OPEC

Organisation of the Petroleum Exporting Countries (OPEC)
Flag of Organisation of the Petroleum Exporting Countries (OPEC)
Flag
Location of Organisation of the Petroleum Exporting Countries (OPEC)
HeadquartersVienna, Austria
Official languageEnglish
TypeInternational cartel[1]
Membership
Leaders
Mohammed Barkindo
EstablishmentBaghdad, Iraq
• Statute
September 1960
• In effect
January 1961
CurrencyIndexed as USD per barrel (OPEC.org

The Organisation of the Petroleum Exporting Countries (OPEC, k/ OH-pek) is an [ref] nations, founded in 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), and headquartered since 1965 in Vienna, Austria. As of September 2018, the 15 countries accounted for an estimated 44 percent of global oil production and 81.5 percent 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.

The stated mission of the organisation 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."[4] The organization is also a significant provider of information about the international oil market. The current OPEC members are the following: Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, the Republic of the Congo, Saudi Arabia (the de facto leader), United Arab Emirates, and Venezuela. Indonesia is a former member, and Qatar will no longer be the member of OPEC from 1 January 2019.[5].By continent, two are South American, seven African, and six are Asian (Middle East). Two-thirds of OPEC's oil production and reserves are in its six Middle-Eastern countries that surround the oil-rich Persian Gulf.

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. The effect can be particularly strong when wars or civil disorders lead to extended interruptions in supply. In the 1970s, restrictions in oil production led to a dramatic rise in oil prices and in the revenue and wealth of OPEC, with long-lasting and far-reaching consequences for the global economy. In the 1980s, OPEC began setting production targets for its member nations; generally, when the targets are reduced, oil prices increase. This has occurred most recently from the organization's 2008 and 2016 decisions to trim oversupply.

Economists often cite OPEC as a textbook example of a cartel that cooperates to reduce market competition, but one whose consultations are protected by the doctrine of state immunity under international law. In December 2014, "OPEC and the oil men" ranked as #3 on Lloyd's list of "the top 100 most influential people in the shipping industry".[6] However, the influence of OPEC on international trade is periodically challenged by the expansion of non-OPEC energy sources, and by the recurring temptation for individual OPEC countries to exceed production targets and pursue conflicting self-interests.

Membership

Current member countries

As of June 2018, OPEC has 15 member countries: six in the Middle East (Western Asia), seven in Africa, and two in South America. According to the U.S. Energy Information Administration (EIA), OPEC's combined rate of oil production (including gas condensate) represented 44 percent of the world's total in 2016,[7] and OPEC accounted for 81.5 percent of the world's "proven" oil reserves, including 48 percent from just the six Middle Eastern members:[8].

Approval of a new member country requires agreement by three-quarters of OPEC's existing members, including all five of the founders.[9] In October 2015, Sudan formally submitted an application to join,[10] but it is not yet a member.

Qatar intends to leave OPEC on 1 January 2019.[11]

Country Region Membership Years[2][3] Population
(2016 est.)[12]
Area
(km2)[13]
Oil Production
(bbl/day, 2016)[A][7]
Proven Reserves
(bbl, 2016)[A][8]
 Algeria North Africa 1969– 40,606,052 2,381,740 1,348,361 12,200,000,000
 Angola Southern Africa 2007– 28,813,463 1,246,700 1,769,615 8,423,000,000
 Ecuador South America 1973–1992, 2007– 16,385,068 283,560 548,421 8,273,000,000
 Equatorial Guinea Central Africa 2017– 1,221,490 28,051 227,000 1,100,000,000
 Gabon Central Africa 1975–1995, 2016– 1,979,786 267,667 210,820 2,000,000,000
 Iran Middle East 1960[B] 80,277,428 1,648,000 3,990,956 157,530,000,000
 Iraq Middle East 1960[B] 37,202,572 437,072 4,451,516 143,069,000,000
 Kuwait Middle East 1960[B] 4,052,584 17,820 2,923,825 101,500,000,000
 Libya North Africa 1962– 6,293,253 1,759,540 384,686 48,363,000,000
 Nigeria West Africa 1971– 185,989,640 923,768 1,999,885 37,070,000,000
 Qatar Middle East 1961–2019[11] 2,569,804 11,437 1,522,902 25,244,000,000
 Republic of the Congo Central Africa 2018–[14] 5,125,821 342,000 260,000 1,600,000,000
 Saudi Arabia Middle East 1960[B] 32,275,687 2,149,690 10,460,710 266,578,000,000
 United Arab Emirates Middle East 1967[C] 9,269,612 83,600 3,106,077 97,800,000,000
 Venezuela South America 1960[B] 31,568,179 912,050 2,276,967 299,953,000,000
OPEC Total 483,630,000 12,492,695 35,481,740 1,210,703,000,000
World Total 7,670,594,000 510,072,000 80,622,287 1,650,585,000,000
OPEC Percent 6.3% 2.4% 44% 73%
  1. ^ a b One petroleum barrel (bbl) is approximately 42 U.S. gallons, or 159 liters, or 0.159 m3, varying slightly with temperature. To put the production numbers in context, a supertanker typically holds 2,000,000 barrels (320,000 m3),[15] and the world's current production rate would take approximately 56 years to exhaust the world's current proven reserves.
  2. ^ a b c d e The five founding members attended the first OPEC conference in September 1960.
  3. ^ The UAE was founded in December 1971. Its OPEC membership originated with the Emirate of Abu Dhabi.

Lapsed members

Country Region Membership Years[2] Population
(2016 est.)[12]
Area
(km2)[13]
Oil Production
(bbl/day, 2016)[7]
Proven Reserves
(bbl, 2016)[8]
 Indonesia Southeast Asia 1962–2008,
Jan-Nov 2016
261,115,456 1,904,569 833,667 3,692,500,000

For countries that export petroleum at relatively low volume, their limited negotiating power as OPEC members would not necessarily justify the burdens imposed by OPEC production quotas and membership costs. Ecuador withdrew from OPEC in December 1992, because it was unwilling to pay the annual US$2 million membership fee and felt that it needed to produce more oil than it was allowed under its OPEC quota at the time,[16] although it rejoined in October 2007. Similar concerns prompted Gabon to suspend membership in January 1995;[17] it rejoined in July 2016. In May 2008, Indonesia announced that it would leave OPEC when its membership expired at the end of that year, having become a net importer of oil and being unable to meet its production quota.[18] It rejoined the organization in January 2016,[2] but announced another "temporary suspension" of its membership at year-end when OPEC requested a 5 percent production cut.[19]

Some commentators consider that the United States was a de facto member of OPEC during its formal occupation of Iraq, due to its leadership of the Coalition Provisional Authority in 2003–2004.[20][21] But this is not borne out by the minutes of OPEC meetings, as no US representative attended in an official capacity.[22][23]

Observers

Since the 1980s, representatives from Egypt, Mexico, Norway, Oman, Russia, and other oil-exporting nations have attended many OPEC meetings as observers. This arrangement serves as an informal mechanism for coordinating policies.[24]

Leadership and decision-making

refer to caption
OPEC Conference delegates at Swissotel, Quito, Ecuador, December 2010

The OPEC Conference is the supreme authority of the organization, and consists of delegations normally headed by the oil ministers of member countries. The chief executive of the organization is the OPEC Secretary General. The Conference ordinarily meets at the Vienna headquarters, at least twice a year and in additional extraordinary sessions when necessary. It generally operates on the principles of unanimity and "one member, one vote", with each country paying an equal membership fee into the annual budget.[9] However, since Saudi Arabia is by far the largest and most-profitable oil exporter in the world, with enough capacity to function as the traditional swing producer to balance the global market, it serves as "OPEC's de facto leader".[25]

International cartel

At various times, OPEC members have displayed apparent anti-competitive cartel behavior through the organization's agreements about oil production and price levels.[26] In fact, economists often cite OPEC as a textbook example of a cartel that cooperates to reduce market competition, as in this definition from OECD's Glossary of Industrial Organisation Economics and Competition Law:[1]

International commodity agreements covering products such as coffee, sugar, tin and more recently oil (OPEC: Organization of Petroleum Exporting Countries) are examples of international cartels which have publicly entailed agreements between different national governments.

OPEC members strongly prefer to describe their organization as a modest force for market stabilization, rather than a powerful anti-competitive cartel. In its defense, the organization was founded as a counterweight against the previous "Seven Sisters" cartel of multinational oil companies, and non-OPEC energy suppliers have maintained enough market share for a substantial degree of worldwide competition.[27] Moreover, because of an economic "prisoner's dilemma" that encourages each member nation individually to discount its price and exceed its production quota,[28] widespread cheating within OPEC often erodes its ability to influence global oil prices through collective action.[29][30]

OPEC has not been involved in any disputes related to the competition rules of the World Trade Organization, even though the objectives, actions, and principles of the two organizations diverge considerably.[31] A key US District Court decision held that OPEC consultations are protected as "governmental" acts of state by the Foreign Sovereign Immunities Act, and are therefore beyond the legal reach of US competition law governing "commercial" acts.[32][33] Despite popular sentiment against OPEC, legislative proposals to limit the organization's sovereign immunity, such as the NOPEC Act, have so far been unsuccessful.[34]

Conflicts

OPEC often has difficulty agreeing on policy decisions because its member countries differ widely in their oil export capacities, production costs, reserves, geological features, population, economic development, budgetary situations, and political circumstances.[35][36] Indeed, over the course of market cycles, oil reserves can themselves become a source of serious conflict, instability and imbalances, in what economists call the "natural resource curse".[37][38] A further complication is that religion-linked conflicts in the Middle East are recurring features of the geopolitical landscape for this oil-rich region.[39][40] Internationally important conflicts in OPEC's history have included the Six-Day War (1967), Yom Kippur War (1973), a hostage siege directed by Palestinian militants (1975), the Iranian Revolution (1979), Iran–Iraq War (1980–1988), Iraqi occupation of Kuwait (1990–1991), September 11 attacks by mostly Saudi hijackers (2001), American occupation of Iraq (2003–2011), Conflict in the Niger Delta (2004–present), Arab Spring (2010–2012), Libyan Crisis (2011–present), and international Embargo against Iran (2012–2016). Although events such as these can temporarily disrupt oil supplies and elevate prices, the frequent disputes and instabilities tend to limit OPEC's long-term cohesion and effectiveness.[41]

Other Languages
Afrikaans: OPUL
አማርኛ: ኦፔክ
العربية: أوبك
aragonés: OPEP
تۆرکجه: اوپک
বাংলা: ওপেক
беларуская: АПЕК
беларуская (тарашкевіца)‎: Арганізацыя краін-экспартэраў нафты
bosanski: OPEC
Cymraeg: OPEC
dansk: OPEC
eesti: OPEC
Esperanto: OPEL
euskara: LPEE
فارسی: اوپک
Fiji Hindi: OPEC
føroyskt: OPEC
furlan: OPEC
हिन्दी: ओपेक
hrvatski: OPEC
Ido: ONEP
עברית: אופ"ק
Basa Jawa: OPEC
Kabɩyɛ: OPEP ŋgbɛyɛ
ಕನ್ನಡ: ಒಪೆಕ್
kurdî: OPEC
Кыргызча: ОПЕК
Latina: OPEC
latviešu: OPEC
lietuvių: OPEC
magyar: OPEC
മലയാളം: ഒപെക്
मराठी: ओपेक
مصرى: اوبيك
مازِرونی: اوپک
монгол: ОПЕК
မြန်မာဘာသာ: အိုပက်
नेपाली: ओपेक
नेपाल भाषा: ओपेक
norsk: OPEC
oʻzbekcha/ўзбекча: OPEC
ਪੰਜਾਬੀ: ਓਪੈੱਕ
پنجابی: اوپیک
پښتو: اوپک
Patois: OPEC
polski: OPEC
română: OPEC
русиньскый: ОПЕК
саха тыла: OPEC
ᱥᱟᱱᱛᱟᱲᱤ: ᱳᱯᱮᱠ
Scots: OPEC
shqip: OPEC
sicilianu: OPEC
Simple English: OPEC
Soomaaliga: OPEC
کوردی: ئۆپێک
српски / srpski: OPEK
srpskohrvatski / српскохрватски: OPEC
Basa Sunda: OPEC
suomi: OPEC
svenska: Opec
தமிழ்: ஓப்பெக்
ไทย: โอเปก
Türkçe: OPEC
українська: ОПЕК
اردو: اوپیک
vèneto: OPEC
Võro: OPEC
Winaray: OPEC
ייִדיש: אפעק
Zazaki: OPEC
žemaitėška: OPEC