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OPEK

OPEC was formed in 1960 by five oil producing countries - Iran, Iraq, Kuwait, Saudi Arabia and Venezuela - to coordinate oil policies and secure fair prices for oil producers. It established its headquarters in Geneva before moving to Vienna in 1965. OPEC's objective is to secure fair prices for oil producers, stable supply to consumers, and fair returns for oil companies. Membership has grown over time with new members joining and some suspending membership at different points. OPEC's influence has fluctuated over the decades as oil prices rose and fell in response to global events, market forces, and economic conditions.

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65 views2 pages

OPEK

OPEC was formed in 1960 by five oil producing countries - Iran, Iraq, Kuwait, Saudi Arabia and Venezuela - to coordinate oil policies and secure fair prices for oil producers. It established its headquarters in Geneva before moving to Vienna in 1965. OPEC's objective is to secure fair prices for oil producers, stable supply to consumers, and fair returns for oil companies. Membership has grown over time with new members joining and some suspending membership at different points. OPEC's influence has fluctuated over the decades as oil prices rose and fell in response to global events, market forces, and economic conditions.

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zoka_o831976
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Brief History

The Organization of the Petroleum Exporting Countries (OPEC) is a permanent,


intergovernmental Organization, created at the Baghdad Conference on September 10–14,
1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were
later joined by nine other Members: Qatar (1961); Indonesia (1962) – suspended its
membership from January 2009; Socialist Peoples Libyan Arab Jamahiriya (1962); United
Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its
membership from December 1992-October 2007; Angola (2007) and Gabon (1975–1994).
OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence.
This was moved to Vienna, Austria, on September 1, 1965.

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.

The 1960s

OPEC’s formation by five oil-producing developing countries in Baghdad in September 1960


occurred at a time of transition in the international economic and political landscape, with
extensive decolonisation and the birth of many new independent states in the developing
world. The international oil market was dominated by the “Seven Sisters” multinational
companies and was largely separate from that of the former Soviet Union (FSU) and other
centrally planned economies (CPEs). OPEC developed its collective vision, set up its
objectives and established its Secretariat, first in Geneva and then, in 1965, in Vienna. It
adopted a ‘Declaratory Statement of Petroleum Policy in Member Countries’ in 1968, which
emphasised the inalienable right of all countries to exercise permanent sovereignty over their
natural resources in the interest of their national development. Membership grew to ten by
1969.

The 1970s

OPEC rose to international prominence during this decade, as its Member Countries took
control of their domestic petroleum industries and acquired a major say in the pricing of
crude oil on world markets. On two occasions, oil prices rose steeply in a volatile market,
triggered by the Arab oil embargo in 1973 and the outbreak of the Iranian Revolution in
1979. OPEC broadened its mandate with the first Summit of Heads of State and Government
in Algiers in 1975, which addressed the plight of the poorer nations and called for a new era
of cooperation in international relations, in the interests of world economic development and
stability. This led to the establishment of the OPEC Fund for International Development in
1976. Member Countries embarked on ambitious socio-economic development schemes.
Membership grew to 13 by 1975.

The 1980s

After reaching record levels early in the decade, prices began to weaken, before crashing in
1986, responding to a big oil glut and consumer shift away from this hydrocarbon. OPEC’s
share of the smaller oil market fell heavily and its total petroleum revenue dropped below a
third of earlier peaks, causing severe economic hardship for many Member Countries. Prices
rallied in the final part of the decade, but to around half the levels of the early part, and
OPEC’s share of newly growing world output began to recover. This was supported by
OPEC introducing a group production ceiling divided among Member Countries and a
Reference Basket for pricing, as well as significant progress with OPEC/non-OPEC dialogue
and cooperation, seen as essential for market stability and reasonable prices. Environmental
issues emerged on the international energy agenda.

The 1990s

Prices moved less dramatically than in the 1970s and 1980s, and timely OPEC action reduced
the market impact of Middle East hostilities in 1990–91. But excessive volatility and general
price weakness dominated the decade, and the South-East Asian economic downturn and
mild Northern Hemisphere winter of 1998–99 saw prices back at 1986 levels. However, a
solid recovery followed in a more integrated oil market, which was adjusting to the post-
Soviet world, greater regionalism, globalisation, the communications revolution and other
high-tech trends. Breakthroughs in producer-consumer dialogue matched continued advances
in OPEC/non-OPEC relations. As the United Nations-sponsored climate change negotiations
gathered momentum, after the Earth Summit of 1992, OPEC sought fairness, balance and
realism in the treatment of oil supply. One country left OPEC, while another suspended its
Membership.

The 2000s

An innovative OPEC oil price band mechanism helped strengthen and stabilise crude prices
in the early years of the decade. But a combination of market forces, speculation and other
factors transformed the situation in 2004, pushing up prices and increasing volatility in a
well-supplied crude market. Oil was used increasingly as an asset class. Prices soared to
record levels in mid-2008, before collapsing in the emerging global financial turmoil and
economic recession. OPEC became prominent in supporting the oil sector, as part of global
efforts to address the economic crisis. OPEC’s second and third summits in Caracas and
Riyadh in 2000 and 2007 established stable energy markets, sustainable development and the
environment as three guiding themes, and it adopted a comprehensive long-term strategy in
2005. One country joined OPEC, another reactivated its Membership and a third suspended
it.

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