What are OPEC’s three goals? OPEC in a World Market
Suppose a large supply of a natural resource is discovered in Country X. This resource is needed by most other countries. However, these countries don’t have supplies of this resource. Should Country X keep the resource for its own use? Or should Country X share its supply by selling the resource to countries that need it? How should a fair price for the resource be determined? Who should set this price, Country X’s government or the private companies that invest in the resource?

Petroleum, commonly called crude oil, is a natural resource. Like coal and natural gas, it is a fossil fuel. Fossil fuels form from the remains of organisms that lived millions of years ago. They are non-renewable, which means that Earth’s supply is limited.

Petroleum is found in underground deposits. It is removed and processed in refineries. Many products are made from petroleum. Fuels such as jet fuel and gasoline power cars, trucks, and planes. Fuel oil is used for heating buildings and producing electricity. Roads are paved with asphalt, a petroleum product. Plastics and chemicals made from petroleum are used in everyday life.

Much of the world’s petroleum comes from the Middle East. Other large producers are Venezuela, Canada, Russia, and the United States. In 1960, Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela got together to discuss the role of petroleum production in a global marketplace. They founded a group to coordinate and combine petroleum policies.
The Organization of the Petroleum Exporting Countries (OPEC)
The group that these five countries started is called the Organization of the Petroleum Exporting Countries (OPEC). Since 1960, OPEC has played a role in controlling the global market for oil. As oil has become more important in world trade, OPEC’s role has become even more important. Today, the group has grown to 14 member countries. Each member has an equal vote in making decisions. Because Saudi Arabia exports more oil than any other member country, it serves as the informal group leader. OPEC has three main goals, although it has not been effective in achieving them. It wants to regulate an efficient and stable worldwide supply of petroleum. It wants to set prices that will provide a steady income for petroleum producers. And it wants to set fair profits for companies that invest money in the petroleum industry.

Regulating the Supply of Petroleum The global oil market has been affected by political events in many parts of the world. Uprisings and wars have disrupted the supply of oil. When supply is disrupted, prices rise. The economies of oil-producing countries soar. OPEC has stabilized the price of crude oil by regulating how much oil each country can produce. When production decreases, prices rise. When production increases, prices decrease.

Setting Fair Prices Demand, supply, and price are interconnected. If the global demand for oil is stable, OPEC regulates oil prices by controlling the supply. It assigns a quota to each member country. Each country is not allowed to produce more or less oil than its quota. Countries that are not OPEC members can produce and export as much or as little oil as they want. They can set their own prices according to demand. However, these non-member countries must compete with OPEC members if they want to export their oil.

Setting Profits for Investing Companies Each member country in OPEC needs a certain oil price in order to balance its budget. Thinking that the price of oil would remain high, many oil companies began huge oil projects in the early twenty-first century. They invested fortunes in developing new oil fields. But oil prices have not stayed high. Low prices have caused oil companies to delay or give up these projects. OPEC has tried to stabilize oil prices so that oil producers will invest in future production. The Future of Oil
In the past few years, there has been a movement to decrease humans’ reliance on oil. Some people fear that the world’s supply of crude oil is running low. Scientists are worried that burning oil pollutes the atmosphere and causes climate change. Alternative energy sources such as nuclear, solar, and wind power are being developed. Will the demand for oil decrease? Will decreasing demand cause the price of oil to drop? Or will OPEC countries decrease production to match demand, causing oil prices to rise? If demand for oil falls, can OPEC continue to exist? No one knows for sure the answers to these questions. We will have to wait to see what the future reveals.