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O. P. E. C.
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DERIVATION The Organization of the Petroleum Exporting Countries (OPEC) is made up of Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela; since 1965 its international headquarters are in Vienna, Austria.
The principal aim of the Organization, according to its Statute, is "the coordination and unification of the petroleum policies of [its] member countries and 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."
MEMBERSHIP
The Organization now has 11 member countries. They are listed below with their affiliation dates.
Although seven of the thirteen members and former members of OPEC are Arabic nations, the official language of the organization is English.
HISTORY
OPEC consists of 11 nations, including seven Arab world countries but also other major petroleum-exporting countries in the developing world like Iran and Venezuela. It was formed on September 17, 1960 to protest pressure by major oil companies (mostly owned by U.S., British, and Dutch nationals) to reduce oil prices and payments to producers. At first it had operated as an informal bargaining unit for the sale of oil by Third World nations. It confined its activities to gaining a larger share of the revenues produced by Western oil companies and greater control over the levels of production. However, in the early 1970s it began to display its strength. YOM KIPPUR WAR
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, Western Europe, and Japan. By the early 1970s the great Western oil conglomerates suddenly faced a unified block of producers.
This Arab-Israeli conflict triggered a crisis already in the making. They consistently drew the oil away from non-Arab nations. 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, redefined 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. "
OPERATIONS
OPEC's member countries hold about two-thirds of the world's oil reserves. They supply 40% of the world's oil production and half of the exports. Thanks to OPEC, member nations receive considerably more for the oil they export. "Last year, OPEC's 11 members . . . received $338 billion in revenue from oil exports, a 42% increase from 2003, according to figures compiled by the federal Energy Information Administration (New York Times, Jan. 28, 2005). Compare these figures to those from 1972, when oil exporters received $23 billion from oil exports, or 1977, when, in the aftermath of the 1973 energy crisis, they received $140 billion (Daniel Yergin, The Prize [Simon & Schuster, 1991], p. 634).
Since 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, because they continue to sell oil in the U.S. dollar. After the introduction of the euro, Iraq decided it wanted to be paid for its oil in euros instead of US dollars.
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.
Unlike many other cartels, OPEC has been successful at increasing the price of oil for extended periods. Much of OPEC's success can be attributed to Saudi Arabia's flexibility. It has tolerated cheating on the part of other cartel members, and cut its own production to compensate for other members having exceeded their production quotas. This actually gives them good leverage, because with most members at full production, Saudi Arabia is the only member with spare capacity, and the ability to increase supply, if needed.
The policy has been successful, causing the price of crude oil to rise to levels that had, at one time, been reached only by refined products. However, OPEC's ability to raise prices does have some limits. An increase in oil price decreases consumption, and could cause a net decrease in revenue. Furthermore, an extended rise in price could encourage systematic behavior change, such as alternative energy utilization, or increased conservation.
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.
After oil prices slumped at around $10 a barrel, 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. 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. Indonesia is reconsidering its membership having become a net importer and being unable to meet its production quota.
OPEC SECRETARIES GENERAL
From 21 Jan 1961-Apr 1965 the Chairmen of the Board of Governors were also, ex-officio, the Secretary-general of the organization. The functions of Chairman of the Board of Governors and Secretary-general were separated Apr 1965.
OIL PRODUCING NON-MEMBERS
Some non-OPEC oil-producing nations are:
Notes
1
Chapter I, Article 2 of The
Statute of the Organization of the Petroleum Exporting Countries (as
amended)
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