OPEC & its influence

on Price of Oil
OPEC
Prepared by
Lulav saeed
Suma Khalid

S u p e r v i s e d b y / M i s s . L u l a v M u fi t y
 Introduction
• Organization of Petroleum Exporting Countries or OPEC
has the largest oil reserves in the world and is
responsible for the supply and prices of petroleum
products to major extent. This interesting report
explores more about the functioning of OPEC and on
how it influences the price of Crude Oil globally.

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 Why OPEC ?
• Stable oil market, with reasonable prices and
steady supplies to consumers : OPEC was
made to make sure that the price of the oil in
the world market will be properly controlled.
There main goal is to prevent harmful
increase in price of oil in global market and
make sure that nations that produce oil have
a fair profit.

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ESTABLISHMENT
• Permanent and intergovernmental organization. Founded on
September 10-14, 1960. Founding members- Iran, Iraq, Kuwait,
Saudi Arabia and Venezuela. A collective act of sovereignty by
oil exporting nations, a tuming point in state control over
natural resources. OPEC's headquarters, first located in Geneva,
was moved to Vienna in 1965.

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 Objectives
O b j e c ti v e s o f O P E C

A. To coordinate & unify the petroleum policies of the member countries and to
determine the best means for safeguarding their individual and collective
interests.
B. To seek ways and means of ensuring the stabilization of prices in international
oil markets, with a view to eliminating harmful and unnecessary fluctuation;
and
C. To provide an efficient, economic and regular supply of petroleum to
consuming nations and a fair return on capital to those investing in the
petroleum industry.

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OPEC

OPEC
Short History
• OPEC was founded in Baghdad, triggered
by a 1960 law instituted by American
President Dwight Eisenhower that
forced quotas on Venezuelan and
Persian Gulf oil imports in favor of the
Canadian and Mexican oil industries.
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• Thus the Organization of the Petroleum
Exporting Countries (OPEC) was formed
and now it is a cartel of twelve
developing countries. OPEC has
maintained its headquarters in Vienna
since 1965 and hosts regular meetings
among the oil ministers of its Member
Countries.
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 OPEC Growth FR

• • In the 1980s, the price of oil was

• • In the 1970s, OPEC began to gain allowed to rise before the adverse
influence steeply raised oil prices effects of higher prices caused demand
during the 1973 oil crisis in response to and price to fall.
US aid to Israel during the War.

• In the 2000s, a combination of factors

pushed up oil prices even as supply
remained high. Prices rose to then record-
high levels in mid-2008 before falling in the
2007 to response financial crisis.

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OPEC Click icon to add picture

• OPEC spare capacity "provides an

indicator of the world oil market's
ability to respond to potential crises
that reduce oil supplies." Saudi Arabia
is the largest oil exporter in the world
and largest oil producer of the OPEC
nations. It has the greatest spare
capacity at about 1.5 million barrels per
day to 2 million barrels per day.

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The Statute further
distinguishes between
three categories of
membership:
• Founder
FullMembers
Members ofare the
theFounder
Organization are those
Members, plus countries
those which were
countries
• Associate
represented Members
at OPEC's are the countries
first Conference, which
held in do notIraq,
Baghdad, qualify for
in September
whose
full applications
membership, butfor Membership
which are have been
nevertheless accepted
admitted by such
under the
1960, and which
Conferencesigned the original establishing OPEC. agreement
special conditions as may be prescribed by the Conference .

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Does OPEC control
the Oil Prices?
• Yes-, OPEC's crude oil exports represent about 60 per cent of the crude oil
traded internationally .
• No-OPEC Member Countries produce about 42 per cent of the world's crude oil
and 18 per cent of its natural gas.
• The price of crude oil is set by movements on the three major international
petroleum exchanges:

I. The New York Mercantile Exchange.

II. The International Petroleum Exchange in London.
III. The Singapore International Monetary Exchange.
• OPEC is trying to price the OIL in Euros rather then in Dollars- As the imports from Europe for OPEC
Add a countries
footer is increasing and the US dollar is becoming unstable in the market. 12
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Current Members

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Advantages & disadvantages

 Advantages
• Economic:
• Oil supply and prices (to lesser
extent) control
• Enables economic growth
• Ensures market stability
Disadvantages
• Political:
• Inner disagreements
• Interdependence with Asia (e.g. China) and
Western countries (US, EU)

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Summery
Prices are fore-casted to rise due to global economic recovery (leading to
increased oil demand), and slower growth in non-OPEC oil supply and continuous
production restraint by members of OPEC. Despite environmental concerns and
various conservation policies, the energy demand is bound to grow due to
economic growth, expanding population and higher standards of living. Energy
growth can be expected to grow by more than 40% by 2030. Fossil fuels, oil and
natural gas will continue to meet most of the world’s energy needs and thus OPEC
having the maximum oil reserves will remain the leading player in the world oil
scenario. Meeting the demand of oil consumers, being mindful of the major
global climate change challenges, as well as oil capacity investment needs, are
likely to be the predominant issues facing this large organization going forward.

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 Thank You.

FR
https://
www.greatlakes.edu.in/gurgaon/sites/default/files/OP
EC&its_Influence_on_the_Price_of_Oil_Ajit_Basil.pdf
FABRIKAM RESIDENCES
https://www.slideshare.net/mobile/ClintonMusha
hary/opec-organization-of-petroleum-exporting-
countries-76228669

https://www.slideshare.net/mobile/asitdholakia/opec-n
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