Who Are The Members Of Organization Of Petroleum Exporting Countries - 275 Words

Who Are The Members Of Organization Of Petroleum Exporting Countries (Essay Sample) Content: OPEC Student’s Name Institutional Affiliations Who are the members of OPEC? Organization of the Petroleum Exporting Countries (OPEC) is a large international organization, founded in 1960 by Baghdad, that deals with global oil production. Currently, OPEC has 14 member countries which include Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Venezuela. There are founder members and full members. The founder countries members are Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. There are two members from South America, six from Africa and six from the Middle East. The joining members must be approved by the founder countries and three-quarter of the full members of the organization. Currently, there are no associate members. Associate countries are countries that want to join, but they don’t qualify for full membership of OPEC. The members are countries have a substantial net export of crude petroleum and have interests similar to member countries. Why does the organization exist, and how do members agree on cutting production rates? The reason as to why the organization exists is outlined in OPEC’s mission. OPEC exists to coordinate and unify the member countries’ petroleum policies and ensure the oil markets stabilize. Their objective is to ensure an efficient, economical and consistent supply of petroleum to all the consumers. Moreover, the organization ensures a steady income to all petroleum producers and a sufficient fair yield on capital for those venturing and investing in the petroleum industry. OPEC is a substantial provider of information regarding the international oil market. OPEC agree on cutting the production rates by holding meetings in which they consider the prevailing market conditions and intended market desires to determine the cut production rates. Some reasons for production cut are oversupply, diminishing returns, low demand and shrinking financial reserves. OPEC officials form a committee that meets and determines production cuts for each of the members. If OPEC controls 40% of crude oil production, who controls the rest? OPEC produces 40% of the crude oil production while rest of 60% of crude oil production is produced by non-Opec members. Non-OPEC members are the countries producing crude oil which are not members of the OPEC. Some of these non-OPEC members are China, Russia, Canada, U.S, and Mexico CITATION Mal06 \l 1033 (Mallakh, 2016). These counties have high consumption rates and hence have little to export. Therefore, they are ineffective and less dominant in the determination of oil market price. Recently, non-OPEC members have had high production, but that has not impacted the oil price. Why would other countries cut or not cut their production in conjunction with OPEC†²s decision? OPEC remains dominant and influential in the market trade hence all OPEC and non-OPEC members must follow the decisions CITATION Sha17 \l 1033 (Sharon, 2017). First, it has a comparatively low-cost price advantage in the market against the relatively high price of the non-OPEC production. Secondly, there are no alternative sources equivalents to OPEC dominant position. Lastly, there is an absence of economically feasible alternatives to replace crude oil use in the market. When OPEC has cut or increased production of oil in the past, has the price of petroleum responded as intended? In 1982, OPEC had production cuts and agreed to slash their daily production by about 700,000 barrels. The aim was to combat falling revenue by attaining a maximum production of 17.5 million barrels each day. However, this move proved ineffective, and Saudi Arabia sold cheap oil resulting in low market price. In 1997-1998 OPEC increased its production by 10%. However, the pric...