Access over 20 million homework & study documents
search

The Organization of Petroleum Exporting Countries Research Paper

Content type

User Generated

Subject

Economics

Type

Research Paper

Rating

Showing Page:
1/7
1
Introduction about OPEC
Oil is one of the most important discoveries that humans have reached, and it is
the main source of energy, the hub of all industrial and agricultural production in the
contemporary world, and has become a vital component of Everyday items. Oil is
considered an important strategic material for the economy of any country in the world,
whether it is a producer or a consumer, which means that a set of non-economic factors,
including political, strategic, and social interaction with economic factors are intertwined.
Today, more than 50% of the major oil-producing countries, directly or indirectly, rely on
oil revenues income, and any fluctuation in oil prices is reflected in their economies.
Because of the importance of oil, The Organization of Petroleum Exporting Countries
(OPEC) was founded in 1960 at the Baghdad Conference and currently includes 13
different countries. The hub founders of OPEC were Saudi Arabia, Iraq, Kuwait,
Venezuela, and Iran. After a while members such as Qatar, Indonesia, Libya, United
Arab Emirates, Algeria, Nigeria, Ecuador, Angola, and Gabon joined OPEC (Vietor and
Evans (2003); OPEC (2016)).
Following its Statute, the main goals of the Organization of the Petroleum Exporting
Countries (OPEC) are 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
Organization). additionally, The OPEC country members control more than 75% of the
world’s oil reserves and about 40% of total world oil production (Vietor and Evans
(2003))

Sign up to view the full document!

lock_open Sign Up
Showing Page:
2/7
2
OPEC and Global Market
OPEC is an important driver of oil prices as it sets goals for managing oil
production. Historically, oil prices increase when OPEC cuts production targets. OPEC
exports constitute around 50-60% of total global crude oil exports. This market share
gives OPEC an influential role in the global oil market.
Looking into the oil market, increases in oil consumption are linked to economic growth
(Onolemhemhen, et, al.2020). When the demand for crude oil increases, its prices rise,
and thus the global market will recover, including stock markets and all vital
commodities. On the other hand, if the demand for crude oil decreases, the prices will
fall, causing a global economic inflation crisis. Therefore, OPEC seeks to stabilize oil
market prices in order to avoid an economic crisis.
economically, OPEC can decide to switch from one to another strategy. When OPEC
finds optimal to pursue a price targeting strategy, it will cut on its original production
following a non-OPEC positive supply shock, therefore the two production changes will
have opposite signs. When market share targeting is found to be optimal, OPEC will
increase beyond its initial status quo level its production. it also exists a range of market
conditions (demand and competitor efficiency) that accommodates a period of inertia
during which no active strategy is pursued.
However, according to (Kingma and Douwe. 2004) the statements of the OPEC
Secretary-General or by a government official from an important OPEC member could
have significant impacts on the daily price of oil. This is an example of the great
influence of OPEC on the oil market.

Sign up to view the full document!

lock_open Sign Up
Showing Page:
3/7

Sign up to view the full document!

lock_open Sign Up

Unformatted Attachment Preview

1 Introduction about OPEC Oil is one of the most important discoveries that humans have reached, and it is the main source of energy, the hub of all industrial and agricultural production in the contemporary world, and has become a vital component of Everyday items. Oil is considered an important strategic material for the economy of any country in the world, whether it is a producer or a consumer, which means that a set of non-economic factors, including political, strategic, and social interaction with economic factors are intertwined. Today, more than 50% of the major oil-producing countries, directly or indirectly, rely on oil revenues income, and any fluctuation in oil prices is reflected in their economies. Because of the importance of oil, The Organization of Petroleum Exporting Countries (OPEC) was founded in 1960 at the Baghdad Conference and currently includes 13 different countries. The hub founders of OPEC were Saudi Arabia, Iraq, Kuwait, Venezuela, and Iran. After a while members such as Qatar, Indonesia, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, Angola, and Gabon joined OPEC (Vietor and Evans (2003); OPEC (2016)). Following its Statute, the main goals of the Organization of the Petroleum Exporting Countries (OPEC) are 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 a ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
Excellent! Definitely coming back for more study materials.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4