1. OPEC Nations Arpan Shrivastava Asst. Professor
IBMR, IPS Academy, Indore

2. What is OPEC “Organization of Petroleum Exporting Courtiers”
Regulates exporting of oil, oil products, and oil pricing
HQ in Vienna, Austria
Produces 40% of whole world’s oil supply
Wants high oil prices
Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE, Venezuela

3. What is OPEC?
OPEC stands for the Organization of Petroleum Exporting Countries
Members include: Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates, Libya, Algeria, Qatar, Indonesia, Nigeria, and Venezuela
Founded in 1960
Their Mission: Control the PRICE of World Oil by limiting the SUPPLY

4. What is SUPPLY? SUPPLY is simply how much ‘stuff’ is available...
... For OPEC that ‘stuff’ is petroleum or oil.

5. What is DEMAND? DEMAND is simply how much ‘stuff’ is wanted or needed.
Oil is very much in demand - because it is so important for economies to grow...

6. SUPPLY and DEMAND
SUPPLY and DEMAND are exact opposites of one another:
The more DEMAND the less the SUPPLY XBox 360 was very popular gift for Christmas (HIGH DEMAND), because it was so popular sometimes it was hard to find in stores (LOW SUPPLY)
The less DEMAND the greater the SUPPLY Sega was not as popular (LOW DEMAND), so it might have been much easier to find that in stores (HIGH SUPPLY)

7. How PRICE is Determined:
If you graphed a SUPPLY Table and a DEMAND Table where the two lines meet is called the PRICE
The more rare or scarce something is - the less SUPPLY the greater the DEMAND... the higher the PRICE!

8. What is a Monopoly?
When one person, company or country produces or controls a substantial amount of a particular something.
For example, Microsoft makes the operating system of more than 90 percent of the world’s computers!
Can you list any other monopolies - how do they control PRICE?

9. Percentage of World Petroleum Reserves
OPEC is a Monopoly!
Percentage of World Petroleum Reserves 1
Saudi Arabia
22.10 2
Iran
11.14 3
Iraq
9.68 4
Kuwait
8.33 5
United Arab Emirates
8.23 6
Venezuela
6.50 7
Russia
6.08 8
Kazakhstan
3.33 9
Libya
3.29 10
Nigeria
2.97
OPEC countries dominate the Top-10 of world’s petroleum SUPPLY (only Russia and Kazakhstan are not members).
Together OPEC controls almost 75 percent of the World Petroleum Reserves!

10. What about DEMAND? Petroleum DEMAND is strongly linked to GDP.
Percentage of World Petroleum Consumers
Oil
GDP 1
United States
24.89
1st 2
China
8.19
2nd 3
Japan
6.41
3rd 4
Germany
3.41
6th 5
Russia
3.28
11th 6
India
3.17
4th 7
South Korea
2.78
15th 8
Canada
2.64
12th 9
France
2.49
8th 10
Italy
2.38
9th
Petroleum DEMAND is strongly linked to GDP.
The world’s biggest economies need huge amounts of oil to function!

11. Member Countries
1960: Founding Members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
Qatar (1961);
Indonesia (1962) – suspended its membership from January 2009
Socialist Peoples Libyan Arab Jamahiriya (1962)
United Arab Emirates (1967)
Algeria (1969)
Nigeria (1971)
Ecuador (1973) – suspended its membership from December 1992-October 2007
Angola (2007)
Gabon (1975–1994).

12. Map of Proven Petroleum Reserves

13. Map of Petroleum Consumption

14. Basic Facts
OPEC was formed in Baghdad in 1960 to coordinate and unify the policies of petroleum exporting nations
The main objective of OPEC is to ensure the “stabilization of oil prices in international markets” and securing a steady income to oil producing nations
In order to achieve these objectives, the OPEC nations meet at least bi-annually to decide whether to raise or lower their collective oil production in order to maintain “stable” prices
The main factors in their formulating of petroleum policy are the forecasts for economic growth rates and petroleum demand and supply
The 11 OPEC member countries produce about 40% of the world’s crude oil, and therefore have a strong influence on the oil market
At the end of 2001, OPEC had reserves of nearly 850 billion barrels of crude oil, representing nearly 80% of the world total of over 1 trillion barrels

16. Middle East
Although OPEC is not an organization of Middle Eastern oil producers, the politics of the Middle East and in particular the Persian Gulf have played and continue to play a dominant role in the policies OPEC decides upon
There have been three main price spikes in world oil prices, all of which were due to unrest in the Middle East with OPEC not increasing quotas enough to compensate:
In the early 1970’s oil prices spiked as Arab oil producers embargoed oil deliveries to countries friendly to Israel
In 1979, prices soared again as Iranian oil workers went on strike in support of the Islamic Revolution, and high prices continued in the early 80’s during the Iran/Iraq War
In 1990 when Iraq invaded Kuwait, oil exports from Kuwait were severely diminished from the burning of their oil fields and the imposing of sanctions on oil exports from Iraq ( In this instance Saudi Arabia did pick up the slack substantially )

17. OPEC History 1960s Opened Sept. 10-14, 1960 in Baghdad, Iraq
Started in economic and political changes
“Seven Sisters” controlled Oil Marked before
Countries joining OPEC control their own resources (OPEC Policy)
After starting company ten countries joined
OPEC History 1960s

18. OPEC History 1970s Oil prices went up drastically (1973)
OPEC became well known
Countries took control of oil company and oil pricing
Oil prices went up drastically (1973)
OPEC Fund for International Development
Organization gained three members

19. OPEC History 1980s Oil prices dropped badly
Small oil market shares fell
Oil revenue lowers badly
Reference Basket to help price oil
New environmental issues become relevant
OPEC History 1980s

20. OPEC History 1990s Prices became more stable
Recovery while post-Soviet Union settled
Economy and weather effected prices
Producers, consumers, OPEC, and Non-OPEC coordinating affiliations
OPEC History 1990s

21. OPEC’s pricing system made pricing better (early 2000s)
Markets increased prices to record levels
Prices crashed after
Made a “comprehensive long-term strategy”
Help achieve stable markets, environment, development.
OPEC History 2000s

22. Problems accusing OPEC countries, limit oil
USA vs. OPEC
Problems accusing OPEC countries, limit oil
OPEC make oil supply go up continuously
Oil pricing issues
OPEC wanting high prices using to advantage, USA depends on oil

23. OPEC and The U.S.
As I touched upon in my first presentation, the United States consumes nearly 7 billion barrels of oil annually
The U.S. imports over half of these 7 billion barrels, with half of these imports coming from OPEC nations
The amount of these imports is only going to increase in the future as the nearly depleted U.S. reserves begin to run out
Some numbers for you math lovers of course:
~ 1998 U.S. oil imports- $50 Billion ~ Approx. $25 Billion to OPEC nations
~ 1999 U.S. oil imports- $67 Billion ~ Approx. $34 Billion to OPEC nations
~ 2000 U.S. oil imports- $119 Billion ~ Approx. $60 Billion to OPEC nations

24. Major Sources of U.S. Petroleum Imports
Country
Total Oil Imports
Canada
1.79
Saudi Arabia
1.66
Venezuela
1.54
Mexico
1.42
Nigeria
.86
Iraq
.78
Norway
.33
Angola
.32
U.K.
.31
Total Imports
11.62

25. US Dependency Country’s demand for oil increasing
Persian Gulf biggest oil production (65%)
Happenings in OPEC countries effect oil prices
Most US oil from OPEC countries
US economy relates to OPEC oil prices
Strategic Oil Revenue-oil supply for emergencies

26. Oil Alternatives Tar Sands-sticky substance underground in sand & rock
Tar Sands-bad for environment
Ethanol-oil made by corn
Ethanol-would hurt our food supply
Ethanol-97% of land would be corn if fuel was only ethanol
Both-industries lose more energy than make

27. Pollution Petroleum/oil products poisonous
Petroleum has sulfur & nitrogen tracings
Hydrocarbon
Petroleum/oil is one of the biggest polluters

28. Problems with the US Oil dependency creating a disaster
Not exactly looking for different fuel resources
Oil companies/companies invested in oil not looking for alternatives-USA stuck in a rut
Synthetic oil payments go in taxes-foreign oil no taxes
Foreign fuel in favor-not giving other sources a chance

29. Religion vs. Oil Some OPEC countries are Muslim
USA worried because of Muslim faith-just seeing beliefs as a threat
Some Muslims want to convert all countries-all faiths need to work together-oil countries
Oil products also in concern

30. Summary
While OPEC still has considerable influence in determining the price per barrel of petroleum by restricting output, their success has greatly diminished since the 1970’s
Despite the overall increase in worldwide demand for petroleum, OPEC nations have not received the brunt of this increased demand. Rather, it has gone to Non-OPEC nations
As a result, over the past few years both production and revenues in the OPEC nations have declined significantly
Successful oil production in the OPEC nations is tied to the political and economic status of the volatile Middle East, which serves as a deterrent to potential importers

31. Conclusion
OPEC still has considerable influence in determining the price per barrel of petroleum by setting quotas, but their best days are behind them
Non-OPEC nations such as Canada and Mexico have stripped the cartel of its power to single-handedly manipulate the petroleum market
The U.S. has benefited from the increased production of petroleum by Non-OPEC nations and thus reduced their annual imports from the OPEC countries in recent years
The United States needs to address its unacceptable energy policy by stressing efficiency and reduced demand for fossil fuels

32. Thank You