2.4: Energy TNC's, OPEC countries and other large producers are increasingly powerful in the global supply of energy Investigate the increasing economic and political power of selected energy TNC's and producer groups OPEC site WIKIPEDIAOil CartelBBC profileGlobal Oil Industry oil markets

What is OPEC? The Organization of the Petroleum Exporting Countries (OPEC) is a permanent intergovernmental organization of 12 oil-exporting developing nations that coordinates and unifies the petroleum policies of its Member Countries. OPEC seeks to ensure the stabilisation of oil prices in international oil markets, with a view to eliminating harmful and unnecessary fluctuations, due regard being given at all times to the interests of oil- producing nations and to the necessity of securing a steady income for them. Equally important is OPEC’s role in overseeing an efficient, economic and regular supply of petroleum to consuming nations, and a fair return on capital to those investing in the petroleum industry. Brief History

Does OPEC control the oil market? No, OPEC does not control the oil market. OPEC Member Countries produce about 40 per cent of the world’s crude oil and 15 per cent of its natural gas. However, OPEC’s oil exports represent about 55 per cent of the oil traded internationally. Therefore, OPEC can have a strong influence on the oil market sometimes, depending upon the overall conditions. OPEC seeks stability in the oil market and aims to deliver steady supplies of oil to consumers at fair and reasonable prices. The Organization has achieved this in a number of ways — by voluntarily producing more or less oil in response to demand and supply dynamics, for example.

Why does OPEC set oil production quotas? The OPEC Statute requires OPEC to pursue stability and harmony in the petroleum market for the benefit of both oil producers and consumers. To this end, OPEC Member Countries respond to market fundamentals and forecast developments by coordinating their petroleum policies. Production quotas are one possible response. If demand grows, or some producers supply less oil, OPEC can increase its oil production to prevent a sudden rise in prices or shortfall in supply. OPEC might also reduce its oil production in response to market conditions, as a means of countering falling prices or a glut on the market. It does this by setting a new group production ceiling or adjusting an existing one. This ceiling is divided into individual Member Country quotas, as agreed by the Conference. However, when OPEC makes its production agreements, it does so with the expectation that non- OPEC producers will actively support the Organization’s measures, since this will ensure OPEC’s decisions are more effective and benefit everyone.

The impact of OPEC output decisions on crude oil prices must be considered separately from the issue of changes in the prices of oil products, such as gasoline or heating oil. There are many factors that influence the prices paid by end- consumers for oil products. In some countries, taxes comprise 70 per cent of the final price paid by consumers, so even a major change in the price of crude might have only a minor impact on consumer prices. Many countries have introduced heavy taxes on oil products. In some countries, the price that motorists pay for gasoline is three or four times higher than the price of the original crude oil. Taxes can account for as much as 70 per cent or more of the final price of oil products. As a result of these oil taxes, some governments in oil- consuming countries (especially in Europe, where taxation levels are highest) receive much more income from oil than OPEC Member Countries. OPEC is concerned that many of the so-called ‘green’ taxes that are currently levied on oil do not specifically help the environment. Instead, they are simply added to government budgets and spent on other items. Oil price high may 2009Oil price falls march 2009issue of oil pricing The price of oilWhy oil prices keep rising