Understanding the Organization of the Petroleum Exporting Countries (OPEC)
OPEC, which describes itself as a permanent intergovernmental organization, was created in Baghdad in Sept. 1960 by its founding members: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. The headquarters of the organization are in Vienna, Austria, where the OPEC Secretariat, the executive organ, carries out OPEC’s day-to-day business.
According to its statutes, OPEC membership is open to any country that is a substantial exporter of oil and shares the ideals of the organization. After the five founding members, OPEC added 11 additional member countries as of 2019. They are, in order of joining, Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007), Equatorial Guinea (2017), and Congo (2018). However, Qatar terminated its membership on Jan. 1, 2019, and Indonesia suspended its membership on Nov. 30, 2016, so as of 2019 the organization consists of 14 states.
How OPEC Works
The group has agreed to define OPEC’s mission thusly: “to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic, and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.”
As a cartel, OPEC members have a strong incentive to keep oil prices as high as possible while maintaining their shares of the global market.
..It is notable that some of the world’s largest oil producers, including Russia, China, and the United States, are not members of OPEC, which leaves them free to pursue their own objectives….
OPEC’s influence on the market has been widely criticized. Because its member countries hold the vast majority of crude oil reserves (79.4%, according to the OPEC website), the organization has considerable power in these markets.
Presented by Romano Pisciotti