The Organization of Petroleum Exporting Countries.

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The Organization of Petroleum Exporting Countries (OPEC) is an important actor in the world economy today. Its member states now produce about 40% of the world’s crude oil (“Organization of Petroleum Exporting Countries”). There are many factors that determine OPEC policies on oil production, prices, and other issues. This essay will first examine OPEC’s history and the top layer of its organization. It will then be argued that complex economic and political factors determine OPEC decisions today. OPEC must act in a way that satisfies both its member states and major Western countries that depend on oil, including the U.S.

        OPEC was founded in 1960 to coordinate petroleum policies among the producing countries and to maintain fair, stable prices for these countries. Its goal is also to ensure the regular supply of petroleum to consuming countries. Its eleven members now are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Muslim and Arab countries dominate OPEC. Saudi Arabia, with its huge oil reserves, has been the most important member of OPEC.

        When OPEC began in the 1960s, the multinational companies were still the strongest decision-makers in the international oil market. OPEC negotiated with the companies, and by the 1970s, the five founding members of OPEC had gained control of their oil industries and played a major role in the pricing of their oil (“History”). In 1973, due to the Arab oil embargo against the Western countries that supported Israel in the Yom Kippur War, OPEC was able to raise oil prices dramatically. Oil prices remained high during the decade and again increased after the 1979 Iranian Revolution.

Prices peaked in the early 1980s and then began to decline, until they collapsed in 1986 (“History”). OPEC was able to raise oil prices again by the late 1980s as a result of close cooperation among its members. That cooperation prevented sharp price increases as a result of the 1991 Gulf War. OPEC members increased their level of production to make up for oil that was no longer exported from Iraq and Kuwait. “Prices then remained relatively stable until 1998, when there was a collapse, in the wake of the economic downturn in South-East Asia” (“History”). The price was an average of $18 a barrel from 1990 to 1997, but it fell to around $11 in 1998 and 1999 (Lukman). OPEC members not only cooperated with one another, but this time they worked with major non-OPEC oil producers to raise the price of oil.

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OPEC’s key decision-making body is the Conference, which consists of the ministers of oil, mines, and energy from the member countries. The Conference usually meets twice a year, in March and September, but it meets more often if necessary. Each member has one vote, and unanimity is required for decisions (“Organization of the Petroleum Exporting Countries, OPEC”). The unanimity rule ensures that all members are satisfied with decisions and they do not leave OPEC because of unhappiness with its decisions. Ultimately, each member of OPEC has complete authority over its own oil. The Conference formulates the general policy of OPEC ...

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