The Organization of the Petroleum Exporting Countries or OPEC is an intergovernmental and permanent entity which is in charge of coordinating and unifying petroleum policies among countries that belong to the organization. Suzzanne Uhland knows that its main goal is to secure stable and fair prices for petroleum companies; a regular and economic petroleum supply to consuming countries and a rational profit and return on capital to those individuals investing in the oil industry.
The OPEC was initially founded between the 10th and the 14th of September, 1960 during a conference held in Baghdad. The founding members of the OPEC where Iraq, Saudi Arabia, Iran, Kuwait, and Venezuela. A year after the OPEC was created, Qatar decided to join it and two years later, Indonesia joined the organization but left it at the beginning of 2009 and came back seven years later, only to suspend its participation in November, last year.
Other OPEC active members are the United Arab Emirates, which joined the organization in 1967; Algeria, Nigeria, Ecuador, Angola, and Gabon. Both Ecuador and Gabon suspended their membership at some point during the last 20 years, but joined back later in 2007 and 2016, respectively.
The organization’s first headquarter was located in Geneva, Switzerland. Five years after being founded, it moved to Vienna, Austria. Since 1995, the OPEC has been located there.
Foundation and First Decade of Operations
The nations that decided to found the OPEC in the 1960’s were the biggest oil producers but were also developing countries. During this year, many political events happened. Kennedy won the presidency of the United States, the Cold War had ended just a few years ago, some nations were running missile tests and many new independent nations derived from developing countries.
The international oil market during this period was dominated by multinational companies called the Seven Sisters. These companies were not closely related to what once was the Soviet Union (FSU) or other centrally planned economies. This is why the OPEC was proposed as a collective solution that could follows its own goals and establish its own headquarter in Geneva and later in Vienna.
The OPEC adopted what was called a Declaratory Statement of Petroleum Policy in Member Countries eight years after it was founded. This statement emphasized in the undeniable right of any country to perform enduring sovereignty over its natural resources to support its own development. By the end of this decade, members will grow to ten.
The 1970s and the International Importance of the OPEC
During the 1970’s the OPEC became one of the most important international organizations in charge of assisting member countries to take control of the petroleum they produced. This way, the OPEC became fundamental to establish petroleum prices in the global market. There were two times when the oil prices went crazy during this decade, and the OPEC was the organization responsible for asking nations to cooperate with each other in order to work for the interests of a sustainable world economy.
By 1975, the OPEC members grew to 13 and started to build determined schemes that contributed to socio-economic development.
The 1980s and the Oil Crisis
Until this decade, oil reached record levels and prices began to decline until they crashed in the mid-80’s. This crisis took place thanks to the overproduction of petroleum and the change in consumption patterns that strived away from oil. OPEC’s revenue dropped and was worth a third of its earlier price, affecting severely the Member Countries.
Prices would only recover at the end of the decade to half of what they were years before. The OPEC share of the oil market began to slowly recover in the newly growing markets and dialogs were held between OPEC and non-OPEC members to set principles of cooperation and establish the basis of a sustainable marked with reasonable prices. During this decade, environmental issues popped up as they became relevant in the international agenda.
A More Stable Decade
Prices during the 1990’s shook less dramatically than they did in the prior decades. The OPEC action was key to reduce the impact of Middle East hostilities in the oil market at the beginning of the 90’s. However, oil prices were highly volatile during this period and were weak most of the time due to the recession happening in the Northern Hemisphere and South-East Asia. Nevertheless, the oil market integrated and recovered thanks to globalization, communications and high tech trends.
The OPEC was present in the United Nations dialogs about climate change.
The New Millennium
Crude prices were stabilized thanks to the band mechanism imposed by the OPEC. However, a group of undesirable situations followed and in 2004, the prices were volatile again and oils were used as an asset class. For years after the oil crisis, prices started to recover again and collapsed during the global economic recession.
The OPEC became vital to support the oil industry and provided its global efforts to solve the problems derived from the economic crisis. It also supported stable energy markets and adopted long-term strategies to preserve the environment.
The OPEC today
The global economy is the most critical factor that may affect the oil prices. The international financial systems are attached to macroeconomic uncertainties that generate social unrest worldwide. In 2014 prices were stable, before a mix of speculation and oversupply broke them. Since then, trade patterns keep changing.
The World’s general environmental concern has also affected the oil prices. However, the OPEC keeps trying to find stability in the global market and is constantly looking for cooperation among consumers and non-OPEC members.
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