OPEC
- Organization of the Petroleum Exporting Countries is known as OPEC. There is this ongoing intergovernmental organisation. It was established at the Baghdad Conference in September 1960 by Kuwait, Venezuela, Iran, and Iraq. There are 13 people there right now. Vienna, Austria, serves as the location of the business headquarters.
- OPEC aims to stabilise the oil supply in order to minimise price swings that could harm the economy of both oil-producing and -consuming nations. Any nation that exports a significant amount of oil is eligible to join OPEC.
What is OPEC, exactly?
- Organization of the Petroleum Exporting Countries (OPEC) was established by Saudi Arabia, Kuwait, Iraq, the Islamic Republic of Iran, and Venezuela.
- Ecuador (1973), Gabon (1975), Qatar (1961), Indonesia (1962), Libya (1962), United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Angola (2007), Equatorial Guinea (2017), and Congo were among the nations that joined later (2018).
- The major goal of OPEC is to harmonise petroleum policies among its member states to provide stable oil prices for producers, a consistent flow of oil to countries that consume it, and a welcoming environment for investments.
- Saudi Arabia, Kuwait, Iraq, Venezuela, and Iran sent representatives to a summit in Baghdad in the past.
- They talked about raising the cost of the crude oil they produce as well as preventing global oil companies from acting unilaterally.
- As a result, OPEC was established to bargain with significant oil firms for the best possible price.
- The US, Saudi Arabia, and other oil-producing countries, both Arab and non-Arab, all vehemently opposed it.
- Arab countries initially favoured having OPEC’s headquarters in Baghdad or Beirut. But Venezuela objected to it. Geneva was selected through an impartial selection process (Switzerland).
- On September 1st, 1965, it was moved to Vienna, Austria, when diplomatic guarantees from Switzerland fell through.
OPEC’s objectives are:
- to integrate and coordinate its members’ petroleum policies in order to support stable and equitable oil producer prices.
- to provide oil-consuming countries with a reliable, cost-effective, and efficient supply of crude oil that also generates a decent return on investment.
OPEC performs the following tasks:
- To ensure the stability of the retail oil market and aid manufacturers in making a profit, the OPEC Member States control their oil production.
- Additionally, the strategy aims to establish a routine that would guarantee a consistent supply of oil to oil-consuming nations.
- Meeting twice a year, the ministry of energy and hydrocarbon affairs discusses the state of the global market and decides on protective measures for the oil market.
- In order to discuss other important issues, the Member Countries also hold committee and panel meetings involving economists, petrochemists, and environmental experts.
What is OPEC+:
- OPEC+ is an association of countries that produce oil. Along with eleven other countries, it consists of OPEC members. South Sudan, Azerbaijan, Brunei, Kazakhstan, Bahrain, Malaysia, Mexico, Oman, Russia, and Sudan are also represented.
What caused the formation of OPEC Plus?
- In 2016, the Russian government believed that higher oil prices would help its financial predicament when it ratified the Vienna Agreement.
- Making this informal cooperation known provides Saudi Arabia with security from anticipated oil market volatility.
- Russia’s influence in the Middle East is increased by the establishment of this organisation.
- To the detriment of US shale producers, who have continued to profit from OPEC production cuts by increasing their market share, both parties, however, want to drive down oil prices.
Worries related to OPEC:
- The OPEC’s constrained supply of oil makes it impossible to reduce the record-high prices.
- The increase in oil prices is another factor contributing to the rise in worldwide inflation. It might reduce the demand for products and services, slowing the economy’s recovery.
India’s concerns are as follows:
- India is the world’s third-largest oil consumer.
- Imports satisfy 84% of its demand.
- Three-fifths of it originates in the oil-producing countries of West Asia.
- India, one of the biggest consumers of crude oil, is worried about actions taken unilaterally by oil-producing nations.
- Particularly in our price-sensitive economy, the unilateral actions of OPEC run the risk of undermining the consumption-led recovery and harming consumers more directly.
- India hopes that OPEC won’t unduly restrict supplies because it expects a significant increase in its crude imports. As a result, it has pushed for more alluring offers with lower rates and longer loan terms.
