what does the acronym opec stand for?: OPEC Organizations

But these two Iraqi wars against fellow OPEC founders marked a low point in the cohesion of the organization, and oil prices subsided quickly after the short-term supply disruptions. The September 2001 Al Qaeda attacks on the US and the March 2003 US invasion of Iraq had even milder short-term impacts on oil prices, as Saudi Arabia and other exporters again cooperated to keep the world adequately supplied. Faced with increasing economic hardship , the “free-riding” oil exporters that had previously failed to comply with OPEC agreements finally began to limit production to shore up prices, based on painstakingly negotiated national quotas that sought to balance oil-related and economic criteria since 1986. (Within their sovereign-controlled territories, the national governments of OPEC members are able to impose production limits on both government-owned and private oil companies.) Generally when OPEC production targets are reduced, oil prices increase. The OPEC Conference is the supreme authority of the organization, and consists of delegations normally headed by the oil ministers of member countries. The conference ordinarily meets at the Vienna headquarters, at least twice a year and in additional extraordinary sessions when necessary.

• The organizational logic that underpins OPEC is that it is in the collective interest of its members to limit the world oil supply in order to reap higher prices.
• In October 2022, key OPEC+ ministers agreed to oil production cuts of 2 million barrels per day, the first production cut since 2020.
• As more restrictions are lifted throughout the US, people are returning to normal, including the amount of time they travel.
• The result throughout the West was severe oil shortages and spiraling inflation .
• 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.
• This loose grouping of countries, known as OPEC+, includes Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.

As OPEC members grew weary of a multi-year supply-contest with diminishing returns and shrinking financial reserves, the organization finally attempted its first production cut since 2008. Despite many political obstacles, a September 2016 decision to trim approximately 1 million barrels per day was codified by a new quota-agreement at the November 2016 OPEC conference. Indonesia announced another “temporary suspension” of its OPEC membership rather than accepting the organization’s requested 5-percent production-cut. Prices fluctuated around US$50/bbl, and in May 2017 OPEC decided to extend the new quotas through March 2018, with the world waiting to see if and how the oil-inventory glut might be fully siphoned-off by then. Longtime oil analyst Daniel Yergin “described the relationship between OPEC and shale as ‘mutual coexistence’, with both sides learning to live with prices that are lower than they would like.” These production cut deals with non-OPEC countries are generally referred to as OPEC+.

History and impact

These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. This means that the country has control over its own production and supply without any interference from the organization.

With only 10 hostages remaining, Carlos held a phone conversation with Algerian president Houari Boumédiène, who informed Carlos that the oil ministers’ deaths would result in an attack on the plane. Boumédienne must also have offered Carlos asylum at this time and possibly financial compensation for failing to complete his assignment. Carlos expressed his regret at not being able to murder Yamani and Amuzegar, then he and his comrades left the plane. All the hostages and terrorists walked away from the situation, two days after it began. Political scientist Jeff Colgan has argued that OPEC has since the 1980s largely failed to achieve its goals (limits on world oil supply, stabilized prices, and raising of long-term average revenues). To the extent that member states comply with their commitments, it is because the commitments reflect what they would do even if OPEC did not exist.

He was finally captured in 1994 and is serving life sentences for at least 16 other murders. A newspaper headline in the foreground shows a story regarding a lack of heating oil in the community. OPEC has not been involved in any disputes related to the competition rules of the World Trade Organization, even though the objectives, actions, and principles of the two organizations diverge considerably. A key US District Court decision held that OPEC consultations are https://forexbitcoin.info/ protected as “governmental” acts of state by the Foreign Sovereign Immunities Act, and are therefore beyond the legal reach of US competition law governing “commercial” acts. Despite popular sentiment against OPEC, legislative proposals to limit the organization’s sovereign immunity, such as the NOPEC Act, have so far been unsuccessful. As more restrictions are lifted throughout the US, people are returning to normal, including the amount of time they travel.

More from Merriam-Webster on OPEC

Since the 1980s, OPEC has had a limited impact on world oil supply and price stability, as there is frequent cheating by members on their commitments to one another, and as member commitments reflect what they would do even in the absence of OPEC. The organization is committed to finding ways to ensure that oil prices are stabilized in the international market without any major fluctuations. Doing this helps keep the interests of member nations while ensuring they receive a regular stream of income from an uninterrupted supply of crude oil to other countries. Lower demand triggered by the 1997–1998 Asian financial crisis saw the price of oil fall back to 1986 levels. After oil slumped to around US$10/bbl, joint diplomacy achieved a gradual slowing of oil production by OPEC, Mexico and Norway.

At the same time, US oil production nearly doubled from 2008 levels and approached the world-leading “swing producer” volumes of Saudi Arabia and Russia, due to the substantial long-term improvement and spread of shale “fracking” technology in response to the years of record oil prices. These developments led in turn to a plunge in US oil import requirements , why the biggest bitcoin mines are in china a record volume of worldwide oil inventories, and a collapse in oil prices that continued into early 2016. Leading up to his August 1990 Invasion of Kuwait, Iraqi President Saddam Hussein was pushing OPEC to end overproduction and to send oil prices higher, in order to help OPEC members financially and to accelerate rebuilding from the 1980–1988 Iran–Iraq War.

The effect can be particularly strong when wars or civil disorders lead to extended interruptions in supply. In the 1970s, restrictions in oil production led to a dramatic rise in oil prices and in the revenue and wealth of OPEC, with long-lasting and far-reaching consequences for the global economy. In the 1980s, OPEC began setting production targets for its member nations; generally, when the targets are reduced, oil prices increase. This has occurred most recently from the organization’s 2008 and 2016 decisions to trim oversupply.

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Saudi Arabia, which has the second largest reserves and a relatively small (but fast-growing) population, has traditionally played a dominant role in determining overall production and prices. Venezuela, on the other hand, has the largest reserves but produces only a fraction of what Saudi Arabia produces. In July 2021, OPEC+ member United Arab Emirates rejected a Saudi proposed eight-month extension to oil output curbs which was in place due to COVID-19 and lower oil consumption. The previous year, OPEC+ cut the equivalent of about 10% of demand at the time. The UAE asked for the maximum amount of oil the group would recognize the country of producing to be raised to 3.8 million barrels a day compared to its previous 3.2 million barrels. A compromise deal allowed UAE to increase its maximum oil output to 3.65 million barrels a day.

In August 1960, ignoring the warnings, and with the US favoring Canadian and Mexican oil for strategic reasons, the MOCs again unilaterally announced significant cuts in their posted prices for Middle Eastern crude oil. Oil prices, which collapsed at the end of the decade, began to increase again in the early 21st century, owing to greater unity among OPEC members and better cooperation with nonmembers , increased tensions in the Middle East, and a political crisis in Venezuela. Having reached record levels by 2008, prices collapsed again amid the global financial crisis and the Great Recession. Meanwhile, international efforts to reduce the burning of fossil fuels (which has contributed significantly to global warming; see greenhouse effect) made it likely that the world demand for oil would inevitably decline. The power of OPEC has waxed and waned since its creation in 1960 and is likely to continue to do so for as long as oil remains a viable energy resource. In April 2020, OPEC and a group of other oil producers, including Russia, agreed to extend production cuts until the end of July.

Saudi-Russian price war

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. Those who argue that OPEC is not a cartel emphasize the sovereignty of each member country, the inherent problems of coordinating price and production policies, and the tendency of countries to renege on prior agreements at ministerial meetings. Those who claim that OPEC is a cartel argue that production costs in the Persian Gulf are generally less than 10 percent of the price charged and that prices would decline toward those costs in the absence of coordination by OPEC. In a series of steps in the 1960s and 1970s, OPEC restructured the global system of oil production in favor of oil-producing states and away from an oligopoly of dominant Anglo-American oil firms . Coordination among oil-producing states within OPEC made it easier for them to nationalize oil production and structure oil prices in their favor without incurring punishment by Western governments and firms.

The 50/50 agreements were still in place until 1970 when Libya negotiated a 58/42 agreement with the oil company Occidental, which prompted other OPEC members to request better agreements with oil companies. In 1971, an accord was signed between major oil companies and members of OPEC doing business in the Mediterranean Sea region, called the Tripoli Agreement. The agreement, signed on 2 April 1971, raised oil prices and increased producing countries’ profit shares. Economists have characterized OPEC as a textbook example of a cartel that cooperates to reduce market competition, but one whose consultations are protected by the doctrine of state immunity under international law. In the 1960s and 1970s, OPEC successfully restructured the global oil production system so that decision-making authority and the vast majority of profits is in the hands of oil-producing countries.

In the years after 1973, as an example of so-called “checkbook diplomacy”, certain Arab nations have been among the world’s largest providers of foreign aid, and OPEC added to its goals the selling of oil for the socio-economic growth of poorer nations. The OPEC Special Fund was conceived in Algiers, Algeria, in March 1975, and was formally established the following January. Current OPEC members are Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela.

oil production cut

Persian Gulf War (1990–91)—which resulted from the invasion of one OPEC member by another —when the kingdom agreed to increase production to stabilize prices and minimize any disruption in the international oil market. They launched the Joint Oil Data Exercise, which in 2005 was joined by IEF and renamed the Joint Organisations Data Initiative , covering more than 90% of the global oil market. GECF joined as an eighth partner in 2014, enabling JODI also to cover nearly 90% of the global market for natural gas. High oil prices are causing some oil-importing countries to look to unconventional—and cleaner—sources of energy. These alternatives, such as shale production as an alternative energy source, and hybrid and electric cars that reduce the dependence on petroleum products, continue to put pressure on the organization. The intergovernmental organization stabilizes the oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers.

The US was simultaneously the world’s largest producer and consumer of oil; and the world market was dominated by a group of multinational companies known as the “Seven Sisters”, five of which were headquartered in the US following the breakup of John D. Rockefeller’s original Standard Oil monopoly. Oil-exporting countries were eventually motivated to form OPEC as a counterweight to this concentration of political and economic power. In 1949, Venezuela and Iran took the first steps towards creating OPEC by inviting Iraq, Kuwait and Saudi Arabia to improve communications among petroleum-exporting nations as the globe recovered from WWII. At the time the global market was dominated by a group of multinational companies known as the ‘Seven Sisters’ – five of which were headquartered in the US following the break up of Rockefeller’s original Standard Oil monopoly. Oil-exporting countries were eventually prompted into establishing OPEC in order to counter this concentration of political and economic power held by the ‘Seven Sisters’.

Some time after the attack, Carlos’s accomplices revealed that the operation was commanded by Wadie Haddad, a founder of the Popular Front for the Liberation of Palestine. They also claimed that the idea and funding came from an Arab president, widely thought to be Muammar Gaddafi of Libya, itself an OPEC member. Fellow militants Bassam Abu Sharif and Klein claimed that Carlos received and kept a ransom between 20 million and US$50 million from “an Arab president”. Carlos claimed that Saudi Arabia paid ransom on behalf of Iran, but that the money was “diverted en route and lost by the Revolution”.

A larger group called OPEC+ was formed in late 2016 to have more control on the global crude oil market. 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. While OPEC does ensure that there is a steady supply of oil in the global market, it has come under fire for holding considerable power in the industry, which allows it to keep prices as high as possible. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.

Indicating that OPEC is not averse to further expansion, Mohammed Barkindo, OPEC’s acting secretary general in 2006, urged his African neighbors Angola and Sudan to join, and Angola did in 2007, followed by Equatorial Guinea in 2017. Since the 1980s, representatives from Egypt, Mexico, Norway, Oman, Russia, and other oil-exporting nations have attended many OPEC meetings as observers, as an informal mechanism for coordinating policies. The term Organization of the Petroleum Exporting Countries refers to a group of 13 of the world’s major oil-exporting nations. OPEC was founded in 1960 to coordinate the petroleum policies of its members and to provide member states with technical and economic aid. Qatar left OPEC on 1 January 2019, after joining the organization in 1961, to focus on natural gas production, of which it is the world’s largest exporter in the form of liquified natural gas . In May 2008, Indonesia announced that it would leave OPEC when its membership expired at the end of that year, having become a net importer of oil and being unable to meet its production quota.

2003: ample supply and modest disruptions

Estimates, released in September 2018, claim that 44% of global oil production and 81.5% of the world’s ‘proven’ oil reserves are accounted for by OPEC. Although oil-importing countries reacted slowly to the price increases, eventually they reduced their overall energy consumption, found other sources of oil (e.g., in Norway, the United Kingdom, and Mexico), and developed alternative sources of energy, such as coal, natural gas, and nuclear power. In response, OPEC members—particularly Saudi Arabia and Kuwait—reduced their production levels in the early 1980s in what proved to be a futile effort to defend their posted prices. OPEC members coordinate policies on oil prices, production, and related matters at semiannual and special meetings of the OPEC Conference.