OPEC organization

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Economics of Oil and Gas Production • https://www.amazon.com/dp/B07BWSQ3LD • energy economics group • / 319983132809585 • economist roshdy ebrahim page • / economist-roshdy-ebrahim-342996629513826 • OPEC organization is composed of 12 countries: Algeria, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela. • OPEC’s member countries hold about two-thirds of the world’s proven oil reserves (about 900 billion barrels) and supply about 40% of the world’s oil production (about 50% of total exports). • The objective of OPEC is to stabilize the international price range for crude oil by controlling the amount of crude oil sold in worldwide markets. • it is clear that the demand is close to the maximum production capacity of both OPEC and petroleum-exporting countries not part of OPEC. • Of course, this high price and high production rate maximizes the income of the petroleum-exporting countries as long as the petroleum-importing countries can maintain healthy economies. • Thus, despite the high cost of crude oil, OPEC has less influence on the crude price than it did previously. • Of course, if OPEC were to decide to cut production, the price would greatly increase. • However, with all the OPEC countries producing at maximum capacity with the exception of Iraq and Saudi Arabia, there is not much OPEC can do to lower the price. • Because the consumer pays the price of petroleum products, not crude oil, a shortage of refinery capacity can also raise the price consumers pay as well as local taxes. • The influence of OPEC also has been reduced by the increase in the amount of petroleum exported by countries not part of OPEC, particularly Russia and Norway which are the second and third largest exporters of petroleum, respectively. • Iraq with 115 billion barrels has the third largest reserves of conventional oil to that of Saudi Arabia, 267 billion barrels, and Iran, 132 billion barrels. • However, Iraq only ranks 14th in amount of oil produced. • This is because of the United Nations sanctions placed on Iraq after the 1991 Arabian Gulf War, initiated by Iraq’s invasion of Kuwait. • More recently, Iraq’s production is even less because of the obstruction by those in Iraq opposed to the occupation of the United States and Great Britain and to the present Iraq government. • The facilities and equipment for the production and transport of petroleum are also much below standard in Iraq, but do not warrant upgrading until the threat of obstruction is mitigated. • Obviously, if Iraq were to achieve full production, the petroleum price would greatly drop unless the rest of OPEC would cut their production accordingly. • the unrest in Nigeria, an OPEC member, also threatens to reduce production in the eighth largest exporter of petroleum. • North African and Middle East countries affected by the Arab Spring revolutions a couple of years earlier had recovered and were producing oil at the same levels as before the revolutions. • OPEC members looked to Saudi Arabia and the wealthier members to curb their production to keep the price up, but the Saudis, Kuwaitis, and Emiratis were unwilling to give up their market share for the benefit of Venezuela and other poorer members. • Within OPEC itself, there is no real mechanism for setting quotas. • It is not based on a country’s proven reserves, or Venezuela would have the lion’s share of the quota. • It is also not based on population or on GDP. • #energy • #oil • #gas • #offshore • #energetic • #economy • #opec

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