It responded to a sudden drop in the U.S. dollar’s value after President Nixon abandoned the gold standard. 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. 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.
If Riyadh continues to pursue a more assertive foreign policy, it could be a challenge for the cartel to remain cohesive. For OPEC and its newfound partner Russia, this possibility, combined with the rise of shale oil, increasing U.S. energy independence, and global efforts to fight climate change, portend a prolonged period of uncertainty. Squabbles among OPEC members have occasionally metastasized into conflicts. For example, Iran and Iraq waged an eight-year-long war that led to hundreds of thousands of deaths.
- The Organization of the Petroleum Exporting Countries (OPEC) is a bloc of thirteen oil-rich member states spanning the Middle East, Africa, and South America.
- The invasion removed four million barrels of oil from the world market and caused prices to jump.
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- 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.
- Changes in U.S. production levels are the result of dozens of private energy companies’ independent decisions, and it can take months before consumers feel any adjustments.
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. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance.
OPEC Member Countries
Longer term, the advent of electric vehicles that run on renewable energy resources represents an existential threat to OPEC. Jaffe and Morse write that rising fossil fuel costs coupled with government subsidies for renewables have spurred investments in the sector. In the United States, Biden has called for massive investments in clean energy production. beaxy exchange review And as climate change concerns take center stage in the coming years, OPEC could take a hit. Others were spurred by differences in opinion over strategy and target prices for the cartel. OPEC, multinational organization that was established to coordinate the petroleum policies of its members and to provide member states with technical and economic aid.
Crude oil benchmarks
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. This website is using a security service to protect itself from online attacks. The action you just performed fx choice review triggered the security solution. 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.
1960: anger from exporting countries
As a cartel, OPEC members have a strong incentive to keep oil prices as high as possible while maintaining their shares of the global market. OPEC was established in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela; its membership has expanded and contracted over the years. OPEC’s founding members power trend not only set out to negotiate higher global posted prices for oil but also pursued greater control over their own resources through the nationalization of international oil company concessions. Indeed, friction between Russia and Saudi Arabia came to a head at the onset of the pandemic in 2020.
Together, OPEC+ nations boast 90% of the world’s oil reserves. Many Republican lawmakers, and some Democrats, have therefore called for the United States to ramp up drilling. Still, analysts say that U.S. shale production, which collapsed during the pandemic-induced price slump, will take months to significantly increase. Biden has reportedly been mulling a visit to Saudi Arabia, and in March, senior U.S. officials made their first trip to Venezuela since Washington cut diplomatic ties with Caracas in 2019. The shale revolution appears to have taken the group by surprise.
OPEC waited to cut oil production because it didn’t want to see its market share drop further. The cartel toughed it out until many of the shale companies went bankrupt. On November 30, 2017, OPEC agreed to continue withholding 2% of global oil supply. That continued the policy OPEC formed on November 30, 2016, when it agreed to cut production by 1.2 million barrels per day (mbpd).
The Board of Governors, which is responsible for managing the organization, convening the Conference, and drawing up the annual budget, contains representatives appointed by each member country; its chair is elected to a one-year term by the Conference. OPEC also possesses a Secretariat, headed by a secretary-general appointed by the Conference for a three-year term; the Secretariat includes research and energy-studies divisions. 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.