• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The Organization of Petroleum Exporting Countries.

Extracts from this document...


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"). ...read more.


Moreover, the demand for oil has decreased during the economic downturn of the past few years. A sign of OPEC's weakness was the fact that in 1991 it had to ask nonmembers to reduce output. The Saudi oil minister stated that OPEC would not lower its production until non-OPEC producers also made reductions: "So we all lose... until everybody cooperates" (Washer 1). The ministers were afraid that prices could go as low as $10 a barrel, but they insisted that OPEC needs the cooperation of non-OPEC countries like Russia to prevent prices from falling that low. The Saudi minister expressed his dissatisfaction with the Russians because they did cut their oil production even close to what OPEC expected (Washer 1). He argued that every time some countries tried to gain a larger market share, all the oil producers lost in the end, as happened in the early 1980s and late 1990s. OPEC used a combination of diplomacy and threats to get outside countries to cooperate with it. "Oman had already pledged support, and Mexico...[in November 2001] said that it would reduce exports by up to 100,000 b/d next year" (Washer 1). A more recent example of internal differences in OPEC could be found in its last meeting in September 2002 in Osaka, Japan. The organization chose to ignore the difficult issue of quota allocations at this meeting, because each member state had its own view on the issue. ...read more.


OPEC has some power, but it has to act in a complex economic and political environment. It has to take into account the interests of its members, but it also has to carefully consider the countries that buy and consume the oil. OPEC also cannot have total control over the world's oil because there are large oil reserves outside of the eleven countries in OPEC. In addition to Russia, the former Soviet republics that are next to the Caspian Sea have large oil reserves that can produce millions of barrels a day probably before 2010. The huge swings in the price of oil in the past forty years indicate that OPEC has not totally accomplished one of its key goals, which is to maintain stable prices. However, the members of OPEC are still very much in favor of continuing their cooperation. That is why they are not walking out. Of course, Saudi Arabia and OPEC as a whole make sure that decisions do not offend any of the members. One reason is that decisions cannot be passed until all member states agree. The members of OPEC have common interests that they can pursue together. Most of them are Muslim countries, and all are developing countries. They all want their countries to advance in industry and technology, and their people to have a higher quality of life. To accomplish these goals, they need to have adequate income from selling oil to the outside world, especially Europe and the United States. OPEC will therefore continue to be an important actor in the world economy in coming decades. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level European Union section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level European Union essays

  1. Chraibi, Driss. Heirs to the Past

    Nagib greatly changes as a person and becomes a much more peaceful man than he had been in the beginning of the book. The effect of hearing the Seigneur's voice had a great impression on Nagib, and although Nagib did not fully understand the Seigneur's message to him, Nagib sat

  2. The Institutional Consequences of Domestic Politics on Africa's International Relations and Regional Cooperation.

    belts which goes contrary to vertical boundaries erected by colonial masters which came at cross purposes with its demography and topography. The corruption at the borders is a small tale when one examines the corruption of the African leadership. Conclusion International relations among nation states to a large extent reflect what happens at the domestic environment of such states.

  1. Why are developing countries unhappy with the global arrangements under the Bretton Woods system?

    percent below the cost of production, similarly, The European Union also exports key commodities for less than the cost of production. In other OECD countries, agricultural subsidies rose from US$271.2 billion in 1986-88 to US$330.6 billion in 1998-2000 (Clapp, 2006:565).

  2. The EU's CFSP and the Iraq Crisis: A Catalyst for Change?

    When it comes to the military, member states also have totally separate armed forces, each with its unique set of capabilities, processes, traditions and skill sets. This is not to downplay the efforts of organizations like NATO, which over the years has proven its ability to effectively coordinate multi-national force deployments.

  1. Transformation of the U.S. Hegemony in Europe through NATO after the Cold War

    The issues that were highlighted in the treaty were mainly to develop common strategies, to increase the decision-making procedures, to regulate a High Representative for the CFSP, to implement a functioning policy planning capability and early warning unit, to incorporate the "Petersberg Tasks" into the EU Treaty and to create resources in order to finance CFSP spending18.

  2. Teaching the History of the Ku Klux Klan

    With this burning cross the Ku Klux Klan is warning the enemy. The Ku Klux Klan now The biggest enemies of the KKK still are the black people in America. Followers of the Klan want their country back, just as it was when they arrived in America.

  1. European colonialism in Southeast Asia.

    Indian revenues were used to pay for the extensive harbour improvements of the British. Workers in British-owned industries such as the cotton and wheat industries were poorly paid and exploited.4 An example where unhappy workers rebelled was the Indian indigo workers' strike against the British known as the "Blue Mutiny"

  2. The WTO is often vilified as an oppressor, favouring rich countries and companies over ...

    This is not my own harsh criticism of the WTO, this is the general consensus amongst some of the developing countries representatives serving at the WTO conferences. There is a growing frustration that the US and the EU particularly the UK are having too much of a leading role in an organisation which is supposedly democratic.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work