organization of petroleum exporting countries (opec)


Formation and membership:

The Organization of Petroleum Exporting Countries (OPEC) was formed in 1960 in Baghdad (Iraq) by five main oil exporting countries: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The formation of (OPEC) was essentially a reaction to the exploitative tendencies of multi-national companies involved in oil exploration.

As a result of the success of this organization in maintaining oil price stability and uniformity of policies, eight other countries were attracted to join the body. This brings the total membership of the organization to thirteen (13). The other eight countries that joined later were Qatar (1961) Indonesia (1962), Libya (1962), United Arab Emirate (1973), Algeria (1969), Nigeria (1971), Gabon (1973) and Ecuador (1973).

The organization’s secretariat is in Vienna, Austria.

Aims and Objectives of OPEC

  • To maintain stability of oil price: One of the main objectives of OPEC is to maintain the stability of oil price in the world market.
  • To ensure steady supply of oil: The organization also ensures that there is a regular and steady supply of oil to the world market.
  •  Encouragement of exploration and development of petroleum resources: OPEC equally ensures that member countries are encouraged in the exploration, exploitation and development of petroleum resources.
  •  Stabilization of oil income: The organization was set up to ensure stabilization of oil income of its member- nations.
  • Co-ordination of petroleum policies: OPEC is set also to ensure the coordination of petroleum policies of its member-countries and to improve their bargaining power.
  •  Allocation of production quota: It fixes and allocates production quota to member nations.
  •  To increase its control over the oil industry: OPEC is also set to make sure that it increases its control over the industry in the world.

Achievements of the Organization Petroleum Exporting Countries (OPE)

  • Establishment of common fund: This fund has helped to alleviate the financial problems of the members at one or the other.
  • Formation of common forum: organization created a forum wt problems confronting the

           met states of OPEC can be res amicably.

  •  Regulation of production: organization, to a large extent, succeeded in allocating

production quotas to member-states.

  •  Regulation of prices: it has succeeded in ensuring that crude oil is regulated and stable
  •  Encouragement of oil exploration Member-states of the organization have been encouraged to participate in exploration.

  • Control of multinational company The organization has also sue controlling the activities of me companies.
  •  Global policies: OPEC is reckoned with in global politics. Oil is a good manipulative weapon international politics.

Problems or failure of Organization of Petroleum Exporting Countries(OPEC)

  • Rivalry in leadership: The rivalry the leadership of the organization between Saudi Arabia and ha problem facing OPEC.
  • Entry of non-OPEC members into oil industry: The emergence of another international oil market in the 1980s, especially of the North Sea oil producers: UK, Norway and Mexico, has reduced OPEC’s influence.
  • Decline of loyalty of member- nations: There is constant disagreement among members of OPEC in the fixing of prices and production quotas, and failure implements agreed prices and production quotas.
  • Stockpiling of oil by advanced nations: The activities of the advanced nation in stockpiling oil, which contributes to the fall of oil price is causing problem for OPEC.
  • Fall in prices of oil: The world economic depression brings about fall in oil prices.
  • Political disagreement: There has been some political disagreements between member-countries e.g. Iran and Iraq, Iraq and Kuwait. These are serious problems for the organization. Research for oil substitute by advanced countries: There is increasing research by the advanced countries to find a substitute for oil.

Solutions or remedies to the Organization of Petroleum Exporting Countries’ (OPEC) problems

  • Imposition of penalties: Penalties or fines have been imposed on member- nations that go against the rules and regulations of the body.
  • Joint research: Members of the organization have embarked on joint research to counteract that of the Western and advanced nation to find a substitute for oil.
  •  Strengthening of unity among its members: The organization is making efforts to create unity among its members.
  •  Fixing of production quota: The organization has enforced its rules to make sure that member-nation adhere to their production quotas.
  •  Rotation of leadership position: The key posts in the organization are being rotated among the member-nations.
  •  Maintenance of a reasonable oil price: OPEC has also tried to maintain a reasonable oil price in order to avoid price fluctuation.

Reasons for the Continued Existence of Organization of Petroleum Exporting Countries (OPEC)

  • To protect the interest of its members.
  • It has helped in the stabilization of world oil prices, thereby preventing wide fluctuations in oil prices and output.
  • It has been responsible for seeking favourable markets for oil produced by it members.
  • The existence of OPEC has led to improved trade relations among members and the international community as a whole.
  • OPEC provides employment for many people especially from the member- nations.
  • OPEC helps to educate its members and the international community through its regular meetings where issues are thoroughly discussed and communiques issued.

  1. demand and supply
  2. types of demand curve and used
  3. advertising industry
  4. factors of production
  5. entrepreneur
  6. joint stock company