OPEC at 40

A Question of Influence

Start of a new millennium is expected to be also the start of a new era in the life of several organizations formed throughout the years to serve economic, social and political interests of man; the beginning for some and the end for some others. Many international organizations are left with no option but to adjust themselves to the new global arrangements if they aim to survive. OPEC is one such organization. Forty years of ups and downs must have turned OPEC into a seasoned organization by now.
OPEC has had a very varying share in the global oil basket. It had 60% of the international oil market in 1970s which dropped to less than 40% in 1980s. Based on the available statistics, OPEC member states currently supply 40% of all the world’s oil production which amounts to 72,600,000 barrels. A study by OWEM (OPEC World Energy Model) forecasts that in the year 2520, OPEC will be supplying 52% of all the world’s oil demands. Speaking of reserves, OPEC members sit on 77% of the fixed oil reserves as well as 42% of the proven gas reserves.

As the most influential economic body of the Third World countries, OPEC is expected to make new determining decisions as it celebrates its 40th birthday. Some believe that OPEC is presently in a transition period from the old order to a new one. To this end, the upcoming summit in Venezuela may be an outstanding event to bring OPEC countries in coordination over the future objectives. It can be a unique opportunity for OPEC members to review mistakes of the past and act smart in the future. OPEC members could use a little bit of constructive dialogue to serve their collective and national interests by recognizing new necessities of energy economics. The ever-changing status of the world energy market makes such a move an indispensable.
According to the statements issued by OPEC officials, oil ministers of member states have agreed on a number of topics to be discussed in the Venezuela Summit in order to set long-term objectives of OPEC. Some major topics will be: means of further solidarity among members, revising Articles of Association, enhancing cooperation between members and non-members, dividing market share and passing rules on future oil capacities of members.
Other speculations over OPEC include establishment of an organization to act as a replacement, or in parallel with OPEC. Advocates of this idea maintain that after 40 years, OPEC has grown too old to influence the energy economics by acting in compatibility with the new global order.
In OPEC, major producers like Iran and Saudi Arabia sit next to minor producers who seek a totally different set of objectives. Moreover, in the next ten years the reserves of some OPEC members will deplete down to a level to merely suffice their own domestic consumption. Membership of such countries in OPEC will no longer make sense.
Some proposals call for establishment of a new organization with a combination of OPEC and non-OPEC membership namely: Iran, Saudi Arabia, Iraq, U.A.E., Kuwait, Venezuela, Mexico, Norway and Russia. Supplying two-thirds of the world oil market, this team could act quite powerfully and independently in controlling supplies, demands and prices. To some experts, this sounds like a quite attractive idea in the interest of members.
All said, OPEC has been established based on the philosophy that oil-exporting countries have common interests. It can therefore survive only as long as it serves the interests of its members. Only compatibility with new conditions, adjustment to new ways of global economy and establishment of long-term strategies can insure the future of OPEC. Otherwise, OPEC members may bitterly face a question of influence: Is it OPEC that influences the energy market or is it the energy market that influences OPEC?