Definition and Introduction to OPEC
OPEC, The Organisation of the Petroleum Exporting Countries, is a name that has become synonymous with the worldwide petroleum market. But what does it do, who is involved and how important is OPEC to our day-to-day lives? This article aims to answer these basic questions in a clear and concise fashion. OPEC is a permanent organisation of 12 countries which are world-leaders in oil production. The primary aim of OPEC is to unify petroleum policies between its member countries, to ensure fair and stable oil prices. OPEC also tries to ensure a steady supply of petroleum to oil consuming nations. The headquarters of OPEC are found in Vienna, Austria.
Brief History of OPEC
OPEC was created in 1960 at the Baghdad Conference (September 10-14th). The organisation was initially created by 5 nations: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The original headquarters of OPEC were in Geneva, Switzerland until the move to Vienna five years later. OPEC was, in part, set up in response to the market dominance of the ‘Seven Sisters’; a term coined to describe the major multinational oil companies of the time. OPEC began to become of international significance in the 1970’s, as the members countries took charge of their respective domestic industries. Collectively, the organisation also became extremely influential in controlling world oil prices. [pic]
One of the first meetings of OPEC. Image Credit: OPEC - Organization of the Petroleum Exporting Countries The 1970’s also saw the creation of the OPEC Fund for International Development as the first summit of OPEC leaders concluded that more cooperation was needed between nations in order to keep oil prices stable. In the 1980’s, cooperation between OPEC and non-OPEC countries vastly improved and environmental policies began to be implemented for the first time. However, a market crash in 1986 meant that oil revenue plummeted and led to tough economic times for several OPEC members. Despite several global issues, including the break-up of the Soviet Union, oil prices in the 1990’s were more stable than previous decades. The price of oil rose to a record high in 2008, but the global financial crisis reduced this significantly soon after. OPEC is important in trying to support the global economy in the on-going global financial turmoil.
Member Countries of OPEC
The members of OPEC have changed over its lifetime, but in general the organisation has grown steadily.
The twelve current members of OPEC are:
• Saudi Arabia
• United Arab Emirates
The five founding members, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, have been permanent and continuous members since 1960. Qatar joined in 1961, Libya in 1962, UAE in 1967, Algeria in 1969, Nigeria in 1971, Ecuador in 1973 and Angola in 2007. Two have nations joined OPEC and subsequently left. Gabon was an OPEC member 1975-1994 and Indonesia (joined 1962), suspended their membership in January 2009. Ecuador also suspended its license 1992-2007. For a nation to become a member of OPEC, it must meet several criteria. The OPEC statute states that firstly, it must have a large net export of crude oil. Once this has been confirmed, it is at the discretion of the member countries whether a new nation is accepted, and the country must be approved by 9 of the 12 member countries, with all founding members voting in the affirmative. OPEC also includes Associate Members-countries that do not meet the full requirements of the OPEC statute, but can be accommodated under special circumstances.
Influence of OPEC
OPEC is considered to have a heavy influence on global oil prices by controlling petroleum supplies, leading the organisation to be...
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