Is Opec Meeting Its Stated Objectives?

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IS OPEC MEETING ITS STATED OBJECTIVES?

SUBMITTED TO JAMES MILNE IN PARTIAL FULLFILLMENT OF THE

COURSE WORK: INTERNAL & EXTERNAL ENVIRONMENTS OF THE

OIL AND GAS INDUSTRY LEADING TO THE AWARD OF MSc IN OIL

AND GAS MANAGEMENT

CHIOMA ONOSHAKPOR
1-12-2011

CONTENTS

1.0 INTRODUCTION----------------------------------------1
2.0 LITERATURE----------------------------------------------3 2.1 DOES OPEC FAIL TO CONTROL CRUDE OIL PRICES?
2.2 DOES OPEC HARMONIZE PETROLEUM POLICIES OF ITS MEMBER COUNTRIES? 2.3 DOES OPEC PROVIDE REGULAR SUPPLY OF PETROLEUM TO CONSUMING COUNTRIES AND A FAIR RETURN TO PRODUCING COUNTRIES? 2.4 2008 CRISIS/RECESSION

2.4.1 OPEC’s REACTION TO THE 2008 CRISIS AND ITS RESULT

3.0 CONCLUSION-------------------------------------------9
4.0 REFERENCES--------------------------------------------10

IS OPEC MEETING ITS STATED OBJECTIVES?

BACKGROUND/INTRODUCTION
The Organization of the Petroleum Exporting Countries (OPEC) was created at the Baghdad Conference on September 10-14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. These five Members were joined later by nine other Members which includes; Qatar, Indonesia, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, Angola and Gabon. The first headquarters was in Geneva, Switzerland, and lasted for five years. It was later moved to Vienna, Austria, on September 1, 1965. AIMS AND OBJECTIVES

Her act states that the primary aims of OPEC is to
(1) Make uniform the petroleum policies of its Member Countries as part of its effort to defend their interests (2) Members of the Cartel shall work in unity to ensure stable oil prices, obtain adequate returns to producing countries and investors in the oil industry, and (3) Provide a sturdy petroleum supply to consumers. (OPEC’s Website). HOW IT FUNCTIONS

Every member country (12 as of today) is represented by its minister of oil, mines and energy. Conferences are held twice every year in March and September and may be more when there is an urgent need to. These conferences has the highest authority of the Cartel where petroleum policies are adjusted and re-adjusted to satisfy both consumers and producers and an effort to stabilize crude oil prices are made. These meetings are overseen by the executive secretary at time (t).

Based on these stated objectives, I would be analyzing whether or not OPEC is really meeting its stated aims and objectives and if not WHY. What are the challenges OPEC is facing, what are their weaknesses and their strengths?

IS OPEC MEETING ITS STATED OBJECTIVES?

LITERATURE

DOES OPEC FAIL TO CONTROL CRUDE OIL PRICES?
As far back as 1972, crude oil price was below $3.50 per bbl. The Arab Oil embargo came on board when the Yom kippur War started. On October 5th, 1973, Syria and Egypt attacked Isreal and United States and many other western countries supported Isreal. Arab exporting countries in response to the support to Isreal, imposed an embargo on the countries supporting Isreal. They stopped exporting as much as 5MMbbl/day.The other producing countries increased production to an excess of 1MMbbl/day.In 1974, there was still a loss of 4MMbbl/day.This increase in demand caused prices to get up to $12.00bbl/day.OPEC watched while it happened. The crisis in Iran and Iraq between 1979 and 1980 also increased oil prices due to shortages in supply of crude.2-2.5MMb/d was lost at the early stages and grew up to 6.5MMb/d in 1980. In 1982, the joint effects of the Iranian revolution and the Iraq-Iran war caused the price to more than double from &14.00b/d to $35b/d. It would have been very feasible to achieve this goal if member countries were controllable .I mean if they could stick to their giving quota but because they literally cannot be punished without any direct effect on the oil production, they behave anyhow. Obviously, conflicts of...
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