What is OPEC? An Introduction

OPEC (Organization of the Petroleum Exporting Countries) is an intergovernmental organization that dates back to 1960 and is comprised of 14 oil-producing member countries. The purpose of OPEC is to coordinate and unify the petroleum policies of its members and to ensure the stabilization of oil markets, promote equitable supply of petroleum to consumers, and foster stable financial returns to producers. The organization is headquartered in Vienna, Austria, and its activities are guided by five founding members: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.

How does OPEC Influence Oil Markets?

OPEC serves as an influential cartel in international oil markets. It controls approximately 75% of the world’s oil reserves and produces around 35% of the world’s oil supply. OPEC decides on oil production levels in order to balance supply and demand in order to support the desired price of oil. If there is a decrease in oil demand due to global economic conditions, OPEC will reduce its output in order to maintain prices. Conversely, if demand is on the rise, OPEC states will increase production in order to meet that demand.

Recent Developments in OPEC

OPEC has made a number of recent decisions in an effort to increase its influence in the global oil market. In January 2019, the members agreed to cut production by 1.2 million barrels per day in order to support higher oil prices. In addition, the OPEC members are considering instituting an automatic cutback in production if oil prices drop below a certain level. The organization is continuing to look for new ways to scale back production in order to maintain sufficient levels of oil supply and stabilize the global oil market.