OPEC and Environment Essay

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Created at the Baghdad Conference on September 10-14, 1960, the Organization of Petroleum Exporting Countries (OPEC) is a multinational consortium whose purpose is to coordinate and regulate petroleum pricing and policies among its member countries. OPEC was created to assure stable prices for member petroleum producers, securing cost-effective and regular supplies of petroleum and distillates to consuming nations with reasonable profits to its members and investors.

The original founding members were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, which were later joined by Qatar in 1961, Indonesia in 1962, the Socialist People’s Libyan Arab Republic in 1962, the United Arab Emirates in 1967, Algeria in 1969, Nigeria in 1971, Ecuador from 1973 to 1992, and Gabon from 1975 to 1994. The organization located its first headquarters in Geneva, Switzerland, for five years, then moved to Vienna, Austria, on September 1, 1965. Nigeria joined OPEC in 1971 and represents the final member nation.

OPEC rose to international prominence during the 1970s when it dominated its own domestic oil production while increasing its direct influence on global crude oil markets. Prompted by the Arab oil embargo of 1973 and the Iranian Revolution in 1979, the world’s crude oil prices skyrocketed (nominal value at $38/barrel), and OPEC’s role in the world market became obvious. The organization’s first Sovereigns and Heads of State Summit was held in March 1975 in Algiers.

Crude oil prices peaked in the early 1980s, only to plummet, causing a worldwide crude oil collapse in 1986. Prices revived in the following years but never approached the earlier high prices until 2000, when crude oil per barrel prices soared to $36/barrel. Nothing however, prepared OPEC for current price escalation to more than $70/barrel due to recent production problems and conflicts across the Middle East.

With increasing Middle East conflicts, market panic instigated a sudden increase in crude oil prices that was reduced by increased production and output dictated by the OPEC members. Prices remained stable until a collapse in 1998 due to economic recessions in Southeast Asia; cooperative action by OPEC and some non-OPEC producers brought about a relative price recovery. A wave of corporate mergers among the major international oil companies followed, which aggravated price fluctuations until the disastrous attack on the United States on September 11, 2001.

With the consequent Iraq war, crude oil production in Iraq, a major global supplier, halted from warfare-related disruption and sabotage, pushing prices in 2006 to more than $70/barrel. These high petroleum values were then exacerbated with the landfall of Hurricanes Katrina and Rita along the U.S. Gulf Coast in 2005-which kept prices high due to importance of that region in North American oil production and distribution services. Increasing Asian demands on oil consumption also contributed to the price rise.

The foremost aims of OPEC, according to its statute, are:

the coordination and unification of the oil policies of its member countries and the determination of the best means for safeguarding their interests, individually and collectively; [devising] ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations; [giving due regard] at all times to the interests of the producing nations and to the necessity of securing a steady income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations, and a fair return on their capital to those investing in the petroleum industry.

OPEC is administered by a board of governors overseen by the secretary general, who is appointed for a term of three years. The secretary general is the legally authorized representative of OPEC and chief executive of the secretariat and administers the affairs of the organization in accordance with the directions of the board of governors. The secretary general is assisted by the Research Division, the Administration and Human Resources Department, and the Public Relations and Information Department.

Bibliography:

  1. Jahangir Amuzegar, Managing the Oil Wealth: OPEC’s Wind(alls and Pit(alls (I. Tauris, 2001);
  2. Albert Danielsen, The Evolution o( OPEC (Harcourt College Publishing, 1982);
  3. Arabinda Ghosh, OPEC, The Petroleum Industry, and United States Energy Policy (Quorum Books, 1983).

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