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Degree of Influence of OPEC on Oil Prices Paper

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Running head: DEGREE OF INFLUENCE OF OPEC ON OIL PRICES 1
The Degree of Influence of OPEC on Oil Prices
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DEGREE OF INFLUENCE OF OPEC ON OIL PRICES 2
The Degree of Influence of OPEC on Oil Prices
The Organization of Petroleum Exporting Countries (OPEC) is an intergovernmental
organization that was formed by 14 oil-producing countries. The organization was formed to
coordinate and unify petroleum policies among its members in ensuring stable prices of oil in the
market. To ensure oil prices remain stable, OPEC has continuously relied on economic concepts
of regular demand and supply of petroleum to consumers, the level of income of produces, and
the economic capacity of country members. The organization has been regulating oil prices to
ensure members get a fair return on capital they have invested in the petroleum industry. OPEC
members meet twice in a year to agree on oil prices and the quantity of oil that each member
should produce (Owyang, 2017). If a nation fails abide by the set rules, no sanctions or penalties
are imposed. Each nation is expected to act responsibly by adhering to the agreed standards of
reporting its own production. However, a country is mostly likely refuse to exploit others in
terms of their contribution because none of the members want to be kicked out of OPEC
(Owyang, 2017). Despite have such strict policies, OPEC has recently completely lost control of
the price of oil. Some countries have added taxes on gasoline and other petroleum-based
products to conserve their reservoirs. The essay will show that the cause of OPEC losing its lost
power is future markets and commodity traders that are changing forces of the oil market.
Some of the recent decisions that OPEC has implemented in 2018 includes the reduction
of 1.2 million barrels of oil that each member contributes to OPEC. Members were supposed to
reduce their production contribution by 800,000 bpd while allies were to reduce by 400, 000 bpd.
The aim of this goal was to ensure the price of oil would return to $70 per barrel (Paraskova,
2019). In November 2019, the changes in oil policies by OPEC caused the average price of oil
barrel to drop to $65. This caused a ripple effect on the supply of oil in the world markets as

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Running head: DEGREE OF INFLUENCE OF OPEC ON OIL PRICES The Degree of Influence of OPEC on Oil Prices Student’s Name Institutional Affiliation 1 DEGREE OF INFLUENCE OF OPEC ON OIL PRICES 2 The Degree of Influence of OPEC on Oil Prices The Organization of Petroleum Exporting Countries (OPEC) is an intergovernmental organization that was formed by 14 oil-producing countries. The organization was formed to coordinate and unify petroleum policies among its members in ensuring stable prices of oil in the market. To ensure oil prices remain stable, OPEC has continuously relied on economic concepts of regular demand and supply of petroleum to consumers, the level of income of produces, and the economic capacity of country members. The organization has been regulating oil prices to ensure members get a fair return on capital they have invested in the petroleum industry. OPEC members meet twice in a year to agree on oil prices and the quantity of oil that each member should produce (Owyang, 2017). If a nation fails abide by the set rules, no sanctions or penalties are imposed. Each nation is expected to act responsibly by adhering to the agreed standards of reporting its own production. However, a country is mostly likely refuse to exploit others in terms of their contribution because none of the members want to be kicked out of OPEC (Owyang, 2017). Despite have such strict policies, OPEC has recently completely lost control of the price of oil. Some countries have added taxes ...
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