Petroleum policies around the world need to be regulated, so petroleum exporting countries all work under the same parameters. To keep things even, two organizations have been created worldwide: the OPEC and the OAPEC.

The Organization of Petroleum Exporting Countries or OPEC and the Organization of Arab Petroleum Exporting Countries or OAPEC are in charge of providing technical and economic guidance to all member countries. They were both founded to manage the supply of oil and help to regulate its production and price worldwide.

Even when both organizations share similarities, there are some remarkable differences between the two of them. In this article, we will talk about both organizations, pointing out key aspects that make both of them different.

The OPEC

The Organization of Petroleum Exporting Countries or OPEC was founded in the second half of the XX century. It was first established in Baghdad with 12 member countries. All members were the biggest and most significant oil producers in the world. This included both Arabian and none- Arabian countries.

The OPEC was created to regulate petroleum policies among all members. This way all interests would be protected, those that were individual and collective. In this sense, the production, availability, and prices of oil in the market would be regulated, securing the stability of petroleum in the market.

In other words, the OPEC aims to erase the volatility of oil prices in the global market. As this volatility is completely unnecessary and may affect the global economy. On the other hand, the OPEC’s mission includes boosting the member countries economy and help to fix their import and export plans related to oil.

One of the most important characteristics of the OPEC is that countries from all around the world are welcomed. This allows the OPEC to be a cartel in charge of managing prices of oil in the global market. The OPEC is open to any country that is an important oil exporter. This is how different members have been added to the cartel during the years.

However, not all countries that produce oil are part of the OPEC. Russia, China, and the United States are some examples of substantial oil producers that refuse to become part of the OPEC in order to pursue their own priorities and interests.

The OPEC members own about 80% of the oil reserves in the world. This is why the OPEC’s policies have been hardly criticized by other countries and organizations since they will always try to protect the member countries interest overall.

The OAPEC

Organization of Arab Petroleum Exporting Countries or OAPEC is formed by some members that are also part of the OPEC. The main difference between these two organizations is that the OPEC is open for any country that produces oil in a large scale, while the OAPEC is only opened to Arab countries that produce oil.

This means that the OAPC is formed only by Saudi Arabia, Libya, Iraq, Kuwait, Algeria, Qatar, Egypt, Syria, Bahrain, Tunisia, and United Arab Emirates. Excluding countries such as Nigeria, Venezuela, or Iran. This means that only Arab oil-exporting republics can actually be part of this organization headquartered in Kuwait.

Both organizations operate independently and while the OPEC aims to regulate the prices of oil globally, reducing its volatility. The OAPEC aims to help countries develop their industry regarding the extraction and production of oil.

On the other hand, the OAPEC was founded eight years after the OPEC as an agreement between three states: The State of Kuwait, Kingdom of Saudi Arabia, and the Kingdom of Libya. This agreement was signed in Beirut, Lebanon.

The OAPEC cares for the economic development of its member countries. It aims to safeguard the best interests of the Arab oil- producing countries, individually and collectively. This means that terms related to the production and commercialization of oil will be regulated in an equitable and reasonable way.

Also, unlike the OPEC, the OAPEC works to create investment opportunities in the member countries. This happens because oil is understood by the Arab countries as a source of national income that should help to boost the industry and economic conditions of each country.

Image courtesy of Sam valadi at Flickr.com

It is important to notice that in order to belong to the OAPEC, countries need to be Arab countries which economy relies heavily on the oil industry. A Ministerial Council should approve its membership and any provisions or agreements set by the organization must be accepted. This happens because the OAPEC is formed by different internal organs that ensure its organization and proper operation.

The OAPEC is key to hold good relations between Arabic countries. It also helps to fund other Arab organization such as the Arab Industrial Development and Mining Organization. In this sense, the OAPEC keeps close and good relations with the Arab League and the Arab Fund for Economic Development.

Related Crude Oil Prices: How to understand their instability by Suzzanne Uhland

* Featured Image courtesy of Patrick Hesse at Flickr.com