Organization of Petroleum Exporting

Companies (OPEC)

What is OPEC?

An organization consisting of the world's major oil-exporting nations

Produces half of the world’s oil exports, controls two thirds of the oil reserves in the world.

Twelve member countries

Manipulates oil production and oil prices.

Statute (recent as of 2012)Outlines purpose of organization at foundingOrganizational structure of OPEC

What is OPEC? (continued)

The Conference Supreme authority of

organization Each country allowed a

delegation, one vote Must unanimously agree

on decisions Elected President and

Alternate President

The Board of Governors One vote, simple majority Two year terms

The Secretariat The headquarters of the

organization Carry out executive

functions Representative of OPEC Three year term

What is OPEC? (continued)

The Conference’s responsibilities (among others)Formulate policyGrant membershipAppoint members to Board of GovernorsApprove budget, as suggested by Board of

GovernorsApprove amendments to the StatuteAppoint Chairman, Assistant Chairman of Board of

GovernorsAppoint Secretary General

What is OPEC? (continued)

Board of Governors’ responsibilities Implement the Conference’s decisionsSubmit reports and make recommendations to the

Conference on the affairs of OPECSubmit budget proposal

Purpose

Founded in 1960

Coordinating and unifying petroleum policies of member countries in order to safeguard individual and collective interests

Role evolved from setting crude oil prices to regulating oil market by changing supply policy

Who is involved?

Who is involved?

President Diezani Alison-Madueke, Nigeria Elected in Nov. 2014

Secretary General Abdallah Salem el-Badri, Libya Serving since 2007

Advantages of Membership

Efficient

Access to bigger world markets

Better access to resources

Greater influence

Won’t be exploited by larger, industrialized nations

Disadvantages of Membership

Can have too much control of product, cannot unilaterally decide production amounts

Difficult to agree on policies, especially when all decisions must be unanimous

Plans in short-term, prone to price fluctuations

International Impact

IranHeavily dependent on oil exportsConsidering return to oil market after nuclear talks,

hopes of lifting sanctions and doubling oil exportshttp://money.cnn.com/2015/03/17/investing/iran-san

ctions-oil-prices-opec/

NigeriaStruggling to reap benefits of membershipLargest supplier of sweet crude oil, intensified trade

with Asian countries following increased US domestic production

International Impact (continued)

Arab countries in OPEC as well as Egypt, Syria, and Tunisia, proclaimed embargo in response to American invovlement in Yom Kippur War (1973)

OPEC began to exercise economic and political strength

By the end of embargo, oil prices rose from $3 to $12 a barrel Embargo against US, UK, Netherlands, Canada, Japan Created rift within NATO countries, many distanced

themselves from American policy in Mid-East

Considered “first oil shock,” followed by “second oil shock” of 1979

International Impact (continued)

America abandoning Bretton-Woods agreement deflated valued of dollar (1971)

OPEC countries saw little increase in real revenues

Increased exploration of alternative energy resources in non-OPEC countries

Mexico, Nigeria unprepared for significant price falls following 1979 embargoes

Works Cited

http://www.opec.org/opec_web/static_files_project/media/downloads/publications/OPEC_Statute.pdf

http://www.opec.org/opec_web/static_files_project/media/downloads/publications/GenInfo.pdf

http://money.cnn.com/2015/03/17/investing/iran-sanctions-oil-prices-opec/