DEFINITION of OPEC
OPEC is the Organization of Petroleum Exporting Countries is an intergovernmental organization of 15 nations, created at the Baghdad Conference on September 10–14, 1960.
WHAT IT IS IN ESSENCE
Since 1965 it is headquartered in Vienna, Austria. The stated mission of the organization is to “coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.”
The organization is also a significant provider of information about the international oil market.
OPEC’s first goal is to keep prices stable. It wants to make sure its members get what a reasonable price for their oil. Since oil is a bit constant commodity, most consumers base their buying decisions on nothing other than price. What’s the right price? It has traditionally said it was between $70 and $80 per barrel. At those prices, these countries have enough oil to last 113 years.
If prices drop below that target, members of the organization agree to restrict supply to push prices higher. That’s why economists often quote OPEC as a textbook example of a cartel that cooperates to reduce market competition, but one whose consultations are protected by the doctrine of state immunity under international law.
In December 2014, “OPEC and the oil men” ranked as #3 on Lloyd’s list of “the top 100 most influential people in the shipping industry”.
HOW TO USE
The influence of OPEC on international trade is periodically challenged by the expansion of non-OPEC energy sources, and by the recurring temptation for individual OPEC countries to exceed production targets and pursue conflicting self-interests.
As of 2018, the 15 countries accounted for an estimated 44 percent of global oil production and 81.5 percent of the world’s “proven” oil reserves.