BUSINESS ECONOMICS
Presented by:
AKSHIT ARORA(201)
YASH BHAYANI(202)
AKHIL SAWANT(209)
ANKIT MEHTA(217)
Overview
Introduction to OPEC
Rise of OPEC
Functioning of OPEC
OPEC…Controller of oil market???
CRUDE OIL PRICES
How does OPEC oil production affect oil prices?
OPEC a Cartel or a Political body?
The First Oil Shock
The Second Oil Shock
The Persian Gulf War
2008 Crisis
Non-OPEC Production
Introduction To OPEC
The Organization of the Petroleum Exporting Countries (OPEC) is
a permanent intergovernmental organization.
OPEC has maintained its headquarters in Vienna since 1965, and
hosts regular meetings among the oil ministers of its member
Countries.
Oil is the vital key to development for the member countries.
Country Joined OPEC Location
Algeria 1969 Africa
Angola 2007 Africa
Ecuador ** rejoined 2007 South America
Iran * 1960 Middle East
Iraq * 1960 Middle East
Kuwait * 1960 Middle East
SP Libyan AJ 1962 Africa
Nigeria 1971 Africa
Qatar 1961 Middle East
Saudi Arabia * 1960 Middle East
United Arab Emirates 1967 Middle East
Venezuela* 1960 South America
* founder Members
** Ecuador joined OPEC in 1973, suspended its membership from Dec. 1992-Oct. 2007
Principal objectives of OPEC
Co-ordinate and unify the petroleum policies of the Member
Countries.
Seek ways and means of ensuring the stabilization of prices in
international oil market.
Provide regular supply of petroleum to consuming nations
Rise of OPEC
OPEC came into existence on 14h September 1960.
OPEC was founded by 5 major oil producing countries namely; Iran,
Iraq, Kuwait, Saudi Arabia and Venezuela.
It was registered in the United Nations on 6th November 1962.
OPEC can be considered as “Cartel” organization.
Oil, with its limited number of suppliers make it the ideal product for
cartelization.
Functioning of OPEC
Representatives of OPEC Member Countries meet every 6 months
to coordinate and unify their petroleum policies.
The Member Countries consider the current situation and forecasts
the market fundamentals, such as the petroleum demand and
supply scenarios.
Depending upon their forecast they decide variously to raise or
lower their collective oil production in order to maintain stable prices.
Common Doubts about OPEC
OPEC…Controller of oil market…???
Does OPEC decide crude oil prices…???
How does OPEC oil production affect oil prices…???
OPEC is a Cartel or a Political body…???
First oil shock
US pulled out of gold exchange standard.
Oil producing states began demanding for more concessions.
Muammar al-Qaddafi’s seizing of power in military coup in Libya.
The Egypt Israeli war of 1973.
Saudi Arabia refused to increase production in order to halt rising
prices.
Oil embargo against the United States.
Oil prices jump from about $3.00 a barrel to $11.65 a barrel.
The Second Oil Shock
Iranian Revolution.
Embargo on Iranian oil.
Outbreak of the war between Iran and Iraq in 1980.
Rise of non OPEC countries.
Oil producing states placed a significant portion of their revenue into
commercial banks.
Increase in interest rates by the developed nations.
The Persian Gulf War
Iraq’s invasion in its fellow OPEC member Kuwait in 1990.
Removal of both the countries from OPEC.
Saudi Arabia expanded its production to meet the global demand.
Iraq's refusal to comply with United Nations resolutions resulted in
the continuation of an oil embargo.
The prices reached to lowest mark of 12$ in 1998.
In 2005 the prices shoot up to 60$.
2008 Crisis
In mid 2006, crude oil was traded for over $79 per barrel.
North Korea's successful nuclear test on October 9, 2006.
October 19, 2007, U.S. light crude rose to $90.02 per barrel.
On January 2, 2008, U.S. light crude surpassed $100 per barrel.
United States of economic "mismanagement“.
On April 18, 2008 the price of oil broke $117 per barrel.
Then due to inflation oil reached all time high of $143 on june 2008.
OPEC’s contribution since 1960
Non-OPEC Countries
Seven of the world's fifteen largest oil producers are outside of
OPEC. They are as follows:
1. Russia
2. United States
3. China
4. Mexico
5. Canada
6. Norway
7. Brazil
8. Britain
Non-OPEC nations produce nearly 60 percent of total production for
the year.
United States, Mexico and Norway have experienced a decline in
production
Whereas there has been significant increases in production from
Brazil, Canada, Russia and a few other former Soviet states.
THANK YOU
