OPEC (which stands for Organization of the Petroleum Exporting Countries by AbbreviationFinder.org) was founded in 1960 to coordinate member states’ oil policies and conduct research. The organization deals with current issues such as the management of current resources and strategies for the future. OPEC receives the most attention for decisions made in order to influence international oil prices by varying the amount of oil produced in the member countries.
The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960.
The purpose was to coordinate the policies between the countries that have oil as their main export income.
OPEC is a relatively loosely composed interest group consisting of oil-producing states. The OPEC countries are assumed to control four-fifths of the world’s known crude oil reserves.
The highest leader is Secretary General Mohammed Barkindo, who took office in 2016.
OPEC’s highest decision-making body, the conference, consists of a delegate from each country, usually the Minister of Energy, and meets at least twice a year. The conference draws up guidelines for the policy and its implementation and appoints Opec’s board and chairman.
In addition, it is the task of the Conference to approve the budget and to appoint the Secretary-General and the Auditor. The decisions of the conference must be unanimous in order to be binding. A summit with the countries’ heads of state or government will be held every five years.
The board is responsible, among other things, for the conference’s decisions being implemented and met twice a year. The Board consists of one representative from each member state.
The General Secretariat in Vienna handles the day-to-day work. The Secretariat, headed by the Secretary-General, is divided into six departments for research, technology, administration, law, economics and information.
A special committee will try to create stability in the oil market through price monitoring and distribution of production quotas. The committee consists of representatives from all Member States and normally meets four times a year.
A financial commission within the secretariat also meets regularly to facilitate the organization’s work for stable prices.
In addition to coordinating member states’ oil policies by setting production and sales quotas and export prices, Opec also conducts energy-related research.
The organization also conducts analyzes of developments in the petrochemical industry and more.
To facilitate economic cooperation between OPEC states and developing countries, an OPEC Fund for International Development was established in May 1976. The fund provides loans for the economic and social development of non-members and is led by the finance ministers of the OPEC countries.
In the end, the members agreed that the quotas must be reduced, but in reality a number of states produced more than their allowable quotas. When the price of oil fell to $ 10 a barrel in early 1999, the organization met in a crisis meeting and decided on major production cuts. As members kept their quotas this time, prices rose sharply at the turn of the millennium.
Industrialization in China is the factor that in recent years has been most decisive for the demand for oil in the world. For a long time, prices have kept prices at a higher level than before, so high that it has also paid off to start extracting oil in a more expensive way than with the methods used, especially in the Persian Gulf. In the USA and Canada, but also some other countries, it has therefore been profitable to produce shale oil. All production methods have a negative environmental impact, as does the combustion of fossil fuels, but if oil prices fall, oil countries in the Persian Gulf do better than producers who have higher costs to absorb the oil. Opecländer has also tried to take advantage of this by keeping prices at such a level that competitors have had profitability problems.
From 2016, the member countries of OPEC and some other oil-producing states, mainly Russia, have collaborated to try to keep prices up. The collaboration is usually called Opec plus.
But prices have fluctuated anyway. Unexpected crises can affect development. The corona pandemic, which spread around the world from the beginning of 2020, has reduced the demand for both fuel and other oil products, as travel and freight were stopped by political decisions around the world. Saudi Arabia then went to price war to try to increase its market share instead. The OPEC countries find it difficult to agree on that method because price wars also reduce Member States’ revenues, making it difficult for them to cover government spending, such as salaries for civil servants.