13 Things About Organization Of The Petroleum Exporting Countries (OPEC) You May Not Have Known
OPEC refers to a group of 13 of the world’s major oil-exporting nations. founded in 1960, It acts as a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, Members: Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia (the De facto leader), the United Arab Emirates and Venezuela. Headquarters: Vienna, Austria. The arrival of fracking technology for natural gas in the U.S. has reduced OPEC’s ability to control the world market. OPEC +: Non member countries which export crude oil are termed as OPEC plus countries.
Saudi Arabia, the world’s top oil exporter, plans to raise its crude oil production significantly above 10 million barrels per day (bpd) in April, after the collapse of the OPEC+ supply cut agreement with Russia.
What is the Opec+: Opec+ refers to the alliance of crude producers, who have been undertaking corrections in supply in the oil markets since 2017. OPEC plus countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan. What are their goals: The Opec and non-Opec producers first formed the alliance at a historic meeting in Algiers in 2016. The aim was to undertake production restrictions to help resuscitate a flailing market.
Why is OPEC+ more influential than OPEC :
OPEC’s 14 members control 35 per cent of global oil supplies and 82 per cent of proven reserves. With the addition of the 10 Non-OPEC nations, notable among them Russia, Mexico and Kazakhstan, those shares increase to 55 per cent and 90 per cent respectively. This affords OPEC+ a level of influence over the world economy never seen before.
A three-year pact between OPEC and Russia ended in acrimony recently after Moscow refused to support deeper oil cuts to cope with the outbreak of the coronavirus and OPEC responded by removing all limits on its own production. Oil prices plunged 10% as the development revived fears of a 2014 price crash when Saudi Arabia and Russia fought for market share with U.S. shale oil producers, which have never participated in output-limiting pacts.
In accordance with its Statute, the mission of the Organization of the Petroleum Exporting Countries (OPEC) 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 Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by: Qatar (1961) – terminated its membership in January 2019; Indonesia (1962) – suspended its membership in January 2009, reactivated it in January 2016, but decided to suspend it again in November 2016; Libya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its membership in December 1992, reactivated it in October 2007, but decided to withdraw its membership effective 1 January 2020; Angola (2007); Gabon (1975) - terminated its membership in January 1995 but rejoined in July 2016; Equatorial Guinea (2017); and Congo (2018). OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965.
OPEC's objective is to coordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic, and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.
OPEC’s formation by five oil-producing developing countries in Baghdad in September 1960 occurred at a time of transition in the international economic and political landscape, with extensive decolonization and the birth of many new independent states in the developing world. The international oil market was dominated by the “Seven Sisters” multinational companies and was largely separate from that of the former Soviet Union (FSU) and other centrally planned economies (CPEs). OPEC developed its collective vision, set up its objectives and established its Secretariat, first in Geneva and then, in 1965, in Vienna. It adopted a ‘Declaratory Statement of Petroleum Policy in Member Countries’ in 1968, which emphasized the inalienable right of all countries to exercise permanent sovereignty over their natural resources in the interest of their national development. Membership grew to ten by 1969.
OPEC rose to international prominence during this decade, as its Member Countries took control of their domestic petroleum industries and began to play a greater role in world oil markets. The decade witnessed several impactful events that caused volatility in the global oil market to rise steeply. OPEC broadened its mandate with the first Summit of Heads of State and Government in Algiers in 1975, which addressed the plight of the poorer nations and called for a new era of cooperation in international relations, in the interests of world economic development and stability. This led to the establishment of the OPEC Fund for International Development in 1976. Member Countries embarked on ambitious socio-economic development schemes. Membership grew to 13 by 1975.
Demand for energy slumped and oil demand fell in the early part of 1980s, culminating in a market crash in 1986 in response to the oil glut and a consumer shift away from hydrocarbons. OPEC’s share of the smaller oil market fell heavily and its total petroleum revenue dropped, causing economic instability in many Member Countries. In the final part of the decade, the oil market witnessed something of a recovery and OPEC’s share of newly growing world output began to recover. This was supported by OPEC introducing a group production adjustment divided among Member Countries and a Reference Basket for pricing, as well as significant progress with OPEC and non-OPEC dialogue and cooperation, seen as essential for market stability. Environmental issues emerged on the international energy agenda.
Timely OPEC action reduced the market impact of Middle East issues in 1990–91, but excessive volatility dominated the decade. The Southeast Asian economic downturn and mild Northern Hemisphere winter of 1998–99 saw the oil market return to mid-1980 conditions. However, a solid recovery followed and the oil market, which was adjusting to the post-Soviet world, became more integrated, with a focus on globalization, the communications revolution and other high-tech trends. Breakthroughs in producer-consumer dialogue matched continued advances in OPEC and non-OPEC relations. As the United Nations-sponsored climate change negotiations gathered momentum, after the Earth Summit of 1992, OPEC sought fairness, balance, and realism in the treatment of oil supply. One country left OPEC, while another suspended its Membership.
OPEC continued with its efforts to help strengthen and stabilize the global oil market in the early years of the decade. But a combination of market forces, speculation and other factors transformed the situation in 2004, pushing up volatility in a well-supplied crude market. Oil was used increasingly as an asset class. Market volatility continued to increase in an unprecedented manner in early 2008, before the collapse of the global financial sector that led to economic recession. OPEC became prominent in supporting the oil sector, as part of global efforts to address the economic crisis. OPEC’s second and third summits in Caracas and Riyadh in 2000 and 2007 established stable energy markets, sustainable development and the environment as three guiding themes, and it adopted a comprehensive long-term strategy in 2005. One country joined OPEC, another reactivated its Membership and a third suspended it.
The global economy represented the main risk to the oil market early in the decade, as global macroeconomic uncertainties and heightened risks surrounding the international financial system weighed on economies. Escalating social unrest in many parts of the world affected both supply and demand throughout the first half of the decade, although the market remained relatively balanced. The oil market was stable between 2011 and mid-2014, before a combination of speculation and oversupply caused it to contract. Trade patterns then continued to shift, with global oil demand growing, particularly in the Asian region. The world’s focus on multilateral environmental matters began to sharpen, resulting in the Paris Agreement in 2015, which OPEC Member Countries have all signed and 10 have ratified. OPEC continued to attend the United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP) meetings to dialogue and exchange views.
Market conditions led to the emergence of the unprecedented Declaration of Cooperation in December 2016, with OPEC Members and 10 non-OPEC oil-producing countries coming together to help rebalance the market, bring down inventory levels and support oil market stability. In 2019, the Charter of Cooperation — a long-term platform dedicated to cooperation and the exchange of views and information — was established.
OPEC held its 5th, 6th and 7th International Seminars in 2012, 2015, and 2018, respectively, which brought together an unprecedented number of representatives from producing and consuming nations, national and international oil companies, along with journalists and industry analysts.
OPEC continued to seek stability in the market and looked to further enhance its dialogue and cooperation with producers, consumers, international organizations, institutions, and other industry stakeholders, noting that the need for energy dialogue has never been greater. The decade witnessed more understanding and appreciation of the role that OPEC has played in helping stabilize the global oil market, in the interests of both producers and consumers.
The new decade witnessed an unprecedented beginning with the outbreak of the COVID-19 pandemic pervading almost every aspect of daily lives. The pandemic had a detrimental impact on both the world economy and the energy sector, pressuring nations to take necessary, firm measures to slow the spread of the virus and counter its effects.
The oil market saw demand in freefall, global storage filling quickly and large scale volatility. This propelled OPEC and its partners in the Declaration of Cooperation to intensify their collaborative efforts to restore much-needed stability, resulting in the largest and longest voluntary production adjustments in the oil market’s history. The importance of these efforts was recognized by numerous countries and organizations, including G20 Energy Ministers, Argentina, Brazil, Canada, Colombia, Norway, the African Petroleum Producers’ Organization, the International Energy Agency, the International Energy Forum and many independent producers.
OPEC turned 60 in September, marking a significant milestone on the Organization’s historic journey.
The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members of the Organization.
These countries were later joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007), Equatorial Guinea (2017) and Congo (2018).
Ecuador suspended its membership in December 1992, rejoined OPEC in October 2007, but decided to withdraw its membership of OPEC effective 1 January 2020. Indonesia suspended its membership in January 2009, reactivated it again in January 2016, but decided to suspend its membership once more at the 171st Meeting of the OPEC Conference on 30 November 2016. Gabon terminated its membership in January 1995. However, it rejoined the Organization in July 2016. Qatar terminated its membership on 1 January 2019.
This means that, currently, the Organization has a total of 13 Member Countries.
The OPEC Statute distinguishes between the Founder Members and Full Members - those countries whose applications for membership have been accepted by the Conference.
The Statute stipulates that “any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries, may become a Full Member of the Organization, if accepted by a majority of three-fourths of Full Members, including the concurring votes of all Founder Members.”
The Statute further provides for Associate Members which are those countries that do not qualify for full membership but are nevertheless admitted under such special conditions as may be prescribed by the Conference.