Organization of the Petroleum Exporting Countries (OPEC) | IAS Target IAS Target

Organization of the Petroleum Exporting Countries (OPEC)

The Organization of the Petroleum Exporting Countries is an intergovernmental organization. The 14 member countries of the OPEC accounted for an estimated 44 percent of global oil production and 81.5 percent of the world's "proven" oil reserves, giving OPEC a major influence on global oil prices that were formerly determined by the so-called "Seven Sisters" grouping of multinational oil companies.
The formation of OPEC marked a turning point toward national sovereignty over natural resources, and OPEC decisions have come to play a leading role in the global oil market and international relations. The effect can be particularly strong when wars or civil disorders lead to extended interruptions in supply. It is notable that some of the world’s largest oil producers, including Russia, China, and the United States, are not members of OPEC and pursue their own objectives.

History

In 1949, Venezuela and Iran took the earliest steps in the direction of OPEC, by inviting Iraq, Kuwait, and Saudi Arabia to improve communication among petroleum-exporting nations as the world recovered from World War II. The formation of OPEC marked a turning point toward national sovereignty over natural resources, and OPEC decisions have come to play a prominent role in the global oil market and international relations, as mentioned above.
The effect can be particularly strong when wars or civil disorders lead to extended interruptions in supply. In the 1970s, restrictions in oil production led to a dramatic rise in oil prices and the revenue and wealth of OPEC, with long-lasting and far-reaching consequences for the global economy. In the 1980s, OPEC began setting production targets for its member nations; generally, when the targets are reduced, oil prices increase. This has occurred most recently from the organization's 2008 and 2016 decisions to cut oversupply.
OPEC is a live example of a cartel that cooperates to decrease market competition and enjoy monopoly to manipulate market. OPEC consultations are safeguarded by the doctrine of state immunity under international law. However, the influence of OPEC on international trade is periodically challenged by the expansion of non-OPEC energy sources, and by the recurring temptation for individual OPEC countries to exceed production targets and pursue conflicting self-interests.

Headquartered Vienna, Austria
Founded 14 September 1960, Baghdad (Iraq)
Official language English
Founding members Iran, Iraq, Kuwait, Saudi Arabia and Venezuela
Report
  • World Oil Outlook (WOO)
  • Annual Statistical Bulletin (ASB)
  • OPEC monthly oil market report

Member Countries

Algeria Guinea Kuwait Saudi Arabia Angola
Gabon Libya United Arab Emirates Ecuador Iran
Nigeria Venzuela Equatorial Iraq The republic of Congo
  • Indonesia and Qatar are former members.
  • Indonesia is a former member, and Qatar will no longer be the member of OPEC since 1 January 2019.

The mission of the OPEC

  • a steady income to producers
  • coordinate and unify the petroleum policies of its member countries
  • an efficient, economic and regular supply of petroleum to consumers
  • ensure the stabilization of oil markets
  • a fair return on capital for those investing in the petroleum industry

Qatar has declared that it would leave OPEC on January 1, 2019. The decision comes just days before OPEC and its allies are scheduled to hold a meeting in Vienna, Austria. Qatar said it is leaving OPEC to focus on gas production. Qatar’s oil production is around 600,000 barrels per day, making it the world’s 17th largest producer of crude. It merely holds around two percent of the world’s global oil reserves.

Issue b/w Saudi and Qatar

Saudi Arabia has been leading a regional blockade on Qatar that has seen trade and travel links severed over its alleged support for terrorism. OPEC members, Saudi Arabia and the United Arab Emirates, and fellow Arab states Bahrain and Egypt have imposed a political and economic boycott leading to the regional blockade on Qatar since June 2017. However, according to Qatar, Saudi led blockade is aimed to interrupt its sovereignty.

The OPEC Statute distinguishes between the Founder Members and Full Members

Full Members The Statute stipulates that “any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries, may become a Full Member of the Organization, if accepted by a majority of 3/4th of Full Members, including the concurring votes of all Founder Members.”
Associate Members The Statute further provides for Associate Members which are those countries that don’t qualify for full membership, but are nevertheless admitted under such special conditions as may be prescribed by the Conference.