Essays

The Organisation of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental organization, created in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Pounding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962)—which suspended its membership from January 2009; Libya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973)—suspended its membership from December 1992- October 2007; Angola (2007) and Gabon (1975-1994). Until 1965, OPEC had its headquarters in Geneva, Switzerland, which was then Shifted to Vienna, Austria.

More than three-quarters of the world's proven oil reserves are located in OPEC Member Countries, with the bulk of OPEC oil reserves in the Middle East, amounting to 72 per cent of the OPEC total. The objective of the OPEC is to coordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; to ensure the stabilisation of oil markets in order to secure an efficient, economic and regular supply of petroleum to consuming nations; a steady income to producers and a fair return on

 Capital to those investing in the petroleum industry.

One of the principal goals of OPEC is to determine the best means for safeguarding the interests of its members, individually and collectively. OPEC also pursues ways and means to eliminate harmful and unnecessary fluctuations in international oil prices. It gives due Regard at all times to the interests of the producing nations and to the Necessity of securing a steady income to the producing countries.

The ability of OPEC to determine production and prices, and thus influence the market, has been widely criticized. Arab members of OPEC alarmed the developed world when they used the "oil weapon” during the Yom Kippur War by implementing oil embargoes and initiating the 1973 oil crisis. However, the ability of OPEC to control the price of oil has diminished in recent times due to the discovery and development of large oil reserves in Alaska, the North Sea, Canada, the Gulf of Mexico, the opening up of Russia, and market modernization   Still, the OPEC nations account for two-thirds of the world's oil reserves And one-thirds of the world's oil production, which gives them considerable control over the global market.

The Iranian war in 1979 caused the second oil crisis, when prices Peaded, before beginning a dramatic decline, which culminated in a collapse in 1986—the third oil pi icing crisis. A fourth pricing crisis was  averted at the beginning of 1990s, on the outbreak of hostilities  in the Middle East, when a sudden sleep rise in prices on panic-stricken  Markets  was moderated by output increases  by OI'I'.C Members. Prices then remained relatively stable until 1998, when there was a collapse, in the wake of the economic downturn in south-east Asia. Collective action by OPEC and some leading non-OPEC producers brought about a recovery. Currently, the ongoing international climate changing negotiations threaten heavy decreases in Inline oil demand.

The Ministers of energy and hydrocarbon affairs from OPEC nations meet twice a year to review the status of the international oil market and the forecasts for the future in order to agree upon appropriate actions which will promote stability in the oil market. The Member countries also hold other meetings at various levels of interest including meetings of petroleum and economic experts, country representatives; and special purpose bodies such as committees lo address environmental affairs.

Decisions about matching oil production to expected demand are taken At the Meeting of the OPEC Conference.

OPEC published World Oil Outlook, which combines the expertise of the OPEC Secretariat, professionals in OPEC Member Countries and its Economic Commission Board, as well as input from various other sources. The publication is part of the Organization's commitment in market stability and a means to highlight and further understand many of the possible future challenges and opportunities that lie ahead for the oil industry. The publication is also a channel to encourage dialogue, cooperation and transparency between OPEC and others within the industry. The World Oil Outlook 2009 focused on "Oil supply and demand outlook to 2030" and "Oil downstream outlook to 2030".

The OPEC Fund, originally intended to be a temporary facility, became a fully fledged, permanent international development agency in May 1980. Initially known as the 'OPEC Special Fund', it was set up with an initial endowment of $ 800 million to channel OPEC aid to developing countries. Its resources were additional to those already earmarked for official development assistance (ODA) by the OPEC nations.                                                         

The key aim of OPEC Fund for International Development (OFID) is to foster social and economic progress in the developing world through the provision of concessional financing for developing countries. However, OFID's work goes beyond simply dispensing aid. One of its central aims is to advance 'South-South' solidarity by promoting cooperation in many spheres among countries of the developing world. In this regard, OFID has been closely associated with two multilateral institutions of great relevance in the developing world: International Fund for Agricultural Development (IFAD) and the Common Fund for Commodities (CFC).

The OFID methods of funding include public sector loans for development projects and programmes, balance of payments support and debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative; trade financing; support to private enterprises ; grants for technical assistance, food aid, research and humanitarian relief work; and contributing to the resources of oilier development organizations whose activities benefit developing countries.

OPID's resources consist of voluntary contributions made by OPEC member countries and the accumulated reserves derived from its various operations. Around 122 countries from the developing world—Africa,! Asia, Latin America, the Caribbean, the Middle East and Europe—have benefited from OFID's assistance. By the end of 2009, the level of cumulative development assistance extended by OFID stood at US$11,682 million.                                               .

Production disputes haunt the unity among the OPEC Member states. It is because the economic needs of the OPEC member states in often at variance. Various members demand for reductions in production quotas to increase the price of oil and thus their own revenues. This stance creates conflict with Saudi Arabia, which has a stated long-term strategy of being a partner with the world's economic powers to ensure a steady flow of oil that would support economic expansion Part of the basis for this policy is the Saudi concern that expensive oil or oil of uncertain supply will drive developed nations to conserve and develop alternative fuels.

The changes in the value of the dollar against other world currencies also affect OPEC's decisions on how much oil to produce, as the worldwide oil sales are mostly denominated in US dollars. Member states like lran, Iraq and Venezuela have at different times experimented with   shifting their oil price form the dollar to the Euro, but have subsequently link to the US dollar.