Is a permanent, intergovernmental Organization, created at the Baghdad Conference on
Later joined Members
•Indonesia (1962) – suspended membership 01/2009
•United Arab Emirates (1967)
•Ecuador (1973) – suspended membership 1992-2007
Objectives of Opec
• OPEC's objective is to co-ordinate and unify petroleum policies among
Member Countries in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry. • …show more content…
OPEC Role in Economics:
How do they operate
The decision-making center of OPEC is the Conference, comprising national delegations at the level of oil minister, which meet twice each year to decide overall oil output—and thus prices—and to assign output quotas for the individual members. Those quotas are upper limits on the amount of oil each member is allowed to produce. The Conference also may meet in special sessions when deemed necessary, particularly when downward pressure on prices becomes acute.
Opec: Operation by self-regulation
Each member country abides by an honor system, agreeing to only produce a certain amount.
However, if a country winds up producing more, there really is no sanction or penalty.
Each country is responsible for reporting its own production.
Therefore, there is room for "cheating."
But: a country won't go too far over its quota, since it doesn't want to risk being kicked out of OPEC.
Opec: Limitations of power
Despite its power, OPEC can not completely control the price of oil.
In some countries, additional taxes are imposed on gasoline and other oil-based end products to promote conservation. More importantly, oil prices are actually set by the oil futures market. Much of the oil price is determined by these commodities traders.
Other threats to Opec‘s power
Technological advances in seismic exploration have dramatically