The structure called OPEC, whose abbreviation, in principle, is familiar to many, plays a significant role in the global business arena. When was this organization founded? What are the main factors that predetermined the establishment of this international structure? Can we say that today's trend, which reflects the decline in oil prices, is predictable and therefore under control for today's "black gold" exporting countries? Or are OPEC countries most likely playing a secondary role in the global political arena, forced to reckon with the priorities of other powers?
OPEC General Information
What is OPEC? Deciphering this abbreviation is quite simple. True, before producing it, it should be correctly transliterated into English - OPEC. It turns out - Organization of Petroleum Exporting Countries. Or, the Organization of the Petroleum Exporting Countries. This international structure was created by major oil-producing powers with the aim, according to analysts, of influencing the "black gold" market, primarily in terms of prices.
OPEC members - 12 states. Among them are the Middle Eastern countries- Iran, Qatar, Saudi Arabia, Iraq, Kuwait, UAE, three states from Africa - Algeria, Nigeria, Angola, Libya, as well as Venezuela and Ecuador, which are located in South America. The headquarters of the organization is located in the Austrian capital - Vienna. The Organization of the Petroleum Exporting Countries was founded in 1960. To date, OPEC countries control about 40% of the world's exports of "black gold".
OPEC History
OPEC was founded in the capital of Iraq, Baghdad, in September 1960. The initiators of its creation were the world's major oil exporters - Iran, Iraq, Saudi Arabia, Kuwait, and Venezuela. According to modern historians, the period when these states came up with a corresponding initiative coincided with the time when an active process of decolonization was underway. Former dependent territories were separating from their mother countries both in political and economic terms.
The global oil market was controlled mainly by Western companies such as Exxon, Chevron, Mobil. There is a historical fact - a cartel of the largest corporations, including those named, came up with a decision to lower prices for "black gold". This was due to the need to reduce the costs associated with oil rent. As a result, the countries that founded OPEC set the goal of gaining control over their natural resources outside the influence of the world's largest corporations. In addition, in the 60s, according to some analysts, the planet's economy did not experience such a great need for oil - supply exceeded demand. And that's whyOPEC activity was designed to prevent a decline in global prices for "black gold".
The first step was to establish the OPEC Secretariat. He "registered" in Swiss Geneva, but in 1965 he "moved" to Vienna. In 1968, the OPEC meeting was held, at which the organization adopted the Declaration on Petroleum Policy. It reflected the right of states to exercise control over national natural resources. By that time, other major oil exporters in the world - Qatar, Libya, Indonesia, and the United Arab Emirates - joined the organization. Algeria joined OPEC in 1969.
According to many experts, OPEC's influence on the global oil market especially increased in the 70s. This was largely due to the fact that the governments of the countries that are members of the organization assumed control over oil production. According to analysts, in those years, OPEC really could directly influence world prices for "black gold". In 1976, the OPEC Fund was created, in charge of which issues of international development appeared. In the 70s, several more countries joined the organization - two African (Nigeria, Gabon), one from South America - Ecuador.
By the beginning of the 80s, world oil prices reached very high levels, but in 1986 they began to decline. Members of OPEC for some time reduced their share in the global market of "black gold". This led, as some analysts note, to significant economic problems in the countries that are members of the organization. However, by the beginning of the 1990s, prices foroil rose again - to about half of the level that was reached in the early 80s. The share of OPEC countries in the global segment also began to grow. Experts believe that this kind of effect was largely due to the introduction of such a component of economic policy as quotas. A pricing methodology based on the so-called "OPEC basket" was also introduced.
In the 1990s world oil prices as a whole were not, according to many analysts, somewhat below the expectations of the countries included in the Organization. The economic crisis in Southeast Asia in 1998-1999 became a significant barrier to the growth of the cost of "black gold". At the same time, by the end of the 90s, the specifics of many industries began to require more oil resources. Particularly energy-intensive businesses have emerged, and the processes of globalization have become especially intense. This, according to experts, created some conditions for an early rise in oil prices. It should be noted that in 1998, Russia, an oil exporter, one of the largest players in the global oil market at that time, received the status of an observer in OPEC. At the same time, in the 90s, Gabon left the organization, and Ecuador temporarily suspended its activities in the OPEC structure.
In the early 2000s, world oil prices began to rise slightly and were fairly stable for a long time. However, their rapid growth soon began, peaking in 2008. By that time, Angola had joined OPEC. However, in 2008crisis factors intensified sharply. In the fall of 2008, the price of "black gold" fell to the level of the early 2000s. At the same time, during 2009-2010, prices rose again and continued to be at a level that the main oil exporters, as economists believe, were right to consider the most comfortable. In 2014, due to a whole range of reasons, oil prices systematically decreased to the level of the mid-2000s. OPEC, however, continues to play a significant role in the global oil market.
OPEC goals
As we noted above, the original purpose of creating OPEC was to establish control over national natural resources, as well as to influence global price-forming trends in the oil segment. According to modern analysts, this goal has not fundamentally changed since then. Among the most urgent tasks, apart from the main one, for OPEC are the development of oil supply infrastructure, the competent investment of income from the export of "black gold".
OPEC as a player in the global political arena
OPEC members are united in a structure that has the status of an intergovernmental organization. That is how it is registered with the UN. Already in the first years of its work, OPEC established relations with the UN Council on Economic and Social Affairs, began to participate in the United Nations Conference on Trade and Development. Meetings are held several times a year with the participation of the highest government positions of the OPEC countries. These events are designed to develop a joint strategy for furtheralignment of activities in the global market.
OPEC Oil Reserves
OPEC members have total oil reserves, which are estimated at more than 1199 billion barrels. This is approximately 60-70% of the world's reserves. At the same time, as some experts believe, only Venezuela has reached peak oil production. Other countries that are members of OPEC can still increase their performance. At the same time, the opinions of modern experts regarding the prospects for growth in the production of "black gold" by the countries of the Organization differ. Some say that the countries that are part of OPEC will strive to increase their respective indicators in order to maintain their current positions in the global market.
The fact is that now the US is an exporter of oil (largely related to the shale type), which has the potential to significantly push the OPEC countries on the world stage. Other analysts believe that the increase in production is unprofitable for the states that are members of the Organization - the increase in supply on the market reduces the price of "black gold".
Governance structure
An interesting aspect in the study of OPEC is the characteristics of the organization's management system. The leading governing body of OPEC is the Conference of the Member States. It is usually convened twice a year. The OPEC meeting in the format of the Conference involves the discussion of issues related to the admission of new states to the organization, the adoption of the budget, and personnel appointments. Topical topics for the Conference are formulated, as a rule, by the Board of Governors. This samethe structure exercises control over the implementation of approved decisions. Within the structure of the Board of Governors there are several departments responsible for a special range of issues.
What is a basket of oil prices?
We said above that one of the price benchmarks for the countries of the Organization is the so-called "basket". What it is? This is the arithmetic average between some brands of oil produced in different OPEC countries. The deciphering of their names is often associated with the variety - "light" or "heavy", as well as the state of origin. For example, there is the Arab Light brand - light oil produced in Saudi Arabia. There is Iran Heavy - heavy oil of Iranian origin. There are such brands as Kuwait Export, Qatar Marine. The "basket" reached its maximum value in July 2008 - $140.73.
Quotas
We noted that there are quotas in the practice of the countries of the Organization. What it is? These are the limits on the daily volume of oil production for each of the countries. Their value may change based on the results of the relevant meetings of the Organization's management structures. In the general case, when quotas are reduced, there is reason to expect a shortage of supply on the world market and, as a result, an increase in prices. In turn, if the corresponding limit remains unchanged or increases, prices for "black gold" may tend to decrease.
OPEC and Russia
As you know, the main oil exporters in the world are not only OPEC countries. Among the largest global suppliers"black gold" in the global market includes Russia. There is an opinion that in some years confrontational relations took place between our country and the Organization. For example, in 2002, OPEC put forward a demand to Moscow to reduce oil production, as well as its sale on the global market. However, according to public statistics, the export of "black gold" from the Russian Federation has practically not decreased since that moment, but, on the contrary, has grown.
The confrontation between Russia and this international structure, as analysts believe, ceased during the years of rapid growth in oil prices in the mid-2000s. Since then, there has been a trend towards constructive interaction between the Russian Federation and the Organization as a whole, both at the level of intergovernmental consultations and in the aspect of cooperation between oil businesses. OPEC and Russia are exporters of "black gold". In general, it is logical that their strategic interests on the global stage coincide.
Prospects
What are the prospects for further partnership of OPEC member states? The interpretation of this abbreviation, which we gave at the very beginning of the article, suggests that the common interests of the countries that established and continue to support the functioning of this organization are based on the export of "black gold". At the same time, as some modern analysts believe, in order to further optimize business strategies, combined with the implementation of national political interests, the countries that are members of the Organization will have totake into account also the opinion of oil-importing states. What could be causing this?
First of all, with the fact that comfortable oil imports for countries that need it are a condition for the development of their economies. National economic systems will develop, production will grow - oil prices will not fall below the critical mark for "black gold" experts. In turn, an increase in the cost of production, which largely arises from excessive fuel costs, will most likely lead to the closure of energy-intensive capacities, their modernization in favor of using alternative energy sources. As a result, global oil prices may decline. Therefore, the main leitmotif of the further development of the OPEC countries, according to many experts, is a reasonable compromise between the realization of their own national interests and the position of the states importing "black gold".
There is another point of view. According to her, there will be no alternative to oil in the next few decades. And that is why the countries of the Organization have every chance to strengthen their positions in the world business arena, and at the same time also gain advantages in terms of realizing political interests. In general, with possible short-term recessions, oil prices will remain high, based on the objective needs of the producing economies, inflationary processes, and also, in some cases, the relatively slow development of new fields. The supply in some years may not keep up at all.demand.
There is also a third point of view. According to her, oil-importing countries may be in a more advantageous position. The fact is that the current price indicators for "black gold", according to analysts who adhere to the concept in question, are almost completely speculative. And in many cases, they are manageable. The cost-effective world price of the oil business for some companies is $25. This is much lower than even the current price of "black gold", which is very likely uncomfortable for the budgets of many exporting countries. And therefore, within the framework of the concept, some experts assign the role of a player who cannot dictate their terms to the countries of the Organization. And moreover, to a certain extent dependent on the political priorities of many oil-importing countries.
Note that each of the three points of view reflects only assumptions, theories voiced by different experts. The oil market is one of the most unpredictable. Forecasts regarding prices for "black gold" and put forward by different experts can be completely different.
