OPEC – Organisation of the Petroleum Exporting Countries
The Organization of the Petroleum Exporting Countries (OPEC) is a permanent intergovernmental organization of 12 oil-exporting countries that coordinates and unifies the policies of its Member States, protects their interests and ensures the stabilisation and supply of oil markets.
OPEC was set up on September 14th, 1960 at the Baghdad Conference by five oil-producing and exporting countries: Saudi Arabia, Iran, Iraq, Kuwait and Venezuela. Facing a context of low energy prices and an organised oil industry, OPEC was given the mission of guaranteeing the oil-producing countries a “fair and stable” oil price by controlling the exports. Until September 1st, 1965, the Headquarters were located in Geneva (Switzerland), until they were moved to Vienna (Austria).
OPEC played an important part in the two oil shocks of 1973 and 1979. In 1973, during Yom Kippur War, the Arabic OPEC Member States unilaterally increased by 70% the price of a barrel of crude oil, imposed a monthly reduction of the oil production by 5% and set up an embargo on oil supply to the United States and Western Europe. Between October 1973 and January 1974, the price of the reference “light Arabian” crude oil barrel was multiplied by four, from $2,32 to $9 a barrel. Although the embargo only lasted for five months, it triggered a two-year-long economic crisis. The oil price never fell back to its pre-crisis level.
From 1979 to 1981, under the effect of both the Iranian revolution and the beginning of the Iran-Iraq war, the oil-producing countries were not anymore able to meet the growing demand of consumer States which had been experiencing economic rebound since 1975. In spite of active policies led by OPEC, in particular the significant increase in the Saudi production, the price of “light Arabian” oil tripled and reached a record level of $40 a barrel in September 1979. This triggered a very strong increase in energy costs and an economic crisis that lasted until 1983.
In the 1980s, the oil prices fell, which led to a significantly lower income from oil exports for the OPEC Member States. The role of OPEC on the international level weakened in comparison to the previous decade. Nowadays, OPEC suffers from the competition of international markets such as the International Petroleum Exchange (IPE) in London and the New-York Mercantile Exchange (NYMEX) in New-York.
The OPEC Statutes mandate the Organisation to:
Coordinate and unify the petroleum policies of its Member Countries;
Ensure the stabilization of oil markets by securing a steady income to producers and a fair return on capital for those investing in the petroleum industry, thanks to a “fair and stable” selling price;
Ensure an efficient, economic, regular and competitive supply of petroleum to meet the consumers’ energy demand.
To achieve this goal, OPEC negotiates with the sector’s industries on all the issues and activities related to oil (production level, price, concessions, products derived from oil).
Member States and governance
To this day, OPEC comprises fourteen Member States: Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Indonesia and Gabon have been Member States to the Organisation before withdrawing from it.
In 2016, the Member States of OPEC represented 73,8% of the world’s estimated oil supply, 44,5% of the crude oil production and 18% of the natural gas production.
OPEC has two policy-making bodies in which the Member States determine the Organisation’s orientations:
The General Conference of the OPEC Member States is the main decision-making body. It decides on the Organisation’s general policy by adopting resolutions and determines the ways and means for its implementation. The Conference meets twice a year and comprises all Member States, which each hold a vote. The resolutions are adopted unanimously. In addition to the two regular sessions, the Secretariat can call for an extraordinary session on a request by a simple majority of States.
The Board of Governors takes place at least twice a year and comprises the Governors appointed by the Member States (one per State) and approved by the Conference. The Board of governors makes decisions regarding the management and administration of the Organisation. It also channels the implementation of the Conference’s decisions. It adopts all the reports submitted by the Secretary General and provides the Conference with reports on the management and administration of the Organisation. Its decisions are taken by simple majority.
The Secretariat is the executive body of OPEC. Based in Vienna (Austria), the Secretariat also serves as the Headquarters for the international organisation. It is responsible for implementing the resolutions adopted by the Conference, as well as the decisions adopted by the Board of Governors.
The Secretariat comprises the Office of the Secretary General, the Legal Office, the Research Division and the Support Service Division.
The Research Division consists of three Departments, namely, Data Services, Energy Studies and Petroleum Studies. The Support Services Division operates through three Departments: Administration and IT Services, Finance and Human Resources and the Public Relations and Information.
The incumbent Secretary General is Mohammed Barkindo, of Nigeria, who has held this position since August 1st, 2016.
OPEC Fund for International Development
The OPEC Fund for International Development (OFID) is a multilateral agency for cooperation and financial support established by the OPEC Member States. The Objective is to strengthen financial cooperation between OPEC Member States and other developing countries by providing the latter with financial support for their economic and social development projects. In particular, it finances and supports:
Specific projects against HIV
The Palestinian Authority.