ORGANISATION OF PETROLEUM EXPORTING COUNTRIES

ORGANISATION OF PETROLEUM EXPORTING COUNTRIES

The Composition and History

The Organisation of Petroleum Exporting Countries (OPEC) is made up of 13 member states mostly developing nations of the world and it was founded in Baghdad, Iraq in 1960.

 

ORIGIN OF OPEC

The formation of OPEC was essentially a reaction to the exploitative tendencies of multi-national companies involved in oil exploration. So, in 1960, some oil producing countries came together as a way of protecting their interest and formed OPEC. Some countries later joined the cartel to increase membership e.g. Libya 1962, Algeria 1969, Nigeria 1971, Qatar 1961. The founding nations were Iraq, Iran, Saudi Arabia, Kuwait, and Venezuela.

Currently, there are 13 member states of the organisation – Iraq, Iran, Saudi Arabia, Kuwait, Nigeria, Venezuela, Gabon, Ecuador, Libya, Algeria, Qatar, United Arab Emirate and Indonesia.

 

AIMS AND OBJECTIVES OF OPEC

  1. To coordinate and unify: OPEC was formed to coordinate the petroleum policies of member states.
  2. To remove price fluctuations: OPEC is also aimed at stabilizing the price of oil in the international market and thereby eliminate price fluctuations.
  3. Steady income: OPEC is set up to ensure steady income to oil producing countries.
  4. Efficient and uninterrupted supply of petroleum: OPEC was also formed to ensure an efficient and uninterrupted supply of petroleum to consuming nations.
  5. Quota: It was to fix or allocate production quota to member – states.
  6. Protection of member states: It was also to find ways of protecting the interests of the members by ensuring that the involvement of multi-national companies in oil exploration does not threaten the interest of member nations.

 

ORGANS OF OPEC

  • The Conference.
  • The board of Governors.
  • The Secretariat.

 

a) The Conference

The Conference is the highest and the most powerful of all the organs. Member States are represented by their ministers of petroleum who leads a delegation to OPEC meetings. Meetings are held twice in a year but extra-ordinary meetings may be called by the Secretary-General at the instance of a member country. This can be done after formal consultation with the president of the conference and approval obtained by a simple majority of member states. 3/4 of the delegates representing member states have to form a quorum before holding a conference. Each state has a single vote and meetings can also hold outside the headquarters or in any of the member states.

 

Functions of the Conference

  1. Policy formulation: The conference is involved in policy formulation. It decides most importantly the best method of its execution or implementation.
  2. Membership: Applications for membership of OPEC are considered by the Conference
  3. Budget: It approves the budget of the organisation.
  4. Appointments: It has the power to appoint the Secretary-General, deputy Secretary General of OPEC.
  5. Members of board: The appointment of the members of board of Governors is approved by the Conference.
  6. Auditing: Auditors that examine the accounts of the organisation are equally appointed by this organ.
  7. Reports and recommendations: The attention of the conference is also drawn to the reports and recommendations made by the Board of Governors. They are reports and recommendations on issues of interest to the organisation.

 

b) The Board of Governors

Representatives of member states make up this body. A representative is referred to as Governor and has one vote and stays for a term of two years. It meets twice yearly. The administration of the organisation is in the hands of this body.

 

Functions of the board of Governors

  1. Preparation of agenda: It prepares agenda for the meetings of the conference.
  2. Management: It manages the affairs and the administration of the organisation.
  3. Decisions-making: Decisions are made by this body based on the reports submitted to it by the Secretary General of OPEC.
  4. Execution of decisions: The board executes issues or matters decided by the conference.
  5. Budget: This body also prepares the budget of the organisation. The final consideration of the budget is made by the Conference.
  6. Auditing: It has the power to nominate the auditor to look into the finances of the organisation with recommendations.
  7. Approval of auditors’ report: The auditors’ report and statement of accounts are approved by the conference based on the consideration given by the board of Governors.

 

c) The Secretariat

OPEC’s Secretariat is in Vienna, Austria, where the headquarters is located. It is involved in the executive and administrative issues of the organisation. The Secretary-General serves as the head of the secretariat, assisted by a deputy Secretary-General and other members of staff. The Secretary-General stays for a term of three years and could be re-appointed.

 

Functions of the Secretariat

  1. Correspondence: The Secretariat is responsible for all the correspondences of the organisation.
  2. Executive and administrative issues: It is involved in the executive and administrative issues of the organisation. There are four departments making up the Secretariat which are:
  • Information department.
  • Economic department.
  • Administrative department.
  • Technical department.

Note: Alhaji Rilwan Lukman, a Nigerian, was formerly the OPEC’s Secretary-General.

 

ACHIEVEMENTS OF OPEC

  1. Common fund: This fund has helped to alleviate the financial problems of the members at one time or the other.
  2. Forum: This organisation has created a forum whereby problems confronting the member – states of OPEC can be resolved amicably.
  3. Activities of multi-national companies: Some activities of these companies have been put to check and they are also being monitored.
  4. Regulation of production and price: OPEC to some extent, has succeeded in regulating production and in raising the price of oil in recent times. Even the activities of multinational corporations are equally regulated.
  5. Encouragement: Member states have been encouraged to participate in oil exploration.
  6. Global politics: OPEC is a force to reckon with in global politics. Oil is a good manipulative weapon in international politics.

 

PROBLEMS OR FAILURES OF OPEC

  1. Threat to price stabilization: The discovery of and marketing of North sea oil and the competition posed by such is a threat to price stabilization.
  2. The issue of quota: Member states often disagree and do not always co-operate on oil quota. Some of them produce more than the quota allocated to them.
  3. Low level of loyalty: Some members expressed lack of loyalty in the area of decisions made and disregards its implementation.
  4. Economic depression or recession worldwide: This has the capacity of bringing down the price of oil.
  5. Research: Some advanced countries are constantly into research, trying to find an alternative to oil. By this move, the price of oil is negatively affected.
  6. International crises: Frequent international crises lead to fluctuations in the price of oil e.g the Gulf war (1990 – 91).
  7. Oil storage: The rate at which some developed countries are storing oil is a source of worry to OPEC. It has led to a fall in the price of oil.
  8. Fall in oil price: This can bring about reduction in oil production in order to shore up prices.

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