CARTOON
REFILE
-ADDITIONAL INFORMATION A cartoon by Lebanese cartoonist Stavro Jabra is
displayed in an exhibit at the United Nations headquarters in New York December
11, 2007. The exhibition entitled "Sketching Human Rights", brings
together cartoons from over 30 countries around the world illustrating the
meaning of the Universal Declaration of Human Rights and conveys the importance
of upholding the fundamental freedoms set forth in it's 30 articles. The
captions on the cartoon reads, "The rights of Man".
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direct.arabnews.com/economy/news/665931?quicktabs_stat2=1 - Cached20 hours ago ... Net growth of 4.8
million b/d over nine years is slower than OPEC and other ...
Low prices in the late 1980s and 1990s saw average efficiency ...
Low prices in the late 1980s and 1990s saw average efficiency ...
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USA-
wow 300 million people... by 2025 can u imagine... AND.. 4. How Costly Would the Standard Be?
The
amount is fiercely debated. The EPA estimates that a 70 ppb standard will cost
about $3.9 billion annually, beginning in 2025, and a 65 ppb standard will cost
$15 billion.
New
U.S. Ozone Rules Likely to Be Felt Nationwide
Nov
26, 2014 · "Bringing ozone pollution ... Most of the United States ... The
Great Energy Challenge is an important National Geographic initiative ...
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Keystone
Be Darned: Canada Finds Oil Route Around Obama ...
Oct
08, 2014 · From the Canadian perspective, Keystone has become a tractor mired
in ... 2014. Browning has left Irving Oil ... The Calgary crowd had a lot to
learn ...
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Plummeting
Oil Prices Won't Derail The Canadian Economy ...
businessincanada.com/2014/10/16/oil-price-fall... Cached
“Real
GDP is not all that sensitive to in-quarter changes in oil prices, but it does
have ... oil sands, the break-evens for a lot of ... Canadian economy, crude
...
Oil is
plunging, with WTI crude dipping below $80 per barrel on Thursday morning for
the first time since June 2012.
But
will the Canadian economy plummet along with it?
That’s
unlikely. At the very least, it’s safe to say that any negative effects of the
drop-off in black gold won’t be felt immediately.
One
reason for this: while tumbling crude prices are both a function of weak demand
growth and supply, the latter has been playing the larger role in pushing the
price to multi-year lows.
“The
geopolitical risk premium that contributed to oil’s rally earlier in the year
did not affect supply in a meaningfully negative way,” says Randall Bartlett,
senior economist at TD Bank. “As such, there was little justification for those
levels in the first place.”
From
an export perspective, real GDP is dependent upon oil shipments as opposed to
the nominal value of what we get for our crude sales. Virtually all of Canada’s
oil exports go to the United States, and judging by the fragility of the global
economy, Canadians should be very thankful we’re hitched to this wagon. Unless
growth in U.S. shale is significant enough to displace America’s thirst for
Canadian crude in volume terms, there’s no reason to expect real oil exports
will take a hit.
(Or,
more accurately, as one reader pointed out, the cheapness of Saudi Arabian and
Venezuelan heavier crude is the larger threat to Canada’s oil exports to the
States.)
Moreover,
plunging crude serves as a form of stimulus for consumers by freeing up cash
that would otherwise be dedicated to gas. For over-extended Canadian
households, this is welcome relief that may continue to prop up retail sales in
the months to come.
But
the far bigger story is the impact on U.S. demand.
Lower
crude has been accompanied by a lower Canadian dollar. As such, we have a dream
scenario for long-struggling non-commodity exporters in Canada. Firm U.S.
demand, with consumers having more disposable income due to lower prices at the
pump, coupled with a lower Canadian dollar that effectively puts our goods on
sale, is just what the doctor ordered for Central Canada. Increased sales might
even lead to an expansion of capacity in these non-commodity segments, as unit
labour costs relative to the United States improve in light of our
petrocurrency’s decline.
But
after all that, I must admit that, yes: a falling oil price is indeed a net
negative for Canada’s economy, with a bit of a lag. And historically speaking,
it’s not a particularly large one.
“Real
GDP is not all that sensitive to in-quarter changes in oil prices, but it does
have an impact – and that impact is negative,” says TD’s Bartlett.
So,
with respect to The Globe and Mail’s David Parkinson, Canadians shouldn’t panic
about the crash in crude – at least, not yet.
It’s
not the fall in oil we’ve seen that should be worrisome, but rather the danger
that prices stay at this level for a prolonged period of time or sink lower.
Companies considering investments in Canada’s oil patch aren’t wholly focused
on the spot price of oil when it comes to making a decision; they’re looking at
what the average price is likely to be over the next decade or so.
Nevertheless,
the $80 per barrel level is a particularly important one: the International
Energy Agency estimates that a quarter of new Canadian projects simply aren’t
viable at such a level.
“The
effects [of lower oil prices] are likely to be quite nonlinear, because if you
look at in situ investment in the oil sands, the break-evens for a lot of those
projects seem to be about $80 per barrel,” said CIBC economist Peter Buchanan.
“Once you start moving below that level, you would then start to see
significant cancellations or delays in these projects.”
The
economist noted that there are some reasons to think that oil prices will recoup
these losses over the medium term, which would make this discussion irrelevant.
For one, he expects the global economy to pick up steam next year, and demand
to rise along with it. In addition, Buchanan thinks production in two key
regions won’t necessarily be as high as some forecast. Russia needs a ton of
investment to keep production in its aging fields from declining, he says, and
the investment environment in Iraq is not too friendly at the present time, to
say the least.
If oil
prices fail to recover, however, the vast amount of capital spending in
Canada’s oil patch means that any slowdown will show up in GDP, and would be
very difficult to offset.
“Another
thing to remember is how enormous investment in resource extraction is – it’s
many times more than one auto plant or what capital outlays have been in
manufacturing in recent years,” Buchanan said. “So certainly, even a modest
softening in energy investment would pose challenges to the Bank of Canada’s
hopes of a rotation into business investment along with exports helping to
support the economy going forward.”
But
above all else, Canada’s economic fortunes are closely tied to those of the
United States, which is in the process of moving from being described as the
‘cleanest dirty shirt’ of global economic powerhouses into ‘finely tailored
tuxedo’ territory. In plain terms: things are looking up for our neighbours to
the south, and that bodes well for Canada. Over the past 30 years, Canadian
economic growth has been positive in 95 percent of the quarters in which the
U.S. economy expanded.
Time
to breathe a sigh of relief.
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www.theguardian.com/business/...blog/.../opec-oil-price-still-matters - Cached10 hours ago ... A cursory glance at
the history of the oil price since the second world war tells ...
As in the 1980s, producers could not make higher prices stick.
[PDF]
As in the 1980s, producers could not make higher prices stick.
[PDF]
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www.oxfordenergy.org/wpcms/wp-content/uploads/2013/01/MEP-3.pdf14 Jan 2013 ... 1 For a historical
account of OPEC see Skeet (1988), Terzian (1985), Seymour ...
The models of the 1980s and 1990s had to incorporate new ...
The models of the 1980s and 1990s had to incorporate new ...
----------------
OPEC....
“If there is a cut, it won’t matter, they’ll cheat — they cheat all the
time," said John Stephenson, president and CEO of Stephenson and Co.
ENERGY
OPEC
struggles for higher oil prices
JONATHAN
FAHEY THE ASSOCIATED PRESS
NEW
YORK — These are the moments OPEC exists for: A sharp drop in global oil prices
has reduced the amount of money OPEC countries take in by nearly $1 billion a
day.
The
12-member group’s purpose is to co-ordinate how much oil is produced in order
to keep prices high and stable and maximize member countries’ revenue while
making sure global demand for oil stays strong. A steep, co-ordinated cut in
output could stop and possibly reverse what has been a 30 per cent decline in
prices over five months.
But
there is widespread doubt that OPEC will be able to do much of anything when it
meets Thursday in Vienna.
Either
the members won’t agree to a cut, analysts say, or the cut will be too small to
influence oil prices. They could also, as in the past, agree to lower production
but then fail to stick to the target.
That
could mean further declines in the price of oil, along with fuels such as
gasoline, diesel and jet fuel.
“The
idea that this is a cartel that places meaningful restrictions on its members’
behaviour is fiction," says Jeff Colgan, a political science professor at
Brown University’s Watson Institute who studies OPEC.
“OPEC
countries do exactly what we would expect them to do if there were no such
thing as OPEC."
OPEC
is at a crossroads. The group, which produces 30 million barrels of oil per
day, one-third of global liquid fuel demand, is facing the most pronounced decline
in oil prices since the financial crisis hit in 2008. And the world now is
drastically different. Oil production outside of OPEC is surging for the first
time in a generation, boosting global oil supplies. U.S. production has surged
70 per cent since 2008, adding 3.5 million barrels of oil per day. The increase
itself is more than any OPEC member produces other than Saudi Arabia.
At the
same time, OPEC members around the world — those in the Middle East and North
Africa, along with countries such as Venezuela and Nigeria — are undergoing
wrenching political upheaval that is putting extraordinary pressure on government
budgets. OPEC countries need oil money more than ever, making the steep cuts in
production that would be necessary to push up prices all but impossible.
“They
have quite a task in front of them," says Bhushan Bahree, senior director
for OPEC and Middle East research at the analysis firm IHS. “They have to
decide how much room to make, if any, for North American supply growth."
Without
a cut in output, global supply is on track to exceed demand by 1.2 million
barrels per day next year. If that comes to pass, oil prices would almost
certainly decline further. Even a modest announced cut of 500,000 barrels per
day, or adherence to current OPEC quotas, might not be enough to stop the
slide in prices.
Already,
the global price of oil has fallen 30 per cent since late June, to $80 a
barrel, from $115. This has been a boon for consumers, airlines and shippers.
The U.S. national average retail price of gasoline has fallen to a fouryear
low of $2.81 per gallon.
When
OPEC meets Thursday, analysts expect members in dire financial positions such
as Iran, Iraq, Nigeria and Venezuela to argue for a significant production cut.
Their problem: They can’t afford to cut output themselves.
Saudi
Arabia, by far OPEC’s biggest producer, is unlikely to agree to cut its own
output enough to reverse the decline in global prices. It has large reserve
funds that allow it to withstand long periods of lower prices. And it may have
geopolitical reasons to keep prices subdued.
For
example, low oil prices may help pressure Iran to reach an agreement on its
nuclear program. Western countries have imposed economic sanctions on Iran,
leading to a decrease in the country’s oil exports. Low oil prices are further
shrinking Iran’s oil revenue. They are also squeezing the finances of Russia,
which has supported Iran’s nuclear efforts.
Lower
oil prices also might slow the growth of oil production in parts of the U.S.,
Canada and elsewhere because it will no longer be so profitable, helping
sideline some OPEC competition.
photo
Oil
personnel work at the Rumaila oil refinery, near the city of Basra, Iraq, in
this file photo. It’s doubtful that members of the Organization of the
Petroleum Producing Countries will agree on a strategy to address falling oil
prices when they meet Thursday in Vienna. NABIL AL-JURANI • AP
----
MARKET
REPORT
OPEC
meeting knocks down TSX
MALCOLM
MORRISON THE CANADIAN PRESS
TORONTO
— The Toronto stock market closed lower Wednesday, pulled down in part by
energy stocks ahead of a key OPEC meeting.
The
S&P/TSX composite index declined 35.24 points to 15,038.41.
The
energy sector fell 2.3 per cent as oil dropped another 40 cents to a four-year
low of US$73.69 a barrel.
The
meeting of the Organization of Petroleum Exporting Countries on Thursday has
been described as the most important gathering of cartel oil ministers in many
years. Prices have tumbled to around US$75 a barrel because of a stronger U.S.
dollar, lower demand and much higher supplies.
Traders
hope the cartel will come to an agreement to cut production in order to support
prices that are down about 30 per cent from mid-summer.
However,
there is plenty of doubt about whether the cartel will come to such a deal. On
Wednesday, Saudi Arabia’s oil minister, Ali Al-Naimi, said he believes the
crude market will “stabilize itself."
Some
analysts suggest it doesn’t matter what OPEC decides.
“If
there is a cut, it won’t matter, they’ll cheat — they cheat all the
time," said John Stephenson, president and CEO of Stephenson and Co.
“They
all cheat for the same basic reason, which is that you can and because it’s in
your interest to cheat because your share of profits is directly proportional
to what you pump. So why not pump the most and make it someone else’s
problem?"
Meanwhile,
the Canadian dollar climbed 0.13 of a cent to 89 cents US.
American
markets were higher ahead of the U.S. Thanksgiving holiday on Thursday when
they will be closed. The Dow Jones industrials was up 12.81 points at 17,827.75,
the Nasdaq gained 29.07 points to 4,787.32 and the S&P 500 index edged up
5.8 points to 2,072.83.
Elsewhere
on the TSX, the base metals sector declined 1.4 per cent as March copper fell
two cents to US$2.96 a pound.
February
bullion faded 30 cents to US$1,197.50 an ounce and the gold sector fell about
two per cent.
Gainers
were led by telecoms and financials.
In
U.S. economic news, durable goods orders put in a much better than expected
showing in October, rising by 0.4 per cent versus an expected 0.6 per cent
drop.
The
U.S. Commerce Department also said consumer spending rose 0.2 per cent last
month. Consumer spending is closely watched because it accounts for 70 per cent
of American economic activity.
Other
data showed that U.S. new home sales edged up 0.7 per cent in October to the
fastest pace since May.
In
earnings news, farm equipment maker Deere & Co. says its sales and profits
will keep falling in its new fiscal year as the sector remains weak.
If
there is a cut, it won’t matter, (OPEC will) cheat — they cheat all the time.
John
Stephenson Energy analyst
-------------------
OPEC
History
Alternate
title: Organization
of the Petroleum Exporting Countries
Written
by Albert
L. Danielsen
Table
of Contents
·
History
History
When
OPEC was formed in 1960, its main goal was to prevent its concessionaires—the
world’s largest oil producers, refiners, and marketers—from lowering the price
of oil, which they had always specified, or “posted.” OPEC members sought to
gain greater control over oil prices by coordinating their production and
export policies, though each member retained ultimate control over its own policy.
OPEC managed to prevent price reductions during the 1960s, but its success
encouraged increases in production, resulting in a gradual decline in nominal
prices (not adjusted for inflation) from $1.93 per barrel in 1955 to $1.30 per
barrel in 1970. During the 1970s the primary goal of OPEC members was to secure
complete sovereignty over their petroleum resources. Accordingly, several OPEC
members nationalized their oil reserves and altered their contracts with major
oil companies.
In
October 1973, OPEC raised oil prices by 70 percent. In December, two months
after the Yom Kippur War (see Arab-Israeli
wars), prices were raised by an additional 130 percent, and the
organization’s Arab members, which had formed OAPEC (Organization of Arab Petroleum Exporting Countries)
in 1968, curtailed production and placed an embargo
on oil shipments to the United States and the Netherlands, the main supporters
of Israel
during the war. The result throughout the West was severe oil shortages and
spiraling inflation. As OPEC continued to raise prices through the rest of the
decade (prices increased 10-fold from 1973 to 1980), its political and economic
power grew. Flush with petrodollars, many OPEC members began large-scale
domestic economic and social development programs and invested heavily
overseas, particularly in the United States and Europe. OPEC also established
an international fund to aid developing countries.
Although
oil-importing countries reacted slowly to the price increases, eventually they
reduced their overall energy consumption, found other sources of oil (e.g., in
Norway, the United Kingdom, and Mexico), and developed alternative sources of
energy, such as coal, natural gas, and nuclear power. In response, OPEC
members—particularly Saudi Arabia and Kuwait—reduced their production levels in
the early 1980s in what proved to be a futile effort to defend their posted
prices.
Production
and prices continued to fall in the 1980s. Although the brunt of the production
cuts were borne by Saudi Arabia, whose oil revenues shrank by some four-fifths
by 1986, the revenues of all producers, including non-OPEC countries, fell by
some two-thirds in the same period as the price of oil dropped to less than $10
per barrel. The decline in revenues and the ruinous Iran-Iraq
War (1980–88), which pitted two OPEC members against each other,
undermined the unity of the organization and precipitated a major policy shift
by Saudi Arabia, which decided that it no longer would defend the price of oil
but would defend its market share instead. Following Saudi Arabia’s lead, other
OPEC members soon decided to maintain production quotas. Saudi Arabia’s
influence within OPEC also was evident during the Persian
Gulf War (1990–91)—which resulted from the invasion of one OPEC
member (Kuwait) by another (Iraq)—when the kingdom agreed to increase
production to stabilize prices and minimize any disruption in the international
oil market.
During
the 1990s OPEC continued to emphasize production quotas. Oil prices, which
collapsed at the end of the decade, began to increase again in the early 21st
century, owing to greater unity among OPEC members and better cooperation with
nonmembers (such as Mexico, Norway, Oman, and Russia), increased tensions in
the Middle East, and a political crisis in Venezuela.
As the 21st century began, international efforts to reduce the burning of
fossil fuels (which has contributed significantly to global warming; see
greenhouse
effect) made it likely that the world demand for oil would
inevitably decline. In response, OPEC attempted to develop a coherent
environmental policy. The power of OPEC has waxed and waned since its creation
in 1960 and is likely to continue to do so for as long as oil remains a viable
energy resource.
Britannica
Web sites
Articles
from Britannica encyclopedias for elementary and high school students.
The
members of the Organization of the Petroleum Exporting Countries (OPEC) are
countries that produce more petroleum (oil) than they need. OPEC tells these
countries how much oil to export, or ship to other countries. It also tells
them how much money to charge for the oil. OPEC’s main purpose is to help its
members to make more money. OPEC’s head office is in Vienna, Austria.
Few
citizens of the industrialized nations had ever heard of the Organization of
the Petroleum Exporting Countries (OPEC) until 1973, when it imposed an oil
embargo on the United States and raised the price of crude oil by 70 percent.
The name of the oil cartel suddenly became a household word.
-----------
OPEC
v Russia- 2001- the Economist
The
oil price has plunged after OPEC launched a full-scale price war to force
Russia to join it in making substantial production cuts. So far, Russia is not
playing ball, though the pressure on it is mounting
Nov 21st 2001
| From the print edition
OPEC's
glory days appear to be well and truly over. For a while in the late 1990s, it
appeared as if the oil cartel could regain its old power to keep up the price
of oil. But its resolve has collapsed in the face of a dramatic fall in demand
triggered by a global downturn. The oil price, which had been weak for months,
plunged on November 15th, when the cartel in effect launched a price war
against Russia, the world's second-biggest oil exporter. After a brief rally,
prices fell again on November 19th when the Russians refused to offer any more
production cuts at a meeting with Mexico, a fellow non-OPEC oil producer. Brent
crude, the North Sea benchmark, fell to $16.65 per barrel in mid-session
trading that day, a 29-month low, before rebounding somewhat on news of
lower-than-expected American oil stocks and the growing pressure on Russia.
Mexico's oil minister said this week that he expected the non-OPEC members to
agree to join the OPEC cuts shortly.
On
November 14th, at a meeting in Vienna, OPEC had pledged to cut production by
1.5m barrels per day (bpd) from January 1st, but only if non-OPEC members cut
their production by 500,000bpd—a tall order. Meeting a lukewarm response from
Russia, Kuwait's oil minister, Adel Khalid al-Sabeeh, angrily predicted that
oil prices could plummet to $10 per barrel. Unsurprisingly, traders duly marked
prices lower. The price of the American benchmark, West Texas Intermediate,
which trades slightly higher than Gulf crudes, fell by $2.34 to $17.50 per
barrel for December delivery. This is well below OPEC's target of $22-28 per
barrel for a basket of Gulf crudes.
While
the cartel is keen for all non-OPEC members to share the pain, its chief ire is
aimed at Russia. Other non-OPEC members have pledged to cut production if Russia
does. Mexico has promised to cut by 100,000bpd and Oman by 50,000bpd. Norway
had been wary of promising a cut—its oil minister said that prices of $20 a
barrel were not low enough to prompt one—but it has said it will act to prevent
a price collapse. It has also made any cut conditional on Russian action. The
three are looking for a Russian cut of 300,000bpd, ten times what it has so far
promised.
Related
items
Oil
extraction: Lateral thinkingNov 1st 2001
Oil
depletion: Sunset for the oil business?Nov 1st 2001
Alaska's
oil: How much would it really help?Oct 18th 2001
The
prospects for oil: Clear as mudSep 27th 2001
OPEC:
Is Baghdad bluffing?Jun 7th 2001
So
Russia is the bad boy in OPEC's eyes. Its promised cut of 30,000bpd is less
than 0.5% of its daily production. Moreover, its record of keeping its word is
not good. During the last sharp drop in oil prices, in 1998-99, Russia promised
to cut production by 7%: instead, output rose during 1999, with exports up by
400,000bpd, according to Salomon Smith Barney, an investment bank. But cutting
oil output would not be easy for Russia. For one thing, whatever its government
may want—and Alexei Kudrin, the finance minister, has said he would like to do
a deal—Russian oil companies are privately held. Only one of the big six oil
companies, Lukoil, which does business with Iran, an OPEC member, favours price
cuts. Mr Kudrin said that Russia's balance of payments was strong, and that he
was not worried about low oil prices. However, this looks like gamesmanship: Russia
needs all the hard currency it can get to service its foreign debts.
Russia
has another reason for not playing OPEC's game. Its president, Vladimir Putin,
has seized the opportunity presented by the September 11th terrorist attacks on
the United States to charm his way into the western fold. Colluding to increase
oil prices when the global economy is teetering on the brink of recession is
hardly the act of an ally.
The
decision to launch a price war marks a change in tactics for the OPEC cartel.
Its members seem to have decided that it is no longer big enough to set the
price of oil—it now accounts for well under half the world's oil exports—and
that it is counter-productive to try. In the run-up to its Vienna meeting,
members had said that there was a consensus that production should be cut by
1.5m bpd, probably immediately. However, it is clear that certain OPEC members
were tired of giving non-OPEC members a free ride. After all, OPEC has already
cut production quotas by 3.5m bpd this year. During that time, Russian
production has grown by 500,000bpd, with a similar rise expected next year. So
OPEC has been surrendering market share to its rival. Despite the fact that oil
is often seen as the perfect commodity, in practice, market share, once lost,
can take years to regain.
The
oil cartel is hoping that it can frighten Russia into cutting production
because it seems bound to lose any prolonged price war, since the cost of
extracting oil is so much lower in the Middle East. Ali Rodriguez, OPEC's
secretary-general, warned: “We have no price floor.” Russia is already feeling
some pain: the prospect of a price war sent the rouble down sharply. On
November 19th, it reached a record low of 29.80 roubles to the dollar. Mr
Kudrin, the finance minister, was forced to cut his forecast of what the crude
oil price will be next year from $18.50 per barrel to $14.50-$18.50 per barrel.
He acknowledged that economic growth would be less than the previously expected
3.5-4.3% next year, and said that Russia might be forced to seek a loan from
the International Monetary Fund to repay foreign debts and fill budget gaps.
In
Saudi Arabia, the cost of extraction is barely $1 per barrel, the lowest in the
world; the global average cost of finding and producing a barrel of oil is
closer to $10 a barrel. However, this is not the complete picture. Many OPEC
members have built bureaucratic, corrupt or outlandishly extravagant public
sectors that need moderate-to-high oil prices to sustain them. Experts have
reckoned that Saudi Arabia needs a “political” price of oil between $15 and $20
a barrel to maintain domestic stability, and that other Gulf states are in a
similar bind. That explains why Saudi Arabia, despite its oil riches, was on
the verge of bankruptcy just three years ago. Last year was the first time that
it managed a government-budget surplus since 1982.
Soon
oil will be cheaper than waterReuters.
The
price war is not good news for the big oil companies either. They have already
had a massive round of consolidation in the late 1990s to cope with lower
prices and share prices have fallen again in anticipation of a nasty price war.
Phillips and Conoco, two American oil companies, became the latest to succumb
to the pressure, unveiling a $54 billion merger on November 18th.
Cheap
oil is good news for the global economy. It is reckoned that a $10-a-barrel
drop in the oil price could boost world trade by about 0.5% after a year.
However, such benefits have to be set against the price of instability in the
Middle East. With feelings already running high over America's intervention in
Afghanistan, cheap oil might not be the blessing it first appears to be.
-------------
OPEC
keeps oil output on hold despite low prices
---------------
Well
aren't these nations the pride and joy of the planet..... no wonder Canada and
USA WANT THEIR OWN OIL AND GAS LINES.... ewwwwwww- the worst countries on
universal human rights- especially 4
women, children and gays....
The
Organization of the Petroleum Exporting Countries
(OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in
September 1960 by five countries namely Islamic Republic of Iran,
Iraq, Kuwait, Saudi Arabia and Venezuela.
They were to become the Founder Members of the Organization.
OPEC’s objective is to co-ordinate and unify
petroleum policies among Member Countries, in order to secure fair and stable
prices for petroleum producers; an efficient, economic and regular supply of
petroleum to consuming nations; and a fair return on capital to those investing
in the industry.
1)
Saudi Arabia
2)
Iran
3)
Iraq
4)
Kuwait
5)
Venezuela
6) Qatar
7) Indonesia
8) Libya
9)
United Arab Emirates
10) Algeria
11) Nigeria
12) Angola
-----------------
History
of OPEC
The
Rise of OPEC
The
Organization of the Petroleum Exporting Countries (OPEC) was created at the
Baghdad Conference
in
Iraq in September 1960. The founding members of the organization were Iran,
Iraq, Kuwait, Saudi
Arabia
and Venezuela. These five states were later joined by eight other countries:
Qatar (1961),
Indonesia
(1962), Libya (1962), United Arab Emirates (1967), Algeria (1969), Nigeria
(1971), Ecuador
(1973),
and Gabon (1975). Ecuador and Gabon withdrew from the organization in 1992 and
1994,
respectively.
The
purpose of OPEC, as with any cartel, is to
limit
supplies
in the
hope of keeping prices high. The oil
industry
has been plagued by production booms and falling prices ever since Colonel
Drakes' discovery
of oil
at Titusville, Pennsylvania in 1859. Just as the major oil companies colluded
from the 1920's to the
1960's
to prevent prices (and profits) from falling, members of OPEC meet on a regular
basis to set
production
levels in the hope of maintaining prices. The essential nature of oil (no
substitutes) coupled
with
its limited number of suppliers make it the ideal product for cartelization.
The
rise of OPEC is tied to a shifting balance of power from the
multinational
oil companies
to the
oil
producing
countries. Lacking exploration skills, production technology, refining
capacity, and
distribution
networks, oil producing countries were unable to challenge the dominance of the
oil
companies
prior to World War II. Although Mexico wrestled control of its oil industry
from foreigners in
1938,
it quickly receded from the lucrative international market due to insufficient
capital for investment.
However,
about the time of World War II the oil exporting countries began seeking better
terms in their
oil
contracts. In 1943 Venezuela signed the first "fifty-fifty principle"
agreement which provided oil
producers
with a lump sum royalty plus a fifty-fifty split of profits (i.e., selling
price minus production
cost).
In the
late 1940's Venezuela revised their tax system to capture a greater share of
the oil profits. The oil
companies
responded to this move by shifting oil purchases to countries with cheaper
contracts. In
response,
Venezuela contacted Arab producers and encouraged them to demand similar
"fifty-fifty" deals
and
reform their tax systems. Saudi Arabia, seeing the value of the fifty-fifty
contract and understanding
the
power of acting collectively, quickly demanded and received a similar contract
from Aramco.
In
1947, the Iranian Parliament passed a law demanding the termination of previous
agreements with
Anglo-Iran
(referred to as Anglo-Persian prior to 1935 and British Petroleum after 1954).
When
negotiations
failed to lead to a compromise, Iranian Prime Minister Mossadegh nationalized
oil
operations
by the in May 1951. The collapse of the oil industry pushed the economy into
chaos.
Domestic
opponents, aided by the American Central Intelligence Agency, were able to
topple Mossadegh
in
1953. A new British-Iranian agreement was signed the following year. The newly
restored Shah of
Iran
became a pillar of American middle east policy until the Iranian Revolution in
1979.
While
world oil demand grew during the 1950s, they were outpaced by the growth in
production. The
problem
was exacerbated by the fact that the "fifty-fifty" deals were based
on "posted" prices rather than
"market"
prices. (See
Table
1
from
Danielsen 1982, 136). Given that posted prices were fixed, oil
History
of OPEC
http://www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM
(1 of 5) [8/22/2001 9:34:14 PM]
producing
countries had an incentive to grant additional concessions to expand oil
revenue. Market
prices
became divorced from their calculations. The increases in supply drove market
prices even further
down
and eroded the profits of the multinational oil companies.
The
downward push on prices led to a policy debate in Washington. Although the
United States had been
a net
exporter of oil until 1948, the expansion of cheaply produced oil from the
middle east led to rising
imports.
As prices fell, domestic producers simply could not compete. Moreover, the
Eisenhower
Administration
concluded (as the Japanese had prior to World War II), dependence on foreign
oil placed
the
country's national security in jeopardy. The U.S. responded with an import
quota. The quota kept
domestic
prices artificially high and represented a net transfer of wealth from American
oil consumers to
American
oil producers. By 1970, the world price of oil was $1.30 and the domestic price
of oil was
$3.18
(Danielsen 1982, 150).
In
order to recapture profits, the multinational oil companies tried to cut the
"posted" price from 1958
onward.
In 1959, British Petroleum unilaterally cut oil prices by about 10 percent. It
instantly set off
denunciation
from the oil exporting countries. In 1960, after a second cut in the posted
price in August,
the
five major oil producing countries responded by forming the Organization of
Petroleum Exporting
Countries
in September(OPEC).
During
its first decade, OPEC was able to halt the free fall in prices. However, it
was not able to raise
prices
as most members had hoped. In general, commodity cartels (such as the tin
cartel or the coffee
cartel)
collapse because there are many substitutes for the product or there are many
potential producers
of the
product. A cartel inspired rise in coffee prices triggers some consumers to
switch to hot tea (i.e.,
demand
falls) and encourages new producers to enter the market (i.e., supply rises).
Both the fall in
demand
and the rise in supply put downward pressure on prices and undermine the
cartel's effectiveness.
Cartels
also suffer from a "collective action problem." That is, every member
has an incentive to cheat on
the
cartel by increasing its production. For example, an individual country such as
Iran can increase its
oil
revenues by expanding production
as
long as all other members stick to their quotas
.
However, all
members
have a similar incentive to increase production -- i.e., they all want to free
ride on the collective
good.
The incentive to cheat implies that cartels are traditionally short-lived
enterprises.
Although
the essential nature of oil and the limited number of suppliers worked in the
OPEC's favor, the
power
of the organization remained limited during the first decade for five reasons.
First, OPEC's share
of
world production was only 28% in 1960. By 1970, this figure would rise to 41%.
(See
Table
2
for
OPEC
share of world production and
Table
3
for
the distribution of output among OPEC members. Both
tables
are from Danielsen 1982, 131-132). Second, the fact that the oil reserves in
the ground belonged to
the
multinational corporations (except in Iran)limited the power of the oil
producing countries. Third, the
oil
glut of the 1960's made any threat to raise prices incredible. Fourth, the oil
exporting countries were
desperate
for revenue to fuel economic development. Sixth, important political divisions
existed in the
Arab
world. The revolutionary government of Nasser repeatedly clashed with the Saudi
monarchy. Iraq
threatened
to invade its neighbor Kuwait (it was deterred by the deployment of British
forces). Iran and
Saudi
Arabia vied for leadership of the Middle East.
History
of OPEC
http://www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM
(2 of 5) [8/22/2001 9:34:14 PM]
The
First Oil Shock
OPEC's
fortunes began to shift in the early 1970's as rising demand for oil began to
outstrip production.
Moreover,
the oil producing states began demanding further concessions. Muammar
al-Qaddafi, after
seizing
power in military coup in Libya, demanded and received a 20 percent increase in
royalties, a
"55-45"
profit sharing agreement, and tax concessions (Yergin 1991, 580). This move
triggered a series
of new
demands that ratcheted up oil prices and oil exporting country profits.
As the
world oil market tightened, the Arab world became more vocal in calling for use
of the oil weapon
to
achieve their economic and political objectives. This was most acutely realized
in the oil embargo
during
the 1973 October War between Egypt and Israel. Saudi Arabia refused to increase
production in
order
to halt rising prices unless the U.S. backed the Arab position. Arab oil ministers
than agreed to an
embargo
to further their political objectives. Productin would be cut by 5 percent per
month until the
West
backed down. States adopting a "freindly" position (from the Arab
perspective) would be
unaffected.
When Nixon publicly proposed a $2.2 billion military aid package for Israel,
Arab states
began
an oil embargo against the United States (later expanded to the Netherlands,
Portugal, South
Africa,
and Rhodesia).
The
new official price was agreed among OPEC member countries: $11.65. As
Figure
1
,
which displays
historical
oil prices from 1920-present, shows the jump in prices was unprecedented. Oil
prices jump
from
about $3.00 a barrel before the war to $11.65. The embargo, which did not end
until the
Syrian-Israeli
disengagement was secured, drove the world economy into deep recession. Gross
national
product
in the U.S. declines by 6 percent in the following two years. The Japanese
economy shrinks for
the
first time since the Second World War (Yergin 1991).
The
Second Oil Shock
The
Second Oil Shock began when the Iranian Revolution and ensuing halt of Iranian
petroleum exports
had
caused panic and speculations in the world oil market. When the Carter
administration placed an
embargo
on the importing of Iranian oil into the United States and froze Iranian assets
in response to the
hostage
taking, Iran counterattacked by prohibiting the exporting of Iranian oil to any
American firm.
Moreover,
the outbreak of the war between Iran and Iraq in 1980 shook the oil market as
well. In its
initial
stage, the Iran-Iraq war abruptly removed almost 4 million daily barrels of oil
from the world
market—15
percent of total OPEC output and 8 percent of free world demand. In 1980 OPEC
representatives
(with the exception of Saudi Arabia) agreed to set prices at thirty-six dollar
a barrel As
Figure
1
again
shows the jump in prices was unprecedented.
However,
the impact of the Second Oil Shock turned out to be short-lived. The influence
of OPEC
appeared
to be diminishing as the production by Mexico, Britain, Norway, and other
non-OPEC
countries
and Alaska was continuing to increase. Anxious to increase market share, they
were making
significant
cuts in their official prices. As a result, OPEC's share of world output
quickly fell by 27
percent
(Yergin 1991). As
Table
4
shows,
oil revenues for OPEC members plunged after 1981. Saudi
Arabia,
the largest producer in OPEC, saw its oil revenues plunge from $113.2 billion
in 1981 to just
$20.0
billion in 1986.
History
of OPEC
http://www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM
(3 of 5) [8/22/2001 9:34:14 PM]
Although
the Second Oil Shock sent the developed world into recession, the most serious
long run
impact
of the second shock was in the developing world. During the 1970s, the oil
producing states
placed
a significant portion of their revenue into commercial banks because they
simply could not spend
the
money as fast as it came in. The commercial banks loaned this money to developing
countries which
hoped
to repay the loans with revenue from their rapidly growing economies. However,
the developed
world
responded to the Second Oil Shock by rapidly raising interest rates which
deepened the on-going
recessions.
The developing countries saw exports fall, oil import prices rise, and interest
payments
skyrocket.
The result was the debt crisis which first appeared in Mexico in 1982 and
quickly spread
throughout
the developing world. In the "lost decade" of the 1980's, years of
hard fought economic gains
were
wiped out. From 1980-88, the real income of mecian workers fell by 40 percent
(Lairson and
Skidmore
1993, 277).
Since
early 1980s, the world petroleum market confronted the OPEC with an unpalatable
choice: cut
prices
to regain markets or cut production to maintain price. However, the OPEC
countries did not want
to
reduce prices, for fear that they would undermine their whole pricing
structure, lose their great
economic
and political gains, and so diminish their political influence. OPEC did not
always organize a
united
front against this pressure. For example, Saudi Arabia, whose oil production
far surpassed other
member
countries, had championed decisions for low pricing for larger market-sharing
and long-term gains.
The
Persian Gulf War
The
third major price spike in
Figure
1
occurred
in 1990-1 when Iraq invaded its fellow OPEC member
Kuwait.
Iraq had long claimed the territory of Kuwait; in 1961 it appeared Iraq was
going to swallow its
tiny
neighbor until the dispatch of troops by the British. In 1991 the on-going
territorial conflict was
exacerbated
by two oil issues: (1) the continued pumping of oil by Kuwait from a field
located under
both
countries; and (2)low oil revenues for Iraq which made paying off its war debts
(to Kuwait and
others)
difficult. A successful invasion would expand reserves, augment Iraqi power in
OPEC, raise oil
prices
and revenue, and annul war debts to Kuwait.
Iraq
gambled that the U.S. response would be political and economic. However, the
Iraqi invasion
triggered
a military response which was supported by an unlikely coalition of western,
developing,
communist,
and Arab states. The sudden removal of two major producers, Kuwait and Iraq,
could have
sent
oil prices through the ceiling. However, Saudi Arabia expanded production by
literally millions of
barrels
per day to keep prices from rising a great deal. Since the war, Iraq's refusal
to comply with United
Nations
resolutions has resulted in the continuation of an oil embargo.
The
Future of OPEC
In any
cartel, success in the short run sets in motion events which make maintaining
success nearly
impossible.
A successful cartel raises prices which encourages consumers to cut demand and
potential
producers
to enter the market. The success of OPEC in the 1970s triggered conservation,
substitution,
and
new production in the 1980s.
While
oil prices are currently at record lows in real terms (i.e., controlling for
inflation), it is clear that
History
of OPEC
http://www.ssc.upenn.edu/polisci/psci260/OPECweb/OPECHIST.HTM
(4 of 5) [8/22/2001 9:34:14 PM]
-------------------
OPEC Quota Wars in 1980s
some
of the reserves probably do not exist
OPEC
quota war in 1980s
Unreliable
oil reserves estimates
Almost
no oil reserve estimates anywhere on Earth are reliable.
In
the mid 1980s, the MidEast countries increased their estimates by double, part
of a quota war that allowed export quotas based on proven reserves. No new oil
fields were discovered to justify these increased figures.
So
how much oil does the Middle East really have? It’s a secret
---------------
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Wastewater Disposal Linked to Remotely Triggered Quakes
news.nationalgeographic.com/news/...fracking-wastewater... Cached
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-----------------
---------------
OH COME ON.... CANADA DOESN'T EVEN SHOW UP HERE.... OH COME ON!!!!
How much of the 13 trillion US debt does china and other countries own? ?
USA DEBT...
National debt for selected years
| Fiscal year (begins Oct. 1 of year prior to stated year) |
Total debt in $billions Treas./OMB [86][87][88] |
Total debt as % of GDP Low-High est. or BEA/OMB (a – Treas. audit) |
Debt held by public $billions OMB or Treas./OMB after 1996 |
Debt held by public as % of GDP; low-hi (from any combination of sources) |
GDP $billions BEA/OMB[89] est.=MW.com |
|---|---|---|---|---|---|
| 1910 | $ 2.65/- | 8.1% | $ 2.65 | 8.1% | est. $ 32.8 |
| 1920 | 25.95/- | 29.2% | 25.95 | 29.2% | est. 88.6 |
| 1927 | [90] 18.51/- | 19.2% | 18.51 | 19.2% | est. 96.5 |
| 1930 | 16.19/- | 16.6% | 16.19 | 16.6% | est. 97.4 |
| 1940 | 42.97/50.70 | 43.8–51.6% | 42.77 | 43.6% | -/98.2 |
| 1950 | 257.3/256.9 | 92.0% | 219.0 | 78.4% | 279.0 |
| 1960 | 286.3/290.5 | 53.6–54.2% | 236.8 | 44.3% | 535.1 |
| 1970 | 370.9/380.9 | 35.4–36.4% | 283.2 | 27.0% | 1,049 |
| 1980 | 907.7/909.0 | 32.4–32.6% | 711.9 | 25.5% | 2,796 |
| 1990 | 3,233/3,206 | 54.2–54.6% | 2,400 | 40.8% | 5,915 |
| 2000 | a1$ 5,659 | a55.8/55.7% | $3,400 | 33.6% | $10,150 |
| 2001 | a25,792 | a54.8% | 3,350/3,300 | 31.4-31.6% | 10,550 |
| 2002 | a36,213 | a57.1% | 3,550 | 32.6% | 10,900 |
| 2003 | a6,783 | a 59.9/59.8% | 3,900 | 34.6% | 11,350 |
| 2004 | a7,379 | a 61.0% | 4,300 | 35.6% | 12,100 |
| 2005 | a47,918 | a 61.4% | 4,600 | 35.7% | 12,900 |
| 2006 | a58,493 | a 62.1% | 4,850 | 35.3% | 13,700 |
| 2007 | a68,993 | a 62.8% | 5,050 | 35.2% | 14,300 |
| 2008 | a710,011 | a 67.9/67.8% | 5,800 | 39.3% | 14,750 |
| 2009 | a811,898 | a 82.5% | 7,550 | 52.4% | 14,400 |
| 2010 | a9$13,551 | a 91.6% | $ 9,000 | 61.0% | $14,800 |
| 2011 | a1014,781 | a 96.1% | 10,150 | 65.8% | 15,400 |
| 2012 | a1116,059 | a 100.2/99.8% | 11,250/11,300 | 70.0-70.4% | 16,050/16,100 |
| 2013 | a1216,732 | a 100.9/100.7% | 12,000 | 72.1-72.3% | 16,600 |
| 2014 | 17,824/- | ~103.3%/- | 12,800/- | ~74.1% | ~17,250/- |
International debt comparisons
| Entity | 2007 | 2010 | 2011 |
|---|---|---|---|
| United States | 62% | 92% | 102% |
| European Union | 59% | 80% | 83% |
| Austria | 62% | 78% | 72% |
| France | 64% | 82% | 86% |
| Germany | 65% | 82% | 81% |
| Sweden | 40% | 39% | 38% |
| Finland | 35% | 48% | 49% |
| Greece | 104% | 123% | 165% |
| Romania | 13% | 31% | 33% |
| Bulgaria | 17% | 16% | 16% |
| Czech Republic | 28% | 38% | 41% |
| Italy | 112% | 119% | 120% |
| Netherlands | 52% | 77% | 65% |
| Poland | 51% | 55% | 56% |
| Spain | 42% | 68% | 68% |
| United Kingdom | 47% | 80% | 86% |
| Japan | 167% | 197% | 204% |
| Russia | 9% | 12% | 10% |
| Asia 1 | 37% | 40% | 41% |
| Latin America 2 | 41% | 37% | 35% |
1China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand
2Argentina, Brazil, Chile and Mexico
COMMENT:
Billions ----------------- Percent
People's Republic of China (mainland) 846.7 ------------ 20.8%
Japan 821.0 -------------- 20.2%
United Kingdom 374.3------------ 9.2%
Oil exporters1 223.8 ------------ 5.5 %
Caribbean Banking Centers2 150.7 ------------- 3.7%
Brazil 162.2 ----------------- 4.0 %
Hong Kong (Special Administrative Region) 135.2 ----------------------%3.3
Russia 130.9 ---------------------- 3.2%
Republic of China (Taiwan) 130.5 ---------------------- 3.2%
It's worth noting that the U.S. also owns foreign debt, so if you factor that in and make things really complicated then China would own 7% of U.S. debt.
Source(s):
http://en.wikipedia.org/wiki/National_debt_of_the_United_States
----------------
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