OPEC is an international cartel of 12 countries that controls a large part of the world’s oil trade, but its influence has diminished due to increased demand and new oil deposits in non-member countries. Its objective is to control the production and availability of oil by setting price and availability restrictions.
The Organization of the Petroleum Exporting Countries (OPEC) is an international cartel that controls a large part of the world’s oil trade. OPEC includes 12 countries; Kuwait, Algeria, Ecuador, Iran, Angola, Iraq, Libya, Saudi Arabia, Nigeria, Qatar, Venezuela, and the United Arab Emirates. The organization has occasionally been the subject of controversy, as its control over the flow of oil is so great. This influence has diminished in recent years for various reasons.
Founded in 1960, the Organization of the Petroleum Exporting Countries quickly became one of the most influential organizations in the world. Although several of the founding countries of OPEC had discussed the possibility of forming a collective, it was not until 1960 that it became necessary. A law passed by then US President Dwight Eisenhower placed limits on oil imports from non-US sources. Since the United States was one of the largest importers of oil, this created a sharp drop in oil profits.
The original five members of the Organization of the Petroleum Exporting Countries began recruiting new members to consolidate their control over the oil trade. Over the course of the next 15 years, OPEC recruited eight more countries and held almost all of the world’s known oil reserves. Certain countries, such as the United Kingdom, were intentionally excluded from the organization due to their ties to colonial activities.
The objective of the Organization of the Petroleum Exporting Countries is to control the production and availability of oil. The group does this by strictly controlling the amount of oil pumped from member countries’ oil fields and by setting price and availability restrictions. During the height of its power, the group maintained a slow increase in cost, but a stable overall price. At times, such as during the 1973 oil embargo or the years of overproduction in the early 1980s, oil prices would fluctuate, but return to their previous levels soon after.
The level of control that the Organization of the Petroleum Exporting Countries has over oil prices makes many non-members uncomfortable. For several decades, OPEC was able to influence prices in all industrialized countries. Simply by making gasoline more expensive, they could make unrelated products more expensive through increased shipping costs. This had ramifications on everything from inflation rates to housing costs.
Although OPEC still controls a large amount of the world’s oil reserves, its overall influence is less than it once was. Due to increased demand, most member countries produce oil almost as fast as their infrastructure allows, making production quotas useless. In addition, several new oil deposits have been located in non-member countries. Since the oil produced by these sources is not subject to OPEC regulations, international oil sales are not as influenced by its pricing.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
