Opec – Formation and Influence on the World Economy

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OPEC – Formation and influence on the world economy
Ahlam
Colorado Heights University

Abstract

The Organization of Petroleum Exporting Countries (OPEC) , is a permanent intergovernmental Organization, created at the Baghdad Conference on September 14 th, 1960, consisting of the world's major oil-exporting nations. It was founded to coordinate and unify the petroleum policies of its members, to serve as a platform for oil producers to achieve their economic objectives by limiting supplies in the hope of keeping prices and profits high. OPEC's influence on the market is undeniable. Because its member countries hold the vast majority of crude oil reserves (about 80%) and nearly half of natural gas reserves in the world, the organization has considerable power politically and economically. Research shows that OPEC is getting weaker, due to competition of Non-OPEC oil producers and the emerging alternative energies that are likely to blossom in the years to come due to rising crude oil prices.

OPEC – Formation and influence on the world economy

History
The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 14 th, 1960, Saudi Arabia, Iran, Iraq, Venezuela and Kuwait. OPEC has since expanded to include other members: Qatar in 1961, Libya in 1962, the United Arab Emirates in 1967, Algeria in 1969, Nigeria in 1971, Ecuador in 1973, and recently Angola in 2007 making a total membership of 12. For the first five years, OPEC’s headquarters was set in Geneva, Switzerland. It was moved to Vienna, Austria, on September 1, 1965. (OPEC, March 2009) OPEC was created in a time when the international oil market was dominated by the “Seven Sisters” multinational companies and was largely separate from that of the former Soviet Union (FSU) and other centrally planned economies (CPEs). ("OPEC- brief history," 2010) The purpose of OPEC is to serve as a platform for oil producers to achieve their economic objectives by limiting supplies and unifying petroleum policies among Member Countries in the hope of keeping prices and profits high. OPEC seeks to “preserve the interests of oil producing companies”, “ensure an efficient, economic and regular supply of petroleum to consumer countries” and “a fair return on capital” for major foreign investors. ("The creation of," 2nd quarter 2011 ) The Ministerial Monitoring Committee, formed by an oil minister from each member country, meets twice a year in ordinary sessions, is responsible for the formulation of the general policies of the organization, such as deciding upon total production and minimum prices. (Levy) OAPEC- Organization of Arab Petroleum Exporting Countries

OAPEC the “Arab branch of OPEC”, established on January 9, 1968, by Kuwait, Libya ,Saudi Arabia, and other Arab countries which rely on the export of petroleum, is a regional inter-governmental organization based in Kuwait that seeks to foster cooperation among the 11 Arab oil-exporting nations that are its members, and develop their petroleum industry. ("Organization of arab," ) Terms of membership

The OPEC Statute stipulates that “any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries, may become a Full Member of the Organization, if accepted by a majority of three-fourths of Full Members, including the concurring votes of all Founder Members.” ("Member countries," )

The Statute further distinguishes between three categories of Membership: Founder Member, Full Member and Associate Member. Associate Members are the countries which do not qualify for full membership, but which are still admitted under special conditions prescribed by the Conference ("Member countries," )

Members| Year of accession| Location|
Founder Members|
IR Iran| 1960| Middle East|
Iraq| 1960| Middle East|
Kuwait| 1960| Middle...
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