What is the 'Organization Of Petroleum Exporting Countries - OPEC'
The Organization of Petroleum Exporting Countries (OPEC) is a group consisting of 12 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. 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.
!--break--OPEC, which describes itself as a permanent intergovernmental organization, was created in Baghdad in Sept. 1960, by its founding members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The headquarters of the organization are in Vienna, Austria, where the OPEC Secretariat, its executive organ, carries out OPEC's day-to-day business.
The Chief Executive Officer of OPEC is its Secretary General. As of July 2016, the position is held by Abdalla Salem El-Badri of Lybia. He has been Secretary General since 2007.
According to its statutes, OPEC membership is open to any country that is a substantial exporter of oil and that shares the ideals of the organization. Along with the five founding members, OPEC has 9 additional member countries, as of 2016. They are: Qatar, Indonesia , Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon and Angola.
It is notable that some of the world's largest oil producers, including Russia, China and the United States, are not members of OPEC and pursue their own objectives.
Officially, OPEC's 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."
OPEC's influence on the market has been widely criticized. Because its member countries hold the vast majority of crude oil reserves (about 80%) and nearly half of natural gas reserves in the world, the organization has considerable power in these markets. As a cartel, OPEC members have a strong incentive to keep oil prices as high as possible, while maintaining their shares of the global market.
The advent of new technology, especially fracking in the United States, has had a major effect on worldwide oil prices and has lessened OPEC's influence on the markets. As a result, worldwide oil production has increased and prices have dropped significantly, leaving OPEC in a delicate position. As late as June 2016, OPEC decided to maintain high production levels, and consequently low prices, in an attempt to push higher-cost producers out of the market and regain market share.