OPEC

OPEC
By: By D. Ramadevi(7064), Mukesh Prabhakar(7080), D. Ramadevi(7064), Mukesh Prabhakar(7080), Kunwar Singh(7081).
Kunwar Singh(7081).

OPEC
The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 1014, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.

Mission of OPEC
The mission of 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.

What are OPECs objectives? How does it meet those objectives?

Objective of OPEC OPEC's objective is to co-ordinate 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.

How it is achieved..?

OPEC meets its objectives through

Quotas, meetings, Embargoes in extreme cases.

Meetings
Every year, OPEC holds a minimum of two meetings that determine short-term goals aimed at upholding the organization's main objectives. OPEC's board of governors then seeks to accomplish the tasks required by such goals. When making decisions, the representatives aim to balance the need for per-barrel revenue with desired sales quantities. Higher prices generate more income per barrel but result in somewhat slower sales and increased consumption of non-petroleum fuels.

Quotas
Production limits are the most important method OPEC uses to achieve its objectives. These quotas restrict the amount of oil member nations may produce in a given year. This helps maintain prices at a desired level. For example, OPEC states that it repeatedly raised production limits during 2004 in response to rising demand, hurricanes, speculation and political concerns. This helped ensure that fuel shortages did not occur in most countries. OPEC also indicates that non-member nations like Russia and Mexico sometimes cooperate with it to affect prices.

Embargoes
Although it seldom applies this method, OPEC can also cut off oil supplies to reach political objectives in the interests of member countries. The organization suspended oil supplies to nations that backed Israel in the 1973 war, for example. This led to high prices and shortages until oil producers restored the supply to normal. Actions such as the invasion or naval blockade of an OPEC member country could potentially spark a new embargo.

2.What countries are member of OPEC? What percentage of world oil production come from these nations? In what way is OPEC a cartel?

The member countries of OPEC are Algeria Angola Ecuador Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia United Arab Emirates Venezuela

Cartel:
A group of companies or countries which collectively attempt to affect market prices by controlling production and marketing.

Since the OPEC being a group of 12 countries which controls the production of oil and its price we can say that it is a cartel

3.What significant oil-exporting countries are not members? What has OPEC done to limit the effect of non member production on its pricing decisions?

The countries like Russia, USA, China, Norway, Canada are the significant countries which exports the large amount of oil but not the members of OPEC

OPEC through both intuition and experience, that it does not operate in a vacuum. If it wants to sell its oil, then it must attract buyers. And it does not attract buyers by scaring them off, or being unreliable. As oil-producing, developing countries, OPECs Members are heavily dependent on a steady flow of income from petroleum sales to help them develop their economies on a sustainable basis.

Queries?

Thank you