OPEC and OPEC+ countries combined produced about 59% of global oil production, 48 million b/d in 2022, and so influence global oil market balances and oil prices now more than ever. More recent production agreements have exempted Iran and Libya because of sanctions and other instability in crude oil output. Over the past few years, OPEC+ meetings have focused on reducing oil production to help stabilize oil prices after the COVID-19 pandemic, which dramatically reduced demand and led to significantly lower oil prices.

What Is the Organization of the Petroleum Exporting Countries (OPEC)?

Instead, OPEC members agree to produce only enough to keep the price high for all members. Current OPEC members areref Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela. “We are seeing a sharp slowdown in economic growth in developed countries, almost to the point of them going into recession,” he says.

“OPEC+ member countries collectively agree on how much oil to produce, which directly affects the ready supply of crude oil in the global market at any given time,” Investopedia, which examined the organization’s influence in more detail, reports. OPEC naturally keeps the market price of oil high in order to maximize its profits, as was seen when the organization slashed production in early April to just 3.7 percent of the global demand, Reuters notes. Nowadays, oil demand keeps growing despite EVs for a number of reasons. First, the developing world remains increasingly hungry for energy and, as oil prices stay relatively low, consumption does increase to some degree. Second, some sectors, like petrochemicals or jet fuel, are unlikely to be replaced in the short term, further propping up demand. What we have here is a scenario where gasoline and diesel demand will fall, being partially offset by LPG, jet fuel, and petrochemicals.

1960: Anger from exporting countries

1. OPEC faces considerable challenges from innovation and new, green technology.
2. Nowadays, oil demand keeps growing despite EVs for a number of reasons.
3. For example, Iran and Iraq waged an eight-year-long war that led to hundreds of thousands of deaths.
4. Oil analysts do not expect the most recent cut to cause a big rise in world crude prices.
5. As one area in which OPEC members have been able to cooperate productively over the decades, the organisation has significantly improved the quality and quantity of information available about the international oil market.
6. Current OPEC members areref Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela.

The 2020 Russian-Saudi price war demonstrated the vulnerability of U.S. producers. As the price of oil fell to its lowest point in nearly two decades, it further stressed a U.S. industry already grappling with the effects of the pandemic; at least asset pricing and portfolio choice theory one major U.S. shale producer, Whiting Petroleum, declared bankruptcy. OPEC members with relatively high breakeven prices, such as Algeria, are also more exposed to sustained low oil prices than Russia or Saudi Arabia, which both have low breakeven prices and significant foreign exchange reserves. To counter this, OPEC partnered with Russia and several other major exporters to coordinate production and stabilize prices.

Opec states were at the heart of two oil-price crises in the decade – the Arab oil embargo of countries that had supported Israel in the Yom Kippur War of 1973, and the fallout from the Iranian Revolution of 1979. The Biden administration in particular has championed renewable energy and a shift away from fossil fuels as a necessity — though Biden himself said during the 2023 State of the Union that the United States “was still going How to buy atm to need oil and gas for a while.” OPEC is forming a partnership with a 10-country oil alliance led by Russia.

Oil prices can drop significantly if they decide to supply more oil to the market. On the other hand, if OPEC member countries decide to cut production and curb supplies, prices are highly likely to shoot up. Having reached record levels by 2008, prices collapsed again amid the global financial crisis and the Great Recession. Meanwhile, international efforts to reduce the burning of fossil fuels (which has contributed significantly to global warming; see greenhouse effect) made it likely that the world demand for oil would inevitably decline.

Peak Oil Demand, EVs, & The Future Of Oil: A Cleantech Perspective

OPEC claims that its members collectively own about four-fifths of the world’s proven petroleum reserves, while they account for two-fifths of world oil production. Members differ in a variety of ways, including the size of oil reserves, geography, religion, and economic and political interests. Some members, such as Kuwait, Saudi Arabia, and the United Arab Emirates, have very large per capita oil reserves; they also are relatively strong financially and thus have considerable flexibility in adjusting their production. Saudi Arabia, which has the second largest reserves and a relatively small (but fast-growing) population, has traditionally played a dominant role in determining overall production and prices.

In response, OPEC attempted to develop a coherent environmental policy. The power of OPEC has waxed and waned since its creation in 1960 and is likely to continue to do so for as long as oil remains a viable energy resource. In 2022, Russia’s invasion of Ukraine and harsh sanctions imposed by the West in response have caused global oil prices to surge and renewed attention on OPEC’s role. That March, Biden announced a ban on Russian oil imports, while the European Union (EU) said it will work to reduce its dependence on Russian energy.

Because OPEC has been beset by numerous conflicts throughout its history, some experts have concluded that it is not a cartel—or at least not an effective one—and that it has little, if any, influence over the amount of oil produced or its price. Other experts believe that OPEC is an effective cartel, though it has not been equally effective at all times. The debate largely centres on semantics and the definition of what constitutes a cartel. Those who argue that OPEC is not a cartel emphasize the sovereignty of each member country, the inherent problems of coordinating price and production policies, and the tendency of countries to renege on prior agreements at ministerial meetings. Those who claim that OPEC is a cartel argue that production costs in the Persian Gulf are generally less than 10 percent of the price charged and that prices would decline toward those costs vantage fx review in the absence of coordination by OPEC.