April 19, 2022 Comments (0) Uncategorised

Why Was the Organization of Petroleum Exporting Countries Formed

While OPEC is plagued by many conflicts throughout its history, some experts have concluded that it is not a cartel – or at least not an effective cartel – and that it has little, if any, influence over the amount of oil produced or its price. Other experts believe that OPEC is an effective cartel, although it has not always been as effective. Much of the debate focuses on the semantics and definition of what constitutes a cartel. Those who argue that OPEC is not a cartel point to the sovereignty of each member country, the problems inherent in coordinating pricing and production policies, and the tendency of countries to break previous agreements at ministerial meetings. Those who claim that OPEC is a cartel argue that production costs in the Persian Gulf are generally less than 10% of the calculated price and that without OPEC coordination, prices would fall towards these costs. In response to the increase in oil supply, OPEC has tried to force a price increase by imposing a quota on its members. By limiting the level of production, OPEC hoped that the decline in supply would lead to higher prices. The quota was a maximum of 17.5 million barrels per day. [18] As was the nature of OPEC, the various countries could not agree, and Saudi Arabia and Iran increased their production to capitalize on the gap left by the lower level of production.

[19] OPEC, which describes itself as a permanent intergovernmental organization, was founded in Baghdad in September 1960 by its founding members, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The organization`s headquarters are located in Vienna, Austria, where the OPEC Secretariat, the executive body, conducts the day-to-day operations of OPEC. But the embargo also meant that part of the Non-Aligned Movement saw power as a source of hope for their developing countries. Algerian President Houari Boumediene expressed this hope in a speech at the 6th Un Special Session in April 1974: continued exploration in the Gulf of Mexico, the North Sea, Alaska, Siberia and other places has eaten away at the OPOC`s grip on the market. In addition, many countries have started burning more coal to avoid expensive oil. While such events can temporarily disrupt oil supplies and drive up prices, frequent conflicts and instabilities tend to limit OPEC`s long-term cohesion and effectiveness. [157] The following month, from September 10 to 14, 1960, the conference was held in Baghdad at the initiative of Tariki, Pérez Alfonzo, and Iraqi Prime Minister Abd al-Karim Qasim, whose country had skipped the 1959 Congress. [16] Government officials from Iran, Iraq, Kuwait, Saudi Arabia and Venezuela met in Baghdad to discuss ways to increase the price of crude oil produced by their countries and how to respond to unilateral action by ministries of health.

Despite strong opposition from the United States: “Together with Arab and non-Arab producers, Saudi Arabia created the Organization of the Petroleum Exporting Countries (OPEC) to get the best price available from the major oil companies.” [17] Middle Eastern members initially demanded that OPEC`s headquarters be in Baghdad or Beirut, but Venezuela argued for a neutral location, and so the organization chose Geneva, Switzerland. On September 1, 1965, OPEC moved to Vienna, Austria, after Switzerland refused to extend its diplomatic privileges. [18] Economists often cite OPEC as a classic example of a cartel that works together to curb competition in the market, but whose consultations are protected by the international doctrine of state immunity. In December 2014, “OPEC and the Men of Oil” ranked No. 3 on Lloyd`s list of the “100 Most Influential People in the Shipping Industry.” [9] However, OPEC`s influence on international trade is regularly challenged by the expansion of non-OPEC energy sources and the recurrent temptation of some OPEC countries to exceed production targets and pursue conflicting self-interests. .

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