The Organization of the Petroleum Exporting Countries Essay Example for Free

The Organization of the Petroleum Exporting Countries Es dictateThe Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on family 1014, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five establishment Members were later joined by nine other Members Qatar (1961) Indonesia (1962) susp deceaseed its social status from January 2009 Libya (1962) fall in Arab Emirates (1967) Algeria (1969) Nigeria (1971) Ecuador (1973) suspended its membership from December 1992-October 2007 Angola (2007) and Gabon (19751994). OPEC had its headquarters in Geneva, Switzerland, in the get-go five years of its existence. This was go to Vienna, Austria, on September 1, 1965. OPECs objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and lasting prices for petroleum producers an efficient, frugal and regular issue of petroleum to consuming nation s and a fair return on capital to those investing in the industry.The 1960sOPECs formation by five crude color-producing developing countries in Baghdad in September 1960 occurred at a time of transition in the world-wide frugal and political landscape, with extensive decolonisation and the birth of many crude independent states in the developing world. The international anoint securities industry was dominated by the Seven Sisters multinational companies and was largely separate from that of the former Soviet Union (FSU) and other centrally planned economies (CPEs). OPEC developed its collective vision, set up its objectives and established its Secretariat, first in Geneva and therefore, in 1965, in Vienna. It adopted a Declaratory Statement of Petroleum form _or_ system of government in Member Countries in 1968, which emphasised the inalienable right of all countries to exercise permanent reign over their natural resources in the interest of their national study. Members hip grew to ten by 1969.The 1970sOPEC rosiness to international prominence during this decade, as its Member Countries alikek control of their domestic petroleum industries and acquired a major say in the pricing of pure(a) cover on world marts. On two occasions, oil prices go up steeply in a volatile market, triggered by the Arab oil embargo in 1973 and the outbreak of the Persian Revolution in 1979. OPEC broadened its mandate with the first Summit of Heads of State and Government in Algiers in 1975, which turn to the plight of the poorer nations and called for a new era of cooperation in international relations, in the interests of world economic increase and stability. This led to the establishment of the OPEC Fund for International Development in 1976. Member Countries embarked on ambitious socio-economic development schemes. Membership grew to 13 by 1975.The 1980sAfter reaching record levels early in the decade, prices began to weaken, to begin with crashing in 1986, r esponding to a big oil glut and consumer shift onward from this hydrocarbon. OPECs share of the little oil market fell heavily and its total petroleum revenue dropped be crushed a trine of earlier peaks, causing severe economic hardship for many Member Countries. Prices rallied in the final differentiate of the decade, scarcely to slightly half the levels of the early part, and OPECs share of newly growing world payoff began to recover. This was supported by OPEC introducing a group end product ceiling divided among Member Countries and a name and address Basket for pricing, as well as significant progress with OPEC/non-OPEC dialogue and cooperation, seen as essential for market stability and reasonable prices. Environmental issues emerged on the international energy agenda.The 1990sPrices moved less dramatically than in the 1970s and 1980s, and timely OPEC action reduced the market impact of Middle East hostilities in 199091. But excessive capriciousness and general price weakness dominated the decade, and the South-East Asian economic downturn and mild Northern Hemisphere winter of 199899 saw prices back at 1986 levels. However, a solid recovery followed in a more integrated oil market, which was ad hardlying to the post-Soviet world, greater regionalism, globularisation, the communications variety and other high-tech trends. Breakthroughs in producer-consumer dialogue matched continued advances in OPEC/non-OPEC relations. As the united Nations-sponsored climate form negotiations gathered momentum, later the Earth Summit of 1992, OPEC sought fairness, balance and realism in the treatment of oil fork out. One pastoral left wing OPEC, piece of music another suspended its Membership.The 2000sAn innovative OPEC oil price roofy mechanism helped strengthen and stabilise crude prices in the early years of the decade. But a gang of market forces, speculation and other factors transformed the situation in 2004, pushing up prices and increasing vo latility in a well-supplied crude market. Oil was used increasingly as an asset class. Prices soared to record levels in mid-2008, in the beginning collapsing in the emerging global pecuniary turmoil and economic recession. OPEC became prominent in financial support the oil sector, as part of global efforts to address the economic crisis. OPECs second and third summits in Caracas and Riyadh in 2000 and 2007 established stable energy markets, sustainable development and the environment as three guiding themes, and it adopted a comprehensive long-term strategy in 2005. One country joined OPEC, another reactivated its Membership and a third suspended it.Venezuela and Iran were the first countries to move towards the establishment of OPEC in the 1960s by approaching Iraq, Kuwait and Saudi Arabia in 1949, suggesting that they exchange views and explore avenues for regular and close-set(prenominal) communication among petroleum-producing nations.citation needed The founding members are Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Later members include Algeria, Angola, Ecuador, Gabon, Indonesia, Libya, Qatar, Nigeria, and the United Arab Emirates.In 1014 September 1960, at the initiative of the Venezuelan brawniness and Mines attend Juan Pablo Perez Alfonso and the Saudi Arabian Energy and Mines minister Abdullah al-Tariki, the governments of Iraq, Iran, Kuwait, Saudi Arabia and Venezuela met in Baghdad to discuss ways to increase the price of the crude oil produced by their respective countries.citation needed67Oil exports imports differenceOPEC was founded to unify and coordinate members petroleum policies. Between 1960 and 1975, the organization expanded to include Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), and Nigeria (1971). Ecuador and Gabon were early members of OPEC, but Ecuador withdrew on December 31, 19928 because it was unwilling or unable to pay a $2 million membership fee and felt that it need ed to produce more oil than it was allowed to under the OPEC quota,9 although it rejoined in October 2007. Similar solicitudes prompted Gabon to suspend membership in January 1995.10 Angola joined on the first day of 2007. Norway and Russia have be OPEC toyings as observers. Indicating that OPEC is not averse to further expansion, Mohammed Barkindo, OPECs Secretary General, recently asked Sudan to join.11 Iraq remains a member of OPEC, but Iraki fruit has not been a part of any OPEC quota agreements since March 1998.In May 2008, Indonesia denote that it would leave OPEC when its membership expired at the end of that year, having become a net importer of oil and organism unable to meet its production quota.12 A statement released by OPEC on 10 September 2008 confirm Indonesias withdrawal, noting that it regretfully accepted the wish of Indonesia to suspend its full Membership in the Organization and recorded its commit that the Country would be in a position to rejoin the Orga nization in the not too distant future. 13 Indonesia is still exporting light, sweet crude oil and importing heavier, more sour crude oil to take advantage of price differentials (import is greater than export).1973 oil embargoeditMain article 1973 oil crisis In October 1973, OPEC stated an oil embargo in response to the United States and Western Europes support of Israel in the Yom Kippur War of 1973. The end point was a rise in oil prices from $3 per barrel to $12 and the commencement of muff rationing. some other factors in the rise in gasoline prices was the peak of oil production in the United States around 1970 and the devaluation of the U.S. dollar.14 U.S. gas stations put a limit on the amount of gasoline that could be dispensed, unkindly on Sundays, and limited the days gasoline could be purchased based on license plates. Even by and by the embargo concluded, prices continued to rise.15The Oil Embargo of 1973 had a lasting effect on the United States. U.S. citizens beg an acquire smaller cars that were more fuel efficient.citation needed The Federal government got involved first with President Richard Nixon recommending citizens reduce their repair for the sake of conservation, and later Congress issuing a 55 mph limit at the end of 1973. This change decreased consumptioncitation needed as well as crash fatalitiescitation needed. Daylight savings time was protracted year round to reduce electrical use in the American home. Nixon also formed the Energy Department as a cabinet office.citation needed People were asked to decrease their thermostats to 65 degrees and factories changed their main energy supply to coal.One of the most lasting effects of the 1973 oil embargo was a global economic recession. Unemployment ruddiness to the highest percentage on record while inflation also spiked. Consumer interest in large gas guzzling vehicles fell and production dropped. Although the embargo only lasted a year, during that time oil prices had quadruple d and OPEC nations discovered that their oil could be used as both a political and economic weapon against other nations1975 security incidenteditMain article OPEC siege This section needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (September 2011)On 21 December 1975, Ahmed Zaki Yamani and the other oil ministers of the members of OPEC were interpreted hostage by a six-person aggroup led by terrorist Carlos the Jackal (which included Gabriele Krocher-Tiedemann and Hans-Joachim Klein), in Vienna, Austria, where the ministers were care a meeting at the OPEC headquarters. Carlos planned to take over the conference by force and bunco all eleven oil ministers in attendance and hold them for ransom, with the exception of Ahmed Zaki Yamani and Irans Jamshid Amuzegar, who were to be executed.Carlos led his six-person team past two police officers in the buildings lobby a nd up to the first floor, where a police officer, an Iraqi plain clothes security guard and a young Libyan economist were shot dead.As Carlos entered the conference room and fired shots in the ceiling, the indicates ducked under the table. The terrorists searched for Ahmed Zaki Yamani and then divided the sixty-three hostages into groups. Delegates of friendly countries were moved toward the door, neutrals were placed in the centre of the room and the enemies were placed along the back wall, next to a chaw of explosives. This last group included those from Saudi Arabia, Iran, Qatar and the UAE. Carlos demanded a agglomerate to be provided to take his group and the hostages to the airport, where a DC-9 air insipid and crew would be waiting. In the meantime, Carlos briefed Yamani on his plan to eventually fly to Aden, where Yamani and Amuzegar would be killed.The bus was provided the following morning at 6.40 as requested and 42 hostages were boarded and taken to the airport. The g roup was airborne just afterward 9.00 and explosives placed under Yamanis seat. The plane first stopped in Algiers, where Carlos left the plane to meet with the Algierian Foreign minister. All 30 non-Arab hostages were released, excluding Amuzegar.The refueled plane left for Tripoli where there was trouble in acquiring another plane as had been planned. Carlos decided to instead return to Algiers and change to a Boeing 707, a plane large enough to fly to Baghdad nonstop. Ten more hostages were released before leaving.With only 10 hostages remaining, the Boeing 707 left for Algiers and arrived at 3.40 a.m. After leaving the plane to meet with the Algerians, Carlos talked with his colleagues in the face up cabin of the plane and then told Yamani and Amuzegar that they would be released at mid-day. Carlos was then called from the plane a second time and returned after two hours.At this second meeting it is believed that Carlos held a phone conversation with Algerian President Houari Boumedienne who informed Carlos that the oil ministers deaths would contribute in an attack on the plane. Yamanis biographycitation needed suggests that the Algerians had used a covert listening device on the front of the aircraft to overhear the earlier conversation between the terrorists, and found that Carlos had in fact still planned to mangle the two oil ministers. Boumedienne must also have offered Carlos asylum at this time and possibly financial compensation for failing to complete his assignment.On returning to the plane Carlos stood before Yamani and Amuzegar and expressed his regret at not being able to murder them. He then told the hostages that he and his comrades would leave the plane after which they would all be free. After waiting for the terrorists to leave, Yamani and the other nine hostages followed and were taken to the airport by Algerian Foreign Minister Abdelaziz Bouteflika. The terrorists were present in the next lounge and Khalid, the Palestinian, asked t o speak to Yamani. As his hand reached for his coat, Khalid was border by guards and a gun was found concealed in a holster.Some time after the attack it was revealed by Carlos accomplices that the operation was commanded by Wadi Haddad, a Palestinian terrorist and founder of the Popular Front for the inflammation of Palestine. It was also claimed that the idea and farm animaling came from an Arab president, widely thought to be Muammar al-Gaddafi.In the years following the OPEC raid, Bassam Abu Sharif and Klein claimed that Carlos had authentic a large sum of coin in exchange for the safe release of the Arab hostages and had kept it for his in-person use. There is still some uncertainty regarding the amount that changed hands but it is believed to be between US$20 million and US$50 million. The source of the money is also uncertain, but, according to Klein, it was from an Arab president. Carlos later told his lawyers that the money was paid by the Saudis on behalf of the Iran ians and was, diverted en route and lost by the Revolution.17The 1980s oil glutsOPEC net oil export revenues for 1971 2007.18In response to the high oil prices of the 1970s, industrial nations took step to reduce habituation on oil. Utilities switched to using coal, natural gas, or nuclear power while national governments initiated multi-billion dollar question programs to develop alternatives to oil. Demand for oil dropped by five million barrels a day while oil production outside of OPEC rose by fourteen million barrels daily by 1986. During this time, the percentage of oil produced by OPEC fell from 50% to 29%. The outlet was a six-year price crash that culminated with a 46 percent price drop in 1986.In order to combat go revenues, Saudi Arabia pushed for production quotas to limit production and boost prices. When other OPEC nations failed to comply, Saudi Arabia slashed production from 10 million barrels daily in 1980 to just one-quarter of that level in 1985. When this p roved ineffective, Saudi Arabia transposed course and flooded the market with cheap oil, causing prices to fall to under ten dollars a barrel. The result was that high price production zones in areas such as the North Sea became too expensive. Countries in OPEC that had previously failed to comply to quotas began to limit production in order to shore up prices.19Responding to war and low priceseditMain articles 1990 oil price shock and 2000s energy crisis Leading up to the 1990-91 Gulf War, The President of Iraq Saddam ibn Talal Hussein recommended that OPEC should push world oil prices up, helping all OPEC members financially. But the division of OPEC countries occasioned by the Iraq-Iran War and the Iraqi invasion of Kuwait marked a low point in the cohesion of OPEC. Once supply disruption fears that accompanied these appointments dissipated, oil prices began to slide dramatically.After oil prices slumped at around $15 a barrel in the late 1990s, joint diplomacy achieved a slowi ng down of oil production beginning in 1998. In 2000, Chavez hosted the first summit of OPEC in 25 years. The next year, however, the September 11, 2001 attacks against the United States,and the following invasion of Afghanistan, and 2003 invasion of Iraq and subsequent occupation prompted a sharp rise in oil prices to levels far higher than those targeted by OPEC themselves during the previous period. Indonesia withdrew from OPEC in 2009 to protect its oil supply.On 19 November 2007, global oil prices reacted violently as OPEC members spoke openly about potentially converting their cash reserves to the euro and away from the US dollar.20Production disputeseditThe economic needs of the OPEC member states often affects the internal politics behind OPEC production quotas. Various members have pushed for reductions in production quotas to increase the price of oil and thus their own revenues.21 These demands conflict with Saudi Arabias stated long-term strategy of being a partner with the worlds economic powers to ensure a steady flow of oil that would support economic expansion.22 Part of the basis for this policy is the Saudi concern that expensive oil or oil of uncertain supply will drive developed nations to preserves and develop alternative fuels. To this point, former Saudi Oil Minister Sheikh Yamani famously said in 1973 The stone age didnt end because we ran out of stones.23One such production dispute occurred on 10 September 2008, when the Saudis reportedly walked out of OPEC negotiating session where the organization voted to reduce production. Although Saudi Arabian OPEC delegates officially endorsed the new quotas, they stated anonymously that they would not observe them. The New York Times quoted one such anonymous OPEC delegate as saying Saudi Arabia will meet the markets demand. We will see what the market requires and we will not leave a customer without oil. The policy has not changed.OPEC aideditOPEC aid dates from well before the 1973/74 oil pr ice explosion. Kuwait has operated a programme since 1961 (through the Kuwait Fund for Arab Economic Development). The OPEC fund became a fully fledged permanent international development agency in May 1980.