Can OPEC Help Fix the Problem of Rising Oil Prices?

The crisis of rising oil prices has been going on since the dispute between Russia and Ukraine, especially since April. The Organization of the Petroleum Exporting Countries (OPEC) and other oil and gas producers have recently received a call from the United States (OPEC). to boost productivity to address this issue. What exactly is OPEC?

The largest intergovernmental organization made up of the major oil exporters in the world is OPEC., among global international trade organizations. OPEC has developed into a significant and potent organization independent of the Western powers. On September 10–14, 1960, five Muslim founding members—Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela—founded it at the Baghdad Conference in Iraq.

History of OPEC

Image Credit: OPEC

OPEC was established during a transition in the global economic and political landscape when many nations had just received become independent countries and developing nations. The major nations and nations implementing other planned economies have separated from the Soviet Union due to the dominance of seven multinational corporations in the global crude oil market. OPEC established its first Secretariat in Geneva and relocated back to Vienna in 1965 after developing a shared vision with specific objectives. In 1968, OPEC adopted a statement on the use of crude oil in its member states that emphasized both nations' monopoly rights. to take control of their natural resources.

There are currently 13 members of OPEC, including five members. Libya joined the organization in 1962. In 1967, the United Arab Emirates joined. Algeria joined in 1969, Nigeria in 1971, and Gabon initially joined in 1975. However, He also left in 1995 and rejoined in 2016, continuing to be a member. Guinea and the Republic of Congo joined in 2017, and Angola and Guinea did so in 2007.

Three additional nations have also quit, including Ecuador, a member from 1973 to 1992. It rejoined OPEC for the second time in 2007 but left in 2020. Indonesia joined twice, once between 1962 and 2008 and again in January 2016. In November 2016, I was relocating. In 1961, Qatar joined but withdrew in 2019.

Objective of OPEC

OPEC was founded, by Article 2 of its Statute, to accomplish the following three objectives:

1. Ensuring stable oil prices globally and the potential to reduce volatility Effects of and avoidable need for price fluctuations

2. Maintaining economic efficiency and a sustainable supply to consumer nations will ensure a stable income for oil-producing countries.

3. Make sure that nations that have invested in the oil industry receive equity of capital revenues.

Leadership Framework

The OPEC statute categorizes each member into one of three groups: The original agreement for the formation of this organization was signed by the founding members, who were all nations represented at the first conference in Baghdad. Second, "full membership" refers to the original member states and those the meeting has ratified. The third group of members comprises nations that do not share the organization's members' primary objectives and interests.

There are three major organizations that makeup OPEC's structure:

1. OPEC Conference is the organization's top decision-making body, and delegates from each member nation attend it. Each country may designate one or more representatives, but the delegation must have a chairperson chosen from among the elite. That. Each nation's Minister of Industry, Mines, and Energy makes up the majority of the delegates. Every organization conference must have a quorum of three-fourths of the total number of member states in attendance. If all Member States have an equal number of votes, all Conference decisions must be unanimous. The procedure has been decided. The conference's decision shall become effective 30 days following the summary meeting or after a date has been set for the conference. Not-member nations.

In March and September, conferences are held twice a year, and at a country's request, extraordinary meetings are held. Any member may do so through the Secretary-General following consultation with the President and with the approval of the nation's majority opinion. Join the team. The conference's chair and vice chair will be chosen during the opening session. The vice-chairman assumes those responsibilities when the chairman is not present or cannot perform the duties.

2. The Board of Governors is elected from among the member nations and conference approves. Each governor has one equal vote and serves a two-year term. The Board of Governors' choice is based on the majority opinion. Two meetings a year are required for the Board of Governors. The Chairman of the Board of Governors, the Secretary-General, or two-thirds of the Board of Governors members may call an extraordinary meeting of the Board of Governors. Every governor.

3. Secretariat will oversee the work under the direction of the Board of Governors by the Constitution's provisions. The Secretary-General and several other necessary employees who work at the organization's headquarters make up the Secretariat. The Secretariat is the organization's official legal representative, and the head of the Secretariat oversees the organization's general operations under the direction of the Board of Governors. A three-year term that can be extended is granted to the Secretary-General.

Member Terms and Conditions

1. The nations that went to the first conference in Baghdad and signed the first contract were the original members of OPEC. of the creation of organizations.

2. The organization can accept full membership from other nations exporting oil and comparable interests. Suppose approved by two-thirds of all members, the organization's rights.

3. Any oil-exporting nation that does not meet the requirements above may be deemed ineligible by the conference's Special Conditions and a two-thirds majority vote.

4. Without the ability to cast a vote, stakeholders may be invited to the Board of Governors' or Discussion Meetings. However, they have the right to take advantage of the Secretariat.

5. Member States may not be expelled without first informing the Summit. After the Conference returns and the Member States have met their financial obligations, this notification will remain in effect until the beginning of the following year.

6. The same is true for new members if a nation suspends membership but later decides to reapply.

Budget Revenue Source

The conference is where the organization annually develops its budget. A request for the Member State's annual contribution of Contribute to the organization shall be made at the Conference for the Admission of Members. After accounting for the contributions of Ineligible Members, the budget allocation shall be distributed equally among all member nations. All expenses for attending conferences and meetings by Member State delegations and working groups. The organization is responsible for covering all of the governors' travel and subsistence costs when they participate in the meetings of the Board of Governors.

Regarding the price caps on oil purchases, this organization makes these decisions based on the cyclicality of the trade balance and trade between OPEC members and the rest of the world. Use gold first, then US dollars, and then euro currency. Before 1971, gold was the preferred form of payment for oil. Then, Iraq was the first member state to switch from August 15, 1971, when it used the US dollar, until November 2000. sales of oil in euros rather than US dollars. This shift results from less oil being imported into the United States than into Europe.

Features that OPEC cannot overlook in the eyes of nations

Two key areas—one for member nations and the other for the entire world—reflect the characteristics of OPEC. The initial for member nations are:

1. Members of OPEC can gain in two different ways: politically and economically.

2. OPEC has become one of the most potent and dynamic global organizations in the World Trade Organization. Directly under Western powers' control and serving as a cooperative example. Good inter-member relations as well.

3. The main objective of OPEC is to maintain stable oil prices for each of its members through the establishment of quotas.

Second, we observe the entire world:

1. OPEC has primarily maintained a secure, competitive, and stable oil market.

2. OPEC has been crucial in preventing crises in the oil industry, such as those involving the supply of oil. An excessive rise or too little decline in the price of oil globally, as well as the effects of fuel consumption on the environment

3. To keep people safe during a spike in oil prices, OPEC may ask for lower tariffs on essential goods like gasoline. People can purchase and use it.