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.

In this scenario, there is room for «cheating.» A country won’t go too far over its quota though unless it wants to risk being kicked out of OPEC. Leading the charge are U.S. shale producers like Diamondback Energy (FANG), Continental Resources (CLR) and EOG Resources (EOG). Oil majors like Exxon Mobil (XOM) and Chevron (CVX) have also expanded their shale operations in the U.S., while curtailing operations in Libya and other Middle Eastern locations due to security risks. High prices can encourage oil consumers to reduce dependence on oil by developing local sources and shifting to alternative energy.

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. For OPEC and its newfound partner Russia, this possibility, combined with the rise of shale oil, increasing U.S. energy independence, and global efforts to fight climate change, portend a prolonged period of uncertainty. In 2016, when oil prices were particularly low, Opec joined forces with 10 other oil producers to create Opec+. Saudi Arabia is the biggest single oil supplier within the group, producing more than 10 million barrels a day.

Deja una respuesta

Tu dirección de correo electrónico no será publicada. Los campos obligatorios están marcados con *