The Organization of the Petroleum Exporting Countries, also known as “OPEC,” is an intergovernmental organization of 13 oil-exporting countries that coordinates the petroleum policies of its members.
Its mission is also to ensure the stabilization of the oil markets to secure a regular and efficient supply of petroleum to consumers, income to producers, and a fair return on capital to industry investors.
It was founded in 1960 by Saudi Arabia, Venezuela, Iraq, Iran, and Kuwait.
They are the OPEC OGs. 😂
The other countries that have joined OPEC since are Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon, Angola, Equatorial Guinea and the Republic of the Congo.
As of January 2020, OPEC has 13 member countries: five in the Middle East, seven in Africa, and one in South America.
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”.
For many commentators, OPEC is a cartel in the sense that it regulates the supply of oil in the hope of controlling the price. OPEC does this by holding biannual meetings to set the oil production quotas for its member countries.
We like to call them the “Black Crack Mafia“.
In the past, OPEC’s dominance over the production of oil meant that the organization was considered to be very powerful.
According to the U.S. Energy Information Administration (EIA), OPEC’s combined rate of oil production (including gas condensate) represented 44 percent of the world’s total in 2016, and OPEC accounted for 81.5 percent of the world’s “proven” oil reserves.
However, the rise of the American fracking industry has raised questions about whether OPEC’s control over the price of oil is weakening.
What does OPEC do?
Broadly speaking, OPEC has three main goals.
1. Keep Oil Prices Stable
The first is to keep oil prices stable by coordinating its members’ oil production through quotas.
The theory is that by controlling supply, OPEC will be able to have greater influence over the price of oil on the world market.
2. Reduce Oil Price Volatility
The second of OPEC’s goals is to reduce oil price volatility, in the hope of making the production and supply of oil as profitable as possible for OPEC members.
It also helps to stave off competition from the growing American fracking industry, as well as from non-OPEC and non-OPEC-affiliated countries.
3. Minimize Surpluses and Shortages
The third goal of OPEC is to adjust the supply of oil to combat surpluses and shortages which, in turn, can help reduce the volatility of oil prices on international markets.