With such differing opinions about this organization and its influence floating around media outlets, it’s in your best interest to be informed about exactly what OPEC is and what purpose it serves.
OPEC is a permanent, intergovernmental organization that dates back to 1960. Today, OPEC consists of 13 nations: Algeria, Angola, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. OPEC states its mission is “to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.”
Overall, OPEC member countries’ production accounts for around 40 percent of the entire world’s crude oil as well as around 60 percent of internationally traded petroleum. With such great influence in the global market, OPEC tends to largely affect oil prices, which often causes some outsiders to feel uneasy.
Although OPEC aims to manage oil production of its member countries by setting production targets for them, unexpected outages or OPEC member countries simply not complying with their targets can heavily influence oil prices as well. While OPEC does have a decent amount of control over international oil prices, there are many other factors that contribute to these numbers.
In particular, Saudi Arabia has a lot of individual influence over oil prices. Ranking as not only OPEC’s largest producer of oil, but also as the world’s largest exporter of petroleum, Saudi Arabia’s great influence in the market comes as no surprise at all. When looking at Saudi Arabia’s great influence, it is important to remember that although OPEC member countries have set production targets, they do not always abide by them. These changes to production targets by individual countries affect oil prices in the market.
Here at Think Energy, we believe in keeping our customers educated about energy news and that starts with learning the basics of topics such as OPEC. Knowing OPEC’s purpose and what factors affect its influence on the oil market allows you to form your own opinions about OPEC topics circulating in the news.