Organization of the petroleum exporting countries (OPEC) Introduction

Moreover, it has gained the membership with countries like Saudi Arabia, Iraq, Iran and Kuwait as well. Organization of the Petroleum Exporting Countries which is multiple organization coordinate many policies on oil prices and other relevant production in conference of OPEC meeting after weeks. Moreover, OPEC claims for its member working in collaboration are proved to be forth-fifth of the petroleum reserves of the world. And account for two-fifth of the oil production at world level.  It also comprises the many other important oil reserves geographically. Other aspects related to petroleum reserves are worth watching at economical level and political interest. United Emirates, Kuwait and Saudia Arabia consisting of large oil reserves therefore, provided the flexibility in adjusting the production (Saboori et al., 2016)

On other hand, OPEC faced many conflicts in history. Many experts believed that OPEC was not cartel and could not provide effective results throughout and debate continued on the prices and cost management in the absence of coordination in entire OPEC.

On the other sides, the influence of individual member of OPEC organization with respect to oil market depends upon the reserves level. Saudia Arabia which is responsible for controlling the one-third total reserves of OPEC has played a leading and well-experienced role in organization. OPEC is cartel and aims for regulation of supplying oil for setting the price on world’s market. While arrival of technology for natural gas in the entire U.S. has reduced the ability of OPEC for controlling the world market (Meredith, 2019).

BRIEF HISTORY of OPEC organization

According to many experts OPEC organization found its establishment in September 1960 at conference of Baghdad by the assistance of many organizations including Iraq, Saudi Arabia, Venezuala. And after five years OPEC relocated the headquarters from Geneva to Vienna. While in 1973, Arab members imposed many factors including embargo against the US for supporting country of Israel. But the embargo leaded to energy crisis and continued with such crisis. In 2008, crisis at global economic rates the crude oil prices were fallen about eighty percent prior to OPEC was to put in the place for largest production as compared to last years. Member countries moved to adhere the quotas and assigned prices for oil by 2009 (Treadgold, 2019).

 During 2014, with changing of international energy agency globally the hit of oil supply put forward the record of 94.2 million barrels after Monetary Funds at international bases and warned much growth at economical level and slower the forecast dramatically. West and Brent Texas intermediated fall of oil was undertaken thirty percent. BY 2015 and 2016, the oil prices related to its production was fluctuating and many authorized personalities struggled to be part of it and made efforts for better requirements (Marino & Roschnotti, 2019).

No doubt criteria and many aspects knockdown organization in various ways but different states collaborated in such regard. By 2018 and 2019 With advancement of innovative technology especially in United States which has major effect on the worldwide oil prices has lessened the influence of OPEC on the entire market.  This is the reason why oil production has become increased worldwide and prices are dropped and results in decline of OPEC in delicate position. OPEC members as cartel have powerful incentives for keeping prices of oil much higher during maintain the global market shares in the market.

MAIN AIM of OPEC organization

Main aim of OPEC is to provide the coordination and unified policies for petroleum regarding to the member of countries and ensure the stabilization of markets of oil for securing the economics, regular suppling petroleum to consumers in efficient manner regarded to steady producers to income and fair returns on the capital for investments with in industry of petroleum.

FALL OF OPEC AND CHALLENGES of OPEC organization

The influence of OPEC on the market has been widely considered to be criticized because of many reasons which includes member countries who hold vast majority of crude oil reserves such as 79.4%. On the other side, OPEC members as cartel have powerful incentives for keeping prices of oil much higher during maintain the global market shares in the market.

With advancement of innovative technology especially in United States which has major effect on the worldwide oil prices has lessened the influence of OPEC on the entire market.  This is the reason why oil production has become increased worldwide and prices are dropped and results in decline of OPEC in delicate position (GOODMAN, 2014).

Last few years of 2016, OPEC planned to maintain the production of oil at high level and consequently low prices for moving towards high production of oil with providing themselves with high cost producers in entire market in return regain the market shares. But in 2019, OPEC faced the decline and reduced the output by 1.2 million barrel per day in every six month. This is due to the severe slowdown economically and created the supply glut. It has extended agreements for more in the incoming days. (Boheman et al., 2015)

MAJOR CHALLENGES of OPEC organization

In the global demand organization of petroleum exporting countries have faced a lot of challenges such as uncertainty with in global demand.

From developed world towards developing countries , structural shifting in demands

Most of non-OPEC nations which produce oil such as Russia, Norway, Canada and Mexico useful for production of oil in excess especially when OPEC cuts it.

Saudia Arabia has been overtaken by Russia as the biggest crude supplier at world level in 2009

The shares of OPEC related to its production has gone down

Existence of various fraction in the OPEC

Within nations of OPEC problems of major cohesion and held to maintain the quota discipline within cartel (Farzanegan, 2011)

Conclusion of OPEC organization

Organization of the Petroleum Exporting Countries is considered to be to most prominent intergovernmental organization which was established during conference in Baghdad. Moreover, it has gained the membership with countries like Saudi Arabia, Iraq, Iran and Kuwait as well. On the other sides, the influence of individual member of OPEC organization with respect to oil market depends upon the reserves level.. OPEC faced many conflicts in history. Main aim of OPEC is to provide the coordination and unified policies for petroleum regarding to the member of countries and ensure the stabilization of markets of oil for securing the economics, regular suppling petroleum to consumers in efficient manner regarded to steady producers to income and fair returns on the capital for investments with in industry of petroleum.

 OPEC still working and considered to have greater determination for proper prices per barrel by setting different quotas. Cartel seemed to more raising in prices which is easier in short run as compared to long run. Non OPEC nations stripped the cartel of power towards single maniplulations of petroleum market. But the world has benefited a lot with the help of increased produvtion of petroleum simultaneously by non-OPEC nations as well to meet the requirements and reduction in annual imports from OPEC countries in recent years proved to be beneficial (Karamelikli et al., 2017)

References of OPEC organization 

1.      Boheman et al., H. ((2015)). "Oil Price Shocks Effect on Economic Growth-OPEC versus non-OPEC Economies.".

2.      Farzanegan, M. R. (2011). Oil revenue shocks and government spending behavior in Iran. Energy Economics, 33, 1055-1069.

3.      GOODMAN, L. M. (2014). A Different Kind of Oil Crisis. Retrieved from www.newsweek.com: https://www.newsweek.com/2014/11/28/different-kind-oil-crisis-285331.html

4.      Karamelikli et al., H. (2017). . "Oil exports and non-oil exports: Dutch disease effects in the Organization of Petroleum Exporting Countries (OPEC).". Journal of Economic Studies, 44(4), 540-551.

5.      Marino, D., & Roschnotti, M. (2019). 62 million barrels of worthless oil options become gold mine. Retrieved from economictimes.indiatimes.com: https://economictimes.indiatimes.com/markets/commodities/news/62-million-barrels-of-worthless-oil-options-become-gold-mine/articleshow/71146559.cms

6.      Meredith, S. (2019). OPEC cuts oil demand growth forecast for a third consecutive month. Retrieved from www.cnbc.com: https://www.cnbc.com/2019/10/10/oil-prices-opec-downgrades-2019-oil-demand-growth-forecast.html

7.      Saboori et al., B. (2016). "Oil-induced environmental Kuznets curve in organization of petroleum exporting countries (OPEC)". International Journal of Green Energy, 13(4), 408-416.

8.      Treadgold, T. (2019). Opec Slides Closer To Collapse As An Oil Glut Overpowers The Oil Price. Retrieved from www.forbes.com: https://www.forbes.com/sites/timtreadgold/2019/09/13/opec-slides-closer-to-collapse-as-an-oil-glut-overpowers-the-oil-price/#29c73c024ecb