OPEC Oil Economic Development and Research Paper

Submitted By mctill
Words: 6595
Pages: 27

The Organization of Petroleum Exporting Countries (OPEC) was crafted in 1960 ideally to unify and protect the securities of petroleum-producing countries. It is essentially an oil cartel whose operations affected the world and the oil industry to this day. OPEC's objective is to co-ordinate and unifies petroleum policies among Member Countries such as Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Indonesia, Libya, The United Arab Emirates, Algeria, and Nigeria. Rauscher 14) they were created to assure reasonable and stable amounts for petroleum producers; thus an efficient, economic and systematic source of petroleum to specific consumerist nation-states. Members of OPEC have stated the formation of a “Very Exclusive club” (Seven 4). The members of OPEC to this day resource and supply amounts of the worlds oil as large as 40% and occupy 78% of the worlds oil reserves. (Sampson 173) I am going to discuss the global ripple effect that OPEC had not only in fuel but also the production of the world.

To this day we question the ethical and social responsibility of oil companies as their determination for success can result in global catastrophes. Oil companies also supply the fuel on which the world runs, that’s keeps homes warm and industry running in point of fact oil underpins the entire worlds prosperity. Control as seen with OPEC illustrates the impacts of organizational success in which I am going to discuss further. The word “Oil” sounds so minimalistic in language yet deems global responsibility as bloodshed, massacre and war have occurred due to a liquid that is less dense then water. It has also designed societies into poverty and desolation all because of capitalist industrial empires lust for wealth and power. One of OPECs objectives were to gradually reduce the influence of oil companies, their primary function was the proliferation of revenues. Initially, their impact globally was minimally invasive until the Yom Kippur war in the early 70s regarding Arab states and Israel. This occurred due to OPECs stance regarding Israeli supported states; they charged certain states that supported Israel. As oil has a huge geographical spread there are deeming political consequences as to the production of such a simple commodity. As OPEC gained control their ability to uniquely influence the market allowed them to master half of the worlds trade.

Prior to the creation of OPEC the member countries involved with OPEC originally had three main objectives.
These were: - “1. An increase in the revenue per barrel that would accrue to the member country or at least the arrest of decline in such revenue”.
“2. Equality of treatment by multinational oil companies of member governments.”
“3 Expansion of the level of output” (Alnasrawi 3).
Before the implementation of OPEC there was little to no legal strategy regarding the buying and selling of oil internationally. There were no implications or punishments for countries that exploited or exacerbated the production of oil. These goals were predetermined based on global oil situations and therefore the monitoring of the system would be better enforced. These goals allowed companies and governments to create their own boundaries and limitations for trade and consumption and through this price fluctuations occurred more frequently. Eventually governments found themselves going head to head with companies as their ability to control the demand for oil was becoming overwhelming. Companies then began to alter prices without consultations of governments leading to unavoidable pricing issues and export limitations. Over the course of two decades OPECs ability to control the markets had grew profoundly, as OPEC didn’t use the tool of negotiation their capabilities to pursue their role as leader became more apparent in the global market. By the 1970’s the control over oil output was candidly in the hands of the oil companies. Post set up of the new Geneva based organisation Fuad…