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International Situation TopicsOPECOPEC is the acronym for the Organization of Petroleum Exporting Countries. It is composed of the following eleven members: Algeria, Angola (joined on January 1, 2007), Ecuador (joined OPEC in 1973, suspended its membership from Dec. 1992-Oct. 2007), Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. The organization was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Its membership is limited to "any other country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of member countries. The demographics of member countries are similar yet, in some ways, very different.
OPEC holds 73% of oil and provides 43% of supply or 60% of internationally traded oil. OPEC holds more than 48% of world�s natural gas and produces 16% of supply. OPEC members seek prices that would provide for a healthy world economy, minimal incentives for alternative fuels, and sufficient cash flow to invest in new production facilities.
OPEC Oil Reserves and Production*
* 2007 data ** The link will take you to the Energy Information Administration's Country Briefs for each country. OPEC seeks to control world oil prices, but this is a very difficult undertaking. Even though OPEC provides 43% of the world's oil, it is subject to variables that it cannot control which will influence prices. These variables include economic growth, weather, political situations and new technologies. OPEC attempts to influence prices by adjusting the production of individual members through output quotas.OPEC production ranges from 520 thousand barrels per day in Ecuador to 10.4 million barrels per day in Saudi Arabia. Venezuela, Iran, Kuwait and Saudi Arabia account for 57% of OPEC supply. Saudi Arabia has the capacity to produce an additional 1.5 to 2 million barrels per day of oil. If demand exceeds OPEC's forecasts, prices can rise resulting in lower economic growth and protests from consuming country governments. If demand is less than anticipated, prices can drop resulting in lower incentives to find oil resources, reduced interests in energy conservation and increased use of fossil fuels which will contribute to global climate change. While it might seem strange, oil producers and environmentalists would both favor higher prices --- producers obtain profits to help find more oil and grow their companies and environmentalists achieve incentives to reduce fossil fuel consumption and invest in alternate energy.It is also naive to view OPEC as a homogeneous family where all countries share the same goals and strategies. Although the role of the oil industry in each member country varies, OPEC members depend on oil exports to provide for income for the overall economy. That means that these countries use oil income to build roads, hospitals and schools. This money is also used to develop other businesses and industries. Some of this money is also used to support internal and external political agendas and the lifestyles of governing officials and families. These member countries debate these production changes at periodic meetings and arrive at production quotas. These quotas are only targets and OPEC has no methodology to force member countries to comply with them. Overproduction and creative accounting have often been used to allow member countries to raise production. OPEC's desire to control prices is also driven by a desire to have a stable income for their country. How would you like to have your income change up and down each month? What if your income was halved one year and then doubled the next? It would be hard to plan on new purchases and if it got too low meet basic expenses like food and shelter. That is OPEC's problem and reason that it wants to control prices. OPEC's prime function is to "coordinate their oil production policies in order to help stabilize the oil market and to help oil producers achieve a reasonable rate of return on their investments." However, in OPEC's forty years of existence they have generally not been able to control prices. Recent market volatility and OPEC's abandonment of the price band concept have confirmed the group's failure to manage prices. OPEC's hope is that increasing demand and shrinking undiscovered resources will continue to drive prices higher.
OAPEC is the acronym for the Organization of Arab Petroleum Exporting Countries. On January 9, 1968 three of the most conservative Arab oil states, Kuwait, Libya and Saudi Arabia, agreed to found OAPEC. Their goal was to separate oil production and sale from politics in the wake of the halfhearted 1967 oil embargo associated with the Six Day War with Israel. Use of the oil weapon in the struggle against Israel had been regularly proposed at Arab Petroleum Congresses, but it took this war for it to happen. However, Saudi Arabia's oil production was up 9% for that year, and the main embargo lasted only ten days and was completely ended by the Khartoum Conference. OAPEC was originally intended to be a conservative Arab political organization which by its restriction in membership to countries whose main export was oil would exclude governments seen as radical, like Egypt and Algeria. In addition they had a rule that the three founders' approval was necessary for new members to join. The original aim was to control the oil weapon and prevent its use from being swayed by popular emotion. Iraq initially declined to join, preferring to work under the umbrella of the Arab League, as it considered OAPEC too conservative. Equally, the three founders considered Iraq too radical and did not want it as a member. However, by early 1972, the criterion for admission changed to oil being an important, rather than principal source of revenue, Algeria, Iraq, Syria and Egypt were admitted. The organization became much more activist. In October 1973, Egypt and Syria attacked Israel in the Yom Kippur War. Ten days after the war started, on October 16, 1973, Kuwait hosted separate meetings of both OAPEC and the Persian Gulf members of OPEC (including Iran). OAPEC resolved to cut oil production 5% monthly "until the Israeli forces are completely evacuated from all the Arab territories occupied in the June 1967 war..." The embargo would last for five months before it was lifted in March 1974 after negotiations at the Washington Oil Summit. Its aftereffects, though, would linger throughout the rest of the decade. For the oil exporting countries, the embargo was the first sign of their ability to leverage their production for political gains. A number of them would now use this sense of control to renegotiate the contracts they had made with the companies that had discovered and exploited their resources. Ironically, though, the vastly increased revenues would prove addictive, and a unified OAPEC oil embargo was never again possible. In 1979, Egypt was expelled from OAPEC for signing the Camp David Accords, but was readmitted a decade later. Currently, OAPEC focuses on cooperation on oil development, collective projects and regional integration.
National Oil CompaniesNational oil companies are the oil and gas organizations of sovereign nations. They are part of the government and are typically found in major oil producing nations. These companies are among the largest in the world and include Saudi Arabian Oil Company, Petroleos de Venezuela. S.A. and Petroleos Mexicanos.
World Oil and Gas ResourcesCountries with the Largest Oil Reserves
Note: Countries in green are OPEC members. Source: BP Statistical Review of World Energy Countries with the Largest Gas Reserves
Note: Countries in green are OPEC members. Source: BP Statistical Review of World Energy
Per Capita Energy Consumption
Copyright 2000
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