Member countries work with developing nations and the international community to provide private and trade sector financing and grants to non-member countries. Some of the world’s greatest oil-producing countries, such as Russia, China, and the U.S., do not belong to OPEC. Members admitted afterward include Qatar (1961), Indonesia (1962), Libya (1962), Abu Dhabi (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Equatorial Guinea (2017), and the Republic of the Congo (2018). The United Arab Emirates—which includes Abu Dhabi (the largest of the emirates), Dubai, ʿAjmān, Sharjah, Umm al-Qaywayn, Raʾs al-Khaymah, and Al-Fujayrah—assumed Abu Dhabi’s membership in the 1970s. Gabon, which had joined in 1975, withdrew in January 1995 but rejoined in 2016. It responded to a sudden drop in the U.S. dollar’s value after President Nixon abandoned the gold standard.

1. Angola, which became a member in 2007, announced its withdrawal in 2023.
2. On November 30, 2017, OPEC agreed to continue withholding 2% of global oil supply.
3. Iran opposes the deal because then Saudi Arabia and Russia will dominate the organization.
4. First, it promotes cooperation among member nations, helping them alleviate some degree of political hostilities.
5. OPEC, multinational organization that was established to coordinate the petroleum policies of its members and to provide member states with technical and economic aid.

Demand is dictated by consumers, businesses, and governments based on their needs for energy. OPEC’s membership expanded to 10 countries in 1969 and was an organization that flew under the radar until Arab member countries cut production and banned exports to the United States and the Netherlands. The embargo was a response to the West’s support of Israel during the Yom Kippur War in October 1973.

Since oil contracts are priced in dollars, the revenues of oil exporters fell when the dollar fell. In response to the embargo, the United States created the Strategic Petroleum Reserve. Countries that left OPEC include Ecuador, which withdrew from the organization in 2020, Qatar, which terminated its membership in 2019, and Indonesia, which suspended its membership in 2016. Qatar terminated its membership on Jan. 1, 2019, and Indonesia suspended its membership on Nov. 30, 2016, so as of 2020 the organization consists of 13 states. It is headquartered in Vienna, Austria, where the OPEC Secretariat, the executive organ, carries out OPEC’s day-to-day business. OPEC was established in Baghdad in September 1960 by founding members Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, and now has 13 member countries.

Saudi-Russian price war

Having said this, it’s no surprise that any moves the group makes have a big impact on global energy prices. Oil prices can drop significantly if they decide to supply more oil to the market. On the other hand, if OPEC member countries decide to cut production and curb supplies, prices are highly likely to shoot up. The Organization of the Petroleum Exporting Countries describes itself as a permanent intergovernmental organization. The organization is designed to “coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets.” This ensures that there is a steady supply for consumers and regular income for petroleum producers. In 1960, five OPEC countries allied to regulate the supply and price of oil.

Other important members are Iran, Iraq, Kuwait, and the United Arab Emirates, whose combined reserves are significantly greater than those of Saudi Arabia. Kuwait, which has a very small population, has shown a willingness to cut production relative to the size of its reserves, whereas Iran and Iraq, both with large and growing populations, have generally produced at high levels relative to reserves. Revolutions and wars have impaired the ability of some OPEC members to maintain high levels of production. Because OPEC has been beset by numerous conflicts throughout its history, some experts have concluded that it is not a cartel—or at least not an effective one—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, though it has not been equally effective at all times. The debate largely centres on semantics and the definition of what constitutes a cartel.

For example, in July 2008, oil prices hit an all-time high of $143 per barrel. OPEC responded by agreeing to produce a little more oil. But the global financial crisis sent oil prices plummeting to $33.73 per barrel in December. Despite its power, OPEC cannot completely control the price of oil. Supply is influenced by exploration, production, and geopolitical influencers that interrupt production and flow of oil from producers to consumers.

This would involve responding to shortages or surpluses by increasing or decreasing supply as needed—effectually achieving its first two goals of controlling price stability and volatility. For example, it replaced the oil lost during the Gulf Crisis in 1990. Several million barrels of oil per day were cut off when Saddam Hussein’s armies destroyed refineries in Kuwait. OPEC also increased production in 2011 during the crisis in Libya.

Crude oil benchmarks

There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. OPEC’s main goal is to maintain oil prices at a profitable level for its members while keeping the market as free as possible from restrictions. The organization ensures its members receive a steady stream of income from an uninterrupted supply of oil. The percentage of crude oil reserves held by OPEC countries in 2021. As one area in which OPEC members have been able to cooperate productively over the decades, the organisation has significantly improved the quality and quantity of information available about the international oil market.

OPEC countries supply about two-fifths of the world’s oil consumption and possess about two-thirds of the world’s proven oil reserves. The result throughout the West was severe oil shortages and spiraling inflation (see oil crisis). As OPEC continued to raise prices through the rest of the decade (prices increased 10-fold from 1973 to 1980), its political and economic power grew. Flush with petrodollars, many OPEC members began large-scale domestic economic and social development programs and invested heavily overseas, particularly in the United States and Europe.

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There are several advantages of having a cartel like OPEC operating in the crude oil industry. First, it promotes cooperation among member nations, helping them alleviate some degree https://www.dowjonesrisk.com/ of political hostilities. And because the organization’s main goal is to stabilize oil production and prices, it is able to exert some influence over production from other nations.

This is especially helpful for a natural-resource industry whose smooth functioning requires months and years of careful planning. The OPEC Special Fund was conceived in Algiers, Algeria, in March 1975, and was formally established the following January. Current OPEC members are[ref] Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela. It rejoined in January 2016 but left after the OPEC conference in November 2016. The Oil and Energy Ministers from the OPEC members meet at least twice a year to coordinate their oil production policies. Each member country abides by an honor system in which everyone agrees to produce a certain amount.

OPEC also established an international fund to aid developing countries. Demand for oil dropped during the global crisis, which began in 2020. Producers had an overabundance in supply with no place to store it, as the world experienced lockdowns cutting down demand. This, along with a price war between Russia and Saudi Arabia, led to a drop in oil prices.

For countries that export petroleum at relatively low volume, their limited negotiating power as OPEC members would not necessarily justify the burdens imposed by OPEC production quotas and membership costs. Ecuador suspended its OPEC membership from 1992 until 2007 and then withdrew in 2020. Indonesia suspended its membership beginning in 2009 and briefly rejoined in 2016 before suspending its membership again that year. Qatar, during a prolonged blockade implemented by other OPEC countries, terminated its membership in January 2019 to focus on natural gas production.

Approval of a new member country requires agreement by three-quarters of OPEC’s existing members, including all five of the founders.[10] In October 2015, Sudan formally submitted an application to join,[165] but it is not yet a member. On July 1, 2019, members agreed to maintain the cuts until the first quarter of 2020. The chief executive officer (CEO) of OPEC is its secretary-general. His Excellency Mohammad Sanusi Barkindo of Nigeria was appointed to the position for a three-year term of office on June 2, 2016, and was re-elected to another three-year term in July 2019.