Page 107 - Mariners Cricket Club (Singapore) - Souvenir Magazine 2020

Overview on OPEC

and implications on crude oil

rude oil is often the focus of headlines slight changes to their collective output more
and boardroom discussions because notable than most other exporters.
Cits demand is widespread and its price Since their inaugural meeting in Baghdad in
volatile. Crude oil is almost always a basic September 1960, OPEC maintains its mission
supply and demand equation: how much oil to “coordinate and unify the petroleum
does the marketplace need, and how much
is available? This balance determines prices policies of its member countries and ensure the
stabilization of oil markets in order to secure

which, in turn, influence trade dynamics, an efficient, economic and regular supply of

policy decisions, environmental effects, and the petroleum to consumers, a steady income to
bottom line for manufacturers, retailers, and producers and a fair return on capital for those
shippers who are key consumers of crude oil
products. investing in the petroleum industry.”
Balance is key, and maintaining a profi table
In terms of supply, a few large players have price point without over-restricting the
historically had a majority of the infl uence, most marketplace remains the organization’s main
notably, a cohort of oil-exporting countries goal.
called the Organization of Petroleum Exporting
Countries (OPEC). Founding members Iraq, Kuwait, Iran, Saudi
Arabia, and Venezuela created OPEC to
The purpose of OPEC monitor the crude oil prices and make collective
decisions about how much they need to produce
OPEC is a alliance of oil-producing countries to remain profitable. If prices are high, the cartel

that unites under one common goal: to maintain
and stabilize international crude oil prices. has room to produce more. When prices sink
lower and demand disappears, the group will
OPEC has the capacity to produce just over limit their output until supply and demand are
one-third of the world’s oil, which makes even more balanced.

Conversely, in a tighter
oil market where supply
and demand are closer
to equilibrium, their
satisfaction with prices
makes intervention less
likely.
Prior to OPEC’s formation,
price dynamics were
often determined by a
series of U.S.-dominated
multinational oil
companies. As OPEC
has grown to include a
contingent of allies, like
Russia, OPEC (+), or the
Vienna Alliance, now

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