Organization of the Petroleum Exporting Countries (OPEC)

12 Key excerpts on "Organization of the Petroleum Exporting Countries (OPEC)"

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  Controversial Issues in Energy Policy

  • Alfred A. Marcus(Author)
  • 1992(Publication Date)
  • SAGE Publications, Inc

    (Publisher)

  4 The Organization of Petroleum Exporting Countries T he Organization of Petroleum Exporting Countries (OPEC) is a cartel that was formed in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. OPEC now includes 13 countries-Algeria, Ecuador, Gabon, Indonesia, Libya, Nigeria, Qatar, and the United Arab Emirates in addition to the 5 founding members. Of these 13 nations, 6 are Arab-Iraq, Kuwait, Saudi Arabia, the United Arab Emirates, Libya, and Algeria. Although Iran is not an Arab nation, it is Islamic and borders Arab nations. In 1967-1968, the Arab members of OPEC formed an exclusively Arab organization, the Organization of Arab Petroleum Exporting Countries (OAPEC). Syria and Egypt subsequently joined OAPEC. On October 17, 1973, 11 days after the armies of Syria and Egypt launched a surprise attack on Israel, OAPEC announced a cutoff of oil to Western countries and Japan. The 1973 oil embargo was one of the most dramatic actions taken by a cartel in history, catching nearly all observers by surprise and altering the course of post-World War II history. The pre-embargo era was marked by stable oil prices, assured supplies, and a flourishing world economy, whereas the post-embargo era has had unstable prices, uncertain supplies, and a floundering world economy. Other factors affected world economic conditions, and oil price rises only partially determined the results, but they did playa role (see Chapter 2). 57 58 CONTROVERSIAL ISSUES IN ENERGY POLICY On January 1, 1979, oil production in another OPEC nation, Iran, was almost entirely shut down because of the strikes and political disturbances that led to the overthrow of the Shah and the establishment of a fundamental-ist Islamic republic. Iraq then invaded Iran, and on September 25, 1980, both countries started to bomb each other's oil facilities. The Iraqis damaged the Iranian refinery at Abadan-the world's largest-and the Iranians retaliated against Iraqi refineries at Basra.

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  Energy Security Challenges for the 21st Century

  A Reference Handbook

  • Gal Luft, Anne Korin, Gal Luft, Anne Korin(Authors)
  • 2009(Publication Date)
  • Praeger

    (Publisher)

  CHAPTER 6 OPEC: An Anatomy of a Cartel Amy Myers Jaffe The history of the Organization of Petroleum Exporting Countries (OPEC) has been a successful one, and it remains one of the most important multinational en- ergy institutions outside the Western industrial world. Founded in 1960, OPEC’s original aim was to wrest higher fixed crude oil prices and royalty tax payments for oil-producing host governments from the international oil companies that owned and operated Middle East and South American oil fields under conces- sionary terms in the post-World War II period. As the 1960s progressed, OPEC ultimately got the upper hand in negotiations with the international oil companies and took control of their own national oil resources through massive nationaliza- tion of in-country oil field and infrastructure assets. OPEC’s actions to “assert its member countries legitimate rights” and gain “a major say in the pricing of crude oil on world markets” made history in 1973, when the organization initiated its famous oil embargo that rocked the international community and quadrupled the price of oil. 1 OPEC’s membership originally included only five countries (Venezu- ela, Saudi Arabia, Iraq, Iran, and Kuwait) but today 13 countries are members, including Saudi Arabia, Venezuela, Kuwait, Iraq, Iran, the UAE, Qatar, Libya, Ni- geria, Algeria, Indonesia, Ecuador and Angola. Throughout the years, OPEC has stuck with a very basic objective: it defends and supports the income and revenue aims of its members and forces any burden of that economic adjustment of higher oil prices on to other countries, namely large oil consuming nations such as the United States, the EU, Japan, and China. OPEC’s ability to achieve its revenue aims has varied over the years, rising and falling on the fate of global economic growth and the increasing ability of the world’s citizenry to attain a high enough standard of living to own an automobile.

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  International Organizations and The Rise of ISIL

  Global Responses to Human Security Threats

  • Daniel Silander, Don Wallace, John Janzekovic(Authors)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  10Organization of the Petroleum Exporting Countries (OPEC) Martin Nilsson

  The 12-member Organization of the Petroleum Exporting Countries that includes Saudi Arabia, Iraq, Iran, the UAE, and Venezuela represents some of the largest oil-producing states in the world. These countries control between 60 and 80 percent of the world’s known oil reserves. OPEC’s primary role is to regulate global oil prices by either reducing or increasing oil production, thereby significantly affecting the crude-oil benchmark (the reference price) of global oil (Colgan, 2014; Kisswani, 2011; Lin, Omoju & Okonkwo, 2015; OPEC, 2015d). As a general rule, OPEC usually does not involve itself in geostrategic or geo-political matters external to its own oil interests (Oil & Gas 360, 2015). With ISIL’s expansion into Syria and northern Iraq, there has been some wide-ranging concern raised internationally by industry heavyweights, politicians, economic pundits, and others on how this might affect the oil prices in the long term (Critchlow, 2015; Hussain, 2014; Oil & Gas 360, 2015). Since the spring of 2015, ISIL has been in control of most of the oil and gas refineries in Syria (itself a small oil and gas producer) and it has expanded its territory into northern Iraq. Baiji in northern Iraq is the country’s largest oil refinery at risk from ISIL operations, and its jihadist affiliates have increasingly threatened the key energy infrastructure in the southern Basra area around the Persian Gulf (see Oil & Gas 360, 2015).

  Up to the end of 2015, OPEC countries, including Saudi Arabia and Iraq, have managed to maintain high levels of oil production, despite others such as Libya having significant reductions as a result of its ongoing civil war (Elass & Jaffe, 2011; Lima, 2015). OPEC’s ability to effectively manage its oil production would be under threat if the production of the organization’s second largest oil producer, Iraq, were interrupted. This would likely affect the entire price-setting mechanisms of the global oil market. There is little that OPEC can do against ISIL at the organizational level, but its global-market dominance and influence may prompt others to respond against the jihadists and its affiliates, particularly if there is a serious threat to the oil market or prices.

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  The Third World Handbook

  Second Edition

  • Guy Arnold(Author)
  • 2016(Publication Date)
  • Bloomsbury Academic

    (Publisher)

  6 OPEC and Oil Power Although the Organization of Petroleum Export-ing Countries (OPEC) was formed in 1960, it attracted little public attention and was virtually ignored by the international oil companies for the first decade of its existence. Only in the 1970s did it come into prominence. Following the closure of the Suez Canal in 1956, oil prices rose in 1957 although 2 years later there was a general reduction. It was still very much the era of cheap oil. The fall in the price of Gulf crudes in 1959 adversely affected those Middle Eastern countries whose budgets depended upon oil revenues. As a result in September 1960, following another oil price reduction, ministers from five major oil-producing countries - Iran, Iraq, Kuwait, Saudi Arabia and Venezuela - met in Baghdad where they decided to establish a perma-nent body to act in the interest of oil producers: in effect a cartel. The original five were joined by others as follows: Qatar (1961), Libya and Indonesia (1962), Abu Dhabi - later the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973) and Gabon (1975, although it had been an associate from 1973). The Conference, the supreme authority of OPEC, formulates general policies and is made up of representatives of member countries who appoint governors and elect the Chairman. The Conference works on the unanimity principle and meets two (or more) times a year. The Board of Governors directs the management of OPEC, implements the resolutions of the Conference and draws up the budget. One gov-ernor is appointed from each member country. The Economic Commission is concerned to prom-ote stability in international oil prices. The Secre-tariat, the administrative organ of OPEC with a Secretary-General, is divided into a number of departments, namely the Research Division, the Economic and Finance Department, the Organization of Petroleum Exporting Countries (OPEC) 13 members of OPEC

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  Expert-generated Data

  Applications In International Affairs

  • Gerald W. Hopple(Author)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  Taken as a whole, the responses represent a complex set of attitudes held--according to the panel--by the OPEC members. The final step involved the use of a statistical technique called multidimensional scaling to organize and display the data.3 History of OPEC As a formal organization, OPEC has been in exis-tence since 1960. The purpose for its formation was to coordinate the attitudes of oil producing countries toward the multinational oil corporations and to provide guidance on oil pricing policies. Although the initial intent was to create an associ-ation of Arab countries, it was realized that non-Arab oil producers like Iran and Venezuela should also be included to guarantee that such an organi-zation would be effective. OPEC now has 13 members 159 who possess 68 percent of the existing world oil and supply 84 percent of annual crude exports (Allen, 1979: xit. The threat of an economic breakdown was brought on by the control of oil prices by Western oil com-panies. Between 1959 and 1960, they cut th~ price on Middle Eastern oil by about 27 percent. The Middle East governments, dependent upon the revenues from oil exports and the tax proceeds on production, feared that they would virtually lose their only source of foreign exchange. In order to defend themselves, five countries (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela) met in Baghdad and formed a cartel with the singular purpose of raising the price of oil. This meeting was the first OPEC Conference. It took thirteen years, however, for the control of price and production to shift away from the major interna-tional oil companies to OPEC. Until this occurred in late 1973, OPEC was not a successful cartel or oli-gopoly (Mikdashi, 1972). In the 1960s there was a worldwide oil glut. The United States--the world's major consumer of oil--was self-sufficient. Oil sold for under $1.80 per barrel. The oil companies, acting together, effectively con-trolled the price of oil.

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  The Challenge of Energy Security in the 21st Century

  Trends of Significance

  • Hooman Peimani(Author)
  • 2011(Publication Date)
  • ISEAS Publishing

    (Publisher)

  The dissatisfaction of the oil exporters with the status quo and their individual inability to change the terms of their bilateral contracts with the Western oil corporations to balanced ones to preserve their interests, gave birth to the idea of establishing an intergovernmental organization of oil exporting nations. The resulting entity was meant to enable the individually-weak oil exporters to overcome their weakness through their collective activities. Thus, OPEC was established to secure the economic interest of oil exporting countries through the formation of an organization to coordinate their oil policies. Such polices were meant to raise global oil prices to a fair level for OPEC members, meaning, on the one hand, a level high enough to meet their economic needs, and on the other, commensurate with the prices of industrial and agricultural goods and services, which OPEC OPEC’s Long-term Role in Affecting Energy Security 83 Map 4.1 OPEC Members Source : Reproduced with kind permission of Geoffrey Pakiam (map generated from ). -NORTH [? A1ERICA ~ /r ~')I GULF OF -, MF.XfCO _v '; ''. n~;-. CARR/BEAN NORTH ATLANTIC OCEAN ~ ,' ~o, .. :h SEA . ..--7 ...:: · , r · ~n~zu~ Ia ~ r '~' ~~; ~ UTH AMERICA i roum ~ I ) y:v .I -SOUTH ATL4NTJC OCEAN >~ ) u 84 Hooman Peimani members had to buy from Western countries and Japan at the time. Towards that end, OPEC saw a necessity to avoid overflooding the global markets with oil for its predictable negative impact on oil prices, that is, pushing them down sharply, a financially disastrous scenario for all OPEC members. Thus, OPEC members agreed among themselves to have a system of annual export quota for every member, to be determined according to the global annual demand, taking into consideration each member’s production capabilities and oil reserves. In short, OPEC has the objective of coordinating its members’ oil policies through managing the supply of crude oil.

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  Sustainable Resource Development

  • Gary M. Zatzman(Author)
  • 2012(Publication Date)
  • Wiley-Scrivener

    (Publisher)

  Chapter 6

  OPEC — The Organization of Petroleum Exporting Countries

  6.1 Birthmarks — The First Twenty Years

  OPEC — the Organization of Petroleum Exporting Countries— was established in 1960.1 The circumstances attending its birth could not have seemed less propitious. Taking advantage of a seriously glutted world market during 1958–59, Soviet Russian and other sources of oil from outside the international petroleum cartel were under-selling the cartel in growing markets in developing countries such as India, as well as in Italy, at a considerable discount off the so-called “posted price.” The posted price was the figure used by cartel member companies to determine how much would be paid to the governments of the countries supplying them with oil. To retain their share of world markets amid the general glut, meanwhile, cartel members began selling below the posted price. Since the host countries’ share was contracted to be a percentage of the higher posted price and not the effective market price, the profits booked by cartel member companies, based on the higher but no longer effective posted price, appeared to be on the verge of shrinking. This turn of events led Standard Oil of New Jersey (today’s Exxon), one of the largest of the cartel member companies, to lower the posted price to the effective market price of oil during the glut. This would keep the host governments’ percentage take the same, but reduce its gross amount.

  By this act, the entire collection of contracts long established between the governments and the member companies of the cartel was unilaterally torn up. The side that was also empowered under these contracts to prevent any attempts by the host countries to reopen any of their terms to further negotiation was tearing them up. That was where Venezuela’s oil minister, Juan Pablo Perez Alfonso, and Saudi Arabia’s oil minister, Abdullah al-Tariki, now sensed an unprecedented historic opportunity. At last it might just be possible to kick down the barriers maintained over the last five decades by the international petroleum cartel against having to accept the host countries as contractual equals.

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  The Community of Oil Exporting Countries

  A Study in Governmental Co-operation

  • Zuhayr Mikdashi(Author)
  • 2023(Publication Date)
  • Routledge

    (Publisher)

  opec was established as a ‘defensive’ mechanism to form a common front vis-a-vis expatriate oil firms and major oil importing countries. opec ’s concern, therefore, is not regional integration of members’ economies and societies, but mainly the co-ordination of members’ policies in one commodity, petroleum, and solely in the export market. In contrast, the Organization of Arab Petroleum Exporting Countries (oapec) has, as its ultimate goal, the integration of its members’ national economies into a single regional economy. A. Measuring Compatibility Among the large number of parameters and variables relevant to opec co-operation, 1 some have dominated discussions of the joint regulation of production; area, population, oil reserves, amount and growth of oil production, production costs, oil revenues, factor endowment (other than oil), and a country’s dependence on the oil industry. Other variables relevant to co-operation among opec countries include the education and expertise of elites and political leaders, and their values, goals, and priorities. Variations among opec countries in socio economic systems, in international economic relations, in foreign alliances, in ideology and degree of dogmatism, and in political stability will also affect these countries’ views and actions on common problems. Among the latter variables, political stability may defy ready measurement, since it contains a high proportion of intangibles and unknowns. However, the chairman of The ‘ Shell ’ Transport and Trading Co. Ltd, the 40 per cent owner of Royal-Dutch Shell, has said that his company was ‘quantifying’ political risks, but he would not elaborate on the techniques used. 2 In addition to identifying critical factors relevant to opec cooperation, there is also the question of ascertaining their relative weights. A number of the variables suggested above are interrelated

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  Energy Security

  An Interdisciplinary Approach

  • Gawdat Bahgat(Author)
  • 2011(Publication Date)
  • Wiley

    (Publisher)

  Within this context, natural gas has been widely considered the fuel of choice for many consumers. It is abundant and less polluting than coal or oil. Little wonder that natural gas consumption and trade have expanded in the last few decades. Consumers in the United States, Europe, and Asia have grown more dependent on natural gas. Domestic production in these regions, however, cannot keep pace with rising demand. This large and growing gap between demand and domestic production has been increasingly filled by imports from foreign suppliers. The deepening dependence on foreign sources has heightened concerns about security of supply. Stated differently, natural gas consumers are increasingly concerned about potential movements by major gas producers to influence gas markets and prices, similar to the role of OPEC in oil markets. Will a “Gas OPEC” emerge?

  On the supply side, natural gas producers have sought to coordinate their policies in order to strengthen their position in negotiating prices and terms of trade with consumers. In a meeting held in Tehran in May 2001, some major gas producing nations created an organization called the Gas Exporting Countries Forum (GECF) to facilitate such cooperation. Since then, some hawkish members, such as Iran and Venezuela, have sought to transform the GECF into Gas OPEC. Others (i.e., Algeria and Qatar) believe it would take some time for such a transformation to take place. Meanwhile, Russia, the major gas producer and exporter, has taken an ambivalent stand, sending conflicting signals.

  In this section, I examine the prospects for the evolution of the GECF into Gas OPEC. I argue that gas producers are likely to continue and expand their cooperation. Such cooperation, however, is unlikely to involve attempting to control output or influencing prices like OPEC does. This low probability that the GECF would evolve into Gas OPEC is based on major differences between the oil and natural gas markets. In addition, Russia is not likely to play a leading role in forming a Gas OPEC, similar to the Saudi leading role in OPEC.

  9.6 GECF and OPEC

  As discussed above, when OPEC was founded the oil trade was characterized by bilateral long-term contracts and oil producers were not satisfied with the low financial returns they were getting for their crude. At the outset, OPEC looked weak and did not have the powerful leverage it came to exert on oil output and prices in the following decades. The 1973 Arab–Israeli War and the subsequent use of oil as a “political weapon” was a turning point in the history of OPEC and the oil industry. Two factors contributed to strengthening OPEC’s bargaining position. First, in the early 1970s, US oil production peaked and Washington began its steady reliance on foreign supplies. Second, oil was almost the primary fuel in the transportation, residential, and industrial sectors, providing almost half of global energy requirements [17]. In the early 1980s, OPEC initiated a production-quota system. Such a move has enabled OPEC to adjust its overall production in response to signals from global oil markets.

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  Handbook of OPEC and the Global Energy Order

  Past, Present and Future Challenges

  • Dag Harald Claes, Giuliano Garavini, Dag Harald Claes, Giuliano Garavini(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  3

  Saudi Arabia’s role in OPEC’s evolution

  OPEC and the global energy order from its origins to the present time

  Majid Al-Moneef

  The relationship between the Organization of Petroleum Exporting Countries, OPEC, and Saudi Arabia and their respective roles in the international oil market have dominated the literature on OPEC’s behavior since 1974 until today. Commentators and market watchers continued for decades to emphasize the dominant position of Saudi Arabia in OPEC since its inception. This role is derived from its weight in OPEC’s reserves and overall production and exports, the relative stability of its supplies throughout and its readily available excess production capacity to mitigate supply interruptions. The relative political stability of Saudi Arabia was reflected among other things in the consistency of its oil policy and the longevity in office of its oil ministers, which contributed to the effective utilization of its role in OPEC and the market.1

  A whole line of economic literature used the dominant firm hypothesis to model OPEC behavior, postulating that Saudi Arabia either alone or in association with its Gulf partners dominated OPEC’s pricing and production decisions. Another line of research used the game theory approach to model Saudi Arabia’s relations with the other members in devising the latter’s role in the market. Others sought to emphasize the political factors contributing to Saudi Arabia’s decision-making process within the Organization.2

  Needless to say, as the market evolved over the decades, so did the Saudi position and role within OPEC, the effectiveness of the organization and the Saudi policy approach to it. However, such a role was also influenced by its political relations with the other members, the market environment, the international political scene and Saudi Arabia’s internal politics. At different critical market junctures, Saudi Arabia’s role was critical, beginning with the events contributing to the birth of OPEC and the process of building the organization during its early years, its assumption of market management role in the seventies, its declining market power in the eighties and its re-established market role since the beginning of the 21st century.

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  Oil Policies, Oil Myths

  Observations of an OPEC Insider

  • Fadhil J. Chalabi(Author)
  • 2010(Publication Date)
  • I.B. Tauris

    (Publisher)

  Our group was very large, composed of all the member coun-tries’ representatives from their respective ministries of Foreign Affairs, Oil and Finance. Several delegates (besides the Algerians) occupied similarly high positions in their respective govern-ments, such as Omar Muntassir of Libya, a prominent government representative. We conducted several strenuous but tedious sessions (some last-ing well into the night) to cover every aspect of a possible vision for a long-term OPEC policy. The Gulf countries, notwithstanding that they sit on the bulk of the world’s oil reserves, predictably allowed themselves to be led by the Algerians and yielded to their demands. This continued to puzzle me. I believe it was because no one produced an alternative strategy – that is, apart from myself, the only one among the delegates who ever discussed the long-term effects of those policies embodied in the declaratory state-ment. They may not have studied carefully the real significance of the principles embodied in it but the group agreed on a draft of what was termed ‘OPEC’s Solemn Declaration’ for the heads of state to sign. Of some OPEC ‘paper powers’ 127 As the world’s foreseeable shift to energy sources outside OPEC was not, at this stage, perceived by OPEC people as feasible, and thus nowhere visible on their ‘radar’, one could argue that a trait of arrogance that pervaded OPEC circles during this era was attribut-able to an illusion that the world would always depend on their oil and that consumers could do absolutely nothing to reduce this dependence. What strengthened such illusions, and the exaggerated self-confidence that went with them, were the many forecasts by oil companies’ governments, by academic institutions and even by cultural institutions such as the Club of Rome, all predicting a very grim picture of imminent oil shortages from the scarcity of supplies.

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  Oil and Mexican Foreign Policy

  • George Grayson(Author)
  • 1988(Publication Date)
  • University of Pittsburgh Press

    (Publisher)

  -116-0il and Mexican Foreign Policy that, in view of U.S. support on debt matters, including SPR purchases from Pemex, Mexico's joining OPEC was out of the question. In August Labastida met with his counterparts from Venezuela, Ecuador, and Trinidad and Tobago to explore the establishment of an Organization of Latin American Petroleum Exporting Countries (OLAPEC). Once in place, such an OLAPEC would play the same regional role as the Organization of Arab Petroleum Exporting Countries (OAPEC), stated an official from Ven- ezuela, the country that had spearheaded the initiative. Still, he neglected to point out that OAPEC had played no role at all since imposing an embargo on the United States and the Netherlands in the wake of the October 1973 Mideast War. Additionally, it was argued that the new organization would bring Mexico closer than ever before to the deliberations of OPEC by linking it to two cartel members. 38 Three months later the energy ministers convened in Cancun. At the end of a two-day session, the leaders called for talks with consuming countries and producers from other regions to stabilize the interna- tional market. While a Mexican spokesman insisted that conditions augured well for an international conference, the November 1983 proposal proved no more successful than had Lopez Portillo's Global Energy Plan four years earlier. 39 Meanwhile, OLAPEC remained only a gleam in the eye of its Venezuelan advocates. In early 1984, six influential OPEC ministers met informally with their counterparts from Mexico and Egypt. They concurred in the need for a stricter ceiling to defend the market price for crude oil. After the meeting, Yamani, accompanied by Mexican and Egyptian representatives, led a small delegation to Lagos in hopes of persuading the Nigerians to rescind the $2 per barrel price cut they had just implemented.

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