Context: Recently, production cuts by major oil producers’ cartel OPEC (Organisation of the Petroleum has led to the rise in crude oil price. The Petroleum Minister of India, has highlighted its adverse impact on major consuming nations and urged OPEC to bring balance and affordability in the oil markets.
More about the news:
- India ranks as the third-largest consumer of crude oil globally, with a substantial 85% of its oil needs being supplied by imports.
- Heavy reliance on imports exposes the Indian economy to significant fluctuations in oil prices.
- For instance: Price volatility can trigger inflationary pressures, disrupt the trade balance, deplete foreign exchange reserves, and pose threats to the post-pandemic recovery.
- Organization of the Petroleum Exporting Countries (OPEC) is a coalition of major oil-producing nations that collaborate to collectively influence the global oil market.
- Establishment: 1960 in Baghdad.
- Five Founding members: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
- Present Member Countries: Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Algeria, Angola, Congo, Equatorial Guinea, Gabon, Libya, Nigeria, United Arab Emirates.
- According to the U.S. Energy Information Administration (EIA), OPEC’s combined oil production rate (including gas condensate) represented 44% of the world’s total in 2016, and OPEC held 81.5% of the world’s “proven” oil reserves.
- During the 1960s and 1970s, OPEC underwent a series of restructuring steps that shifting global oil production landscape in favour of oil-producing countries, diminishing the dominance of Anglo-American oil corporations known as the “Seven Sisters.”
- The admission of a new member nation necessitates the agreement of three-quarters of OPEC’s existing members, including all five of the founding countries. Sudan submitted an application to join in October 2015, it has not yet become a member.
Organisation and Structure
- Before OPEC’s formation, individual oil-producing states faced punitive measures when attempting to alter the governance of oil production within their borders.
- The fundamental principle underlying OPEC is that its members collectively benefit from limiting global oil supply to drive up prices.
- Decision-making within OPEC follows these principles:
- OPEC Conference, led by delegations, headed by member countries’ oil ministers, serves as the organization’s highest authority.
- OPEC secretary general functions as the organization’s chief executive.
- Conference typically convenes at the Vienna headquarters at least twice a year.
- It generally operates on the basis of unanimity and “one member, one vote,” with each country contributing an equal membership fee to the annual budget.
- Given, Saudi Arabia’s status as the world’s largest and most profitable oil exporter, capable of acting as the traditional swing producer to balance the global market, it effectively serves as the de facto leader of OPEC.
- In response to the steep drop in oil prices, primarily driven by substantial increases in U.S. shale oil production, OPEC entered into an agreement with ten other oil-producing nations in 2016, forming what is now recognized as OPEC+.
- This informal coalition of nations, collectively referred to as OPEC+, comprises Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan.
- Among these ten nations was Russia, the world’s third-largest oil producer as of 2022, responsible for 13% of the global oil output.
Publications and Reports
- The OPEC Secretariat produces a wide range of publications with the aim of keeping the public informed about the Organization’s activities and disseminating data and insights related to OPEC Member Countries and the global oil industry.
- Monthly Oil Market Report, which delves into critical issues confronting the worldwide oil market.
- World Oil Outlook, known as WOO, presents OPEC’s medium- to long-term perspective on the global oil market.