The structure, called OPEC, the decoding of the abbreviation of which, in principle, is very familiar to many, plays a significant role in the global business arena. When was this organization created? What are the main factors that predetermined the establishment of this international structure? Today's trend, reflecting a decline in oil prices, can we say that it is predictable and therefore controlled for today's exporting countries of "black gold"? Or are OPEC countries with high probability - performers of the supporting role in the global political arena, forced to reckon with the priorities of other powers?
OPEC: general information
What is OPEC? Decoding of this abbreviation is quite simple. However, before producing it, you should correctly transliterate it into English - OPEC. It turns out - Organization of Petroleum Exporting Countries. Or, Organization of Petroleum Exporting Countries. This international structure was created by major oil producing countries with the goal, according to analysts, of influencing the "black gold" market in terms of, above all, prices.
OPEC members - 12 states. Among them are Middle Eastern countries - Iran, Qatar, Saudi Arabia, Iraq, Kuwait, the United Arab Emirates, three states from Africa - Algeria, Nigeria, Angola, Libya, as well as Venezuela and Ecuador, which are located in South America. The headquarters of the organization is located in the Austrian capital - Vienna. The Organization of Petroleum Exporting Countries was founded in 1960. To date, OPEC countries control about 40% of world exports of black gold.
History of OPEC
OPEC was founded in the capital of Iraq, the city of Baghdad, in September 1960. The initiators of its creation were the world's largest oil exporters - Iran, Iraq, Saudi Arabia, Kuwait, as well as Venezuela. According to modern historians, the period when these states came forward with the corresponding initiative coincided with the time when the decolonization process was active. Former dependent territories were separated from their metropolises in both political and economic terms.
The global oil market was controlled mainly by Western companies such as Exxon, Chevron, Mobil. There is a historical fact - a cartel of the largest corporations, including the aforementioned ones, came out with a decision to lower prices for "black gold". This was due to the need to reduce the costs associated with oil rents. As a result, the countries that established OPEC set a goal - to gain the ability to control their natural resources outside the influence of the world's largest corporations. In addition, in the 60s, according to some analysts, the planet’s economy did not experience such a large demand for oil - the supply exceeded demand. And therefore, OPEC's activities were designed to prevent a decline in global prices for black gold.
The first step was the establishment of the OPEC Secretariat. He "registered" in Swiss Geneva, but in 1965 he "moved" to Vienna. In 1968, the OPEC meeting was held, at which the organization adopted the Declaration on Oil Policy. It reflected the right of states to exercise control over national natural resources. By that time, the organization joined other major oil exporters in the world - Qatar, Libya, Indonesia, as well as the UAE. In 1969, Algeria entered OPEC.
According to many experts, the influence of OPEC on the global oil market especially increased in the 70s. This was largely due to the fact that the control of oil production was assumed by the governments of the countries included in the organization. According to analysts, in those years, OPEC could really directly influence the world prices of black gold. In 1976, the OPEC Fund was created, under the authority of which issues of international development appeared. In the 70s, several more countries joined the organization - two African (Nigeria, Gabon), one of South America - Ecuador.
By the beginning of the 80s, world oil prices reached very high levels, but in 1986 they began to decline. OPEC members for some time reduced their share in the global black gold market. This led, as some analysts note, to significant economic problems in the countries included in the organization. At the same time, by the beginning of the 90s, oil prices rose again - to about half the level that was reached in the early 80s. The share of OPEC countries in the global segment has also begun to grow. Experts believe that this kind of effect was largely due to the introduction of such a component of economic policy as quotas. A pricing methodology was also introduced based on the so-called OPEC basket.
In the 90s, world oil prices as a whole were not, according to many analysts, slightly lower than the expectations of the countries included in the Organization. A significant barrier to the growth of the cost of "black gold" was the economic crisis in Southeast Asia in 1998-1999. However, by the end of the 90s, the specifics of many industries began to require more oil resources. Particularly energy-intensive businesses appeared, the processes of globalization became especially intense. This, according to experts, created some conditions for the rapid increase in oil prices. It should be noted that in 1998 Russia, an oil exporter, one of the largest players in the global black gold market at that time, received observer status at OPEC. At the same time, Gabon left the organization in the 90s, and temporarily suspended its activities in the structure of OPEC Ecuador.
In the early 2000s, world oil prices began to rise gradually and for a long time were sufficiently stable. However, their rapid growth soon began, peaking in 2008. By that time, Angola had joined OPEC. However, in 2008, crisis factors sharply intensified. In the fall of 2008, prices for "black gold" fell to the level of the early 2000s. At the same time, during 2009-2010, prices rose again and continued to be at a level that the main oil exporters, as economists believe, were entitled to consider as the most comfortable. In 2014, for a whole range of reasons, oil prices steadily declined to the level of the mid-2000s. At the same time, OPEC continues to play a significant role in the global black gold market.
Objectives of OPEC
As we noted above, the initial goal of creating OPEC was to establish control over national natural resources, as well as influence on world pricing trends in the oil segment. According to modern analysts, this goal has not fundamentally changed since then. Among the most urgent tasks, apart from the main one, for OPEC is the development of the oil supply infrastructure, the competent investment of income from the export of "black gold".
OPEC as a player in the global political arena
OPEC members are united in a structure that bears the status of an intergovernmental organization. That is how it is registered with the UN. Already in the first years of work, OPEC established relations with the UN Council on Economic and Social Affairs, and began to participate in the United Nations Conference on Trade and Development. Several times a year, meetings are held with the participation of senior government posts of countries belonging to OPEC. This kind of event is intended to develop a joint strategy for further building activities in the global market.
Oil reserves in OPEC
OPEC members have total oil reserves estimated at more than 1, 199 billion barrels. This is approximately 60-70% of world reserves. Moreover, as some experts believe, only Venezuela has reached peak oil production. The remaining countries that are members of OPEC can still increase their performance. At the same time, the opinions of modern experts regarding the growth prospects of the extraction of "black gold" by the Organization countries differ. Some say that the states that are part of OPEC will seek to increase the relevant indicators - in order to maintain current positions in the global market.
The fact is that now the United States is an exporter of oil (largely related to the type of shale oil), which in potential can significantly squeeze OPEC countries on the world stage. Other analysts believe that the increase in production is unprofitable for the states that are members of the Organization - an increase in supply on the market reduces the price of black gold.
Managment structure
An interesting aspect in the study of OPEC is the characteristic of the organization’s management system. The leading governing body of OPEC is the Conference of the Member States. It is usually convened 2 times a year. The OPEC meeting in the format of the Conference involves a discussion of issues related to the admission of new states to the organization, adoption of the budget, and staff appointments. Actual topics for the Conference are usually formulated by the Board of Governors. The same structure exercises control over the implementation of approved decisions. The structure of the Board of Governors includes several departments responsible for a special range of issues.
What is a basket of oil prices?
We said above that the so-called “basket” is one of the price guidelines for the Organization’s countries. What it is? This is the arithmetic mean between some brands of oil produced in different OPEC countries. The decoding of their names is often associated with the variety - "light" or "heavy", as well as the state of origin. For example, there is the brand Arab Light - light oil produced in Saudi Arabia. There is Iran Heavy - heavy oil of Iranian origin. There are brands such as Kuwait Export, Qatar Marine. The maximum value of the "basket" reached in July 2008 - 140.73 dollars.
Quotas
We noted that quotas are present in the practice of the countries of the Organization. What it is? These are restrictions on the daily volume of oil production for each country. Their value may vary based on the results of relevant meetings of the Organization’s management structures. In the general case, with a decrease in quotas, there is reason to expect a shortage of supply in the world market and, as a result, price increases. In turn, if the corresponding restriction remains unchanged or increases, the prices for "black gold" may tend to decrease.
OPEC and Russia
As you know, the main oil exporters in the world are not only OPEC countries. Among the largest global suppliers of "black gold" in the global market is Russia. It is believed that in some years between our country and the Organization there have been confrontational relations. For example, in 2002, from OPEC, Moscow was put forward a demand - to reduce oil production, as well as its sale on the global market. However, according to public statistics, the export of “black gold” from the Russian Federation has practically not declined since then, but, on the contrary, has grown.
The confrontation between Russia and this international structure, analysts believe, ceased during the years of rapid growth in oil prices in the mid-2000s. Since then, between the Russian Federation and the Organization as a whole, there has been a tendency towards constructive interaction - both at the level of intergovernmental consultations, and in the aspect of cooperation between the oil businesses. OPEC and Russia are black gold exporters. In general, it is logical that their strategic interests on the global arena coincide.
