The Organization of the Petroleum Exporting Countries is an intergovernmental organization of 13 nations.
- Founded on 14 September 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), it has since 1965 been headquartered in Vienna, Austria.
- As of September 2018, the 13 member countries accounted for an estimated 44 per cent of global oil production and 81.5 per cent of the world’s “proven” oil reserves, giving OPEC a major influence on global oil prices that were previously determined by the so-called “Seven Sisters” grouping of multinational oil companies.
- A larger group called OPEC+ was formed in late 2016, to have more control on global crude oil market
- Due to the COVID-19 pandemic, the demand for OPEC oil has fallen to a 30-year low in the second quarter of 2020.
- The stated mission of the organization 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 is also a significant provider of information about the international oil market
- The formation of OPEC marked a turning point toward national sovereignty over natural resources, and OPEC decisions have come to play a prominent role in the global oil market and international relations
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) 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).
- 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.
- In 1960, five OPEC countries allied to regulate the supply and price of oil. These countries realized they had a nonrenewable resource. If they competed with each other, the price of oil would drop too far. They would run out of the finite commodity sooner than they would if oil prices were higher.
- OPEC held its first meeting on September 10-14, 1960, in Baghdad, Iraq. The five founding members were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. OPEC registered with the United Nations on November 6, 1962.
- OPEC didn’t flex its muscle until the 1973 oil embargo. It responded to a sudden drop in the U.S. dollar’s value after President Nixon abandoned the gold standard. Since oil contracts are priced in dollars, the revenues of oil exporters fell when the dollar fell. In response to the embargo, the United States created the Strategic Petroleum Reserve.
Objective of OPEC
OPEC’s main motto is given below:
1. To co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers
2. To ensure an efficient, economic and regular supply of petroleum to consuming nations and a fair return on capital to those investing in the industry.
Functions of OPEC
Organization of the Petroleum Exporting Countries(OPEC) has a working methodology which is mentioned below.
- The OPEC Member Countries coordinate their oil production policies in order to help stabilise the oil market and to help oil producers achieve a reasonable rate of return on their investments.
- This policy is also designed to ensure that oil consumers continue to receive stable supplies of oil.
- The Ministers of energy and hydrocarbon affairs 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 to address environmental affairs.
OFID(OPEC FUND FOR INTERNATIONAL DEVELOPMENT)
- Established as a multilateral development finance institution to promote cooperation between Member States of OPEC and other developing countries, OFID was conceived at the Summit of the Sovereigns and Heads of State of the OPEC Member Countries (MCs) held in the Algerian capital, Algiers, in March 1975.
- It reaffirmed the natural solidarity which unites OPEC MCs with other developing countries in their struggle to overcome underdevelopment and called for measures to strengthen cooperation with these countries.
- All non-OPEC developing countries are, in principle, eligible for OFID assistance. However, the least developed and other low-income countries are accorded priority and, therefore, receive a larger share.
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