A decade after its development OPEC (Organization of Petroleum Exporting Countries) had taken over from’ Texas Railroad Commission’ as an unofficial governing body influencing overseas crude oil pricing. However, ever since, there are already debates put forth to decline some such statements favoring OPEC. Let us learn further, during all these years how effective OPEC has been in controlling global crude prices.
OPEC nowadays has in total twelve people (five founder members and also rest contained in the convention at a later stage). Each of its people represents its own political entity and possesses various oil producing capabilities. They each are bound together with a typical bond of crude.
With exception of Saudi Arabia sleep all of the OPEC members create oil at nearly to their complete capabilities and also have hardly any scope to boost the supply in case needed. This drawback often increases question marks on OPEC’s ability to reduce crude prices by improving its output unless supported by Saudi Arabia.
A person of such cases happened during 1979 80 when there was an unprecedented rise in global crude prices. In spite of Saudi Arabia’s warning to various other member countries to boost the supply, they all refused to cooperate as they desired to maximize their realizations from product sales at higher prices. Saudi Arabia was conscious of the situation that these excessive costs will adversely impact the crude’s need in the world market. Under such conditions, Saudi Arabia unilaterally acted by boosting the source and brought a little help within the increasing price levels.
As a consequence of cost realization that is higher for crude other non-OPEC nations increased their spending budget on oil exploration. Within several years’ non-OPEC countries could improve their oil production by 10,000 barrels/day, causing decreased dependency on OPEC participants.
Once again in the year, 1982 85 OPEC attempted to enforce manufacturing quotas for member countries to stabilize crude rates. The exercising proved to be useless once more as member countries continued to produce well beyond their quota boundaries. Saudi Arabia actually tried fixing their crude rates with a characteristic to prevailing spot costs, but similar was not supported by some other community members.
So time and then there have been instances of lack of coordination among member nations of OPEC, raising a really serious question on its power to manage crude prices. Though OPEC perhaps nowadays stands as a premier connection of crude oil supplying nations, however, it can’t be categorized as a governing body which could completely manage global crude prices. To read more news about the Oil and Gas sector in Nigeria, check out the updates from ibe kachikwu on his social media pages.