Explained: What Is Organisation Of Petroleum Exporting Countries (OPEC)
The Organisation of the Petroleum Exporting Countries (OPEC) refers to the group of 13 countries which are the major oil-exporting countries. OPEC was founded in 1960 to coordinate the petroleum policies of its members and to provide the member states with economic aid.
Oil is the most important resource which is in demand in today¡¯s world. The modern usage of Petroleum products as energy sources date back to the late 19th century where kerosene was first used. The role of oil began from the usage of coal and kerosene industry. Until the mid-20th century, coal and kerosene dominated the energy industry which changes later on. The replacing of steam engine with diesel plays an important role in military technology and was a driver of conflict for the two world wars.
AFP/Representational Image
Extensive oil fields were discovered in the Middle East in the 1930s which increased the usage of oil even more. The oil supply from the Middle East presently dominates 90% of all of the oil usage in the world and primarily in the automobile industry. Because of the increased burning of oil and coal, the atmosphere was getting damaged because of the excessive release of green house gases.
OPEC:
The Organisation of the Petroleum Exporting Countries (OPEC) refers to the group of 13 countries which are the major oil-exporting countries. OPEC was founded in 1960 to coordinate the petroleum policies of its members and to provide the member states with economic aid. OPEC manages the amount of oil that is produced and supplied to each country and also it has a say in the price of the oil in the global market. OPEC is headquartered in Vienna, Austria. OPEC was initially established in Baghdad, Iraq in September 1960.
The thirteen countries that belong to OPEC are- Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela (the five founders), Algeria, Angola, Congo, Equatorial Guinea, Gabon, Libya, Nigeria and the United Arab Emirates.
Unsplash
The main goal of OPEC according to the OPEC website is ¡°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.¡± The organisation is committed to finding ways to stabilize the oil prices in the international market without any major fluctuations.
So, the OPEC has a huge say in the oil prices in the global market because it is the largest producer and exporter of crude oil and other petroleum products. Roughly 40% of the world¡¯s oil production and about 60% of the world¡¯s petroleum production.
The Pros of having an organisation like OPEC maintain the oil industry is that it promotes the cooperation between the member states and stabilizes the oil production and makes it sustainable and prevents over-production. The cons are that because it is majorly responsible for the entire oil industry, it holds a lot of power which it could misuse. They could also keep the oil prices high to maintain the global market share.
Unsplash
The OPEC lost the demand for oil during the global pandemic of COVID-19. Because of this there was a very large production of oil but the supplies did not have a place to be stored. Because of this the oil prices dropped and OPEC decided to cut the productions by 9.7 million barrels per day. Other issues are, because of the high prices of oil, some countries look for other alternate sources of oil like the Shale oil and also invest in electric vehicles. This puts pressure on the organisation.
Oil is still in demand but because of inflation, the prices are on a rise which makes countries economically weak. The future of OPEC has some challenges because of the adoption of green technologies and the ideas like net-zero where the countries have agreed to use lesser environment harming energy sources.
