OPEC was formed in These companies are known as the seven sisters. This group tried to eliminate competitors so they could control the world crude oil market. High market share has also given OPEC the bargaining power to price oil above what prices would be in a more competitive market. This means OPEC has the ability to sway crude oil prices by increasing or decreasing production. If OPEC has the power to sway prices by cutting production, why did OPEC decide not to cut production, which subsequently led to the recent collapse in the price of oil?
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We should also not forget that, over the last two years, there has been a strong increase in non-energy commodity prices, sometimes at rates greater than that of oil. This is an often overlooked fact. Slide 4 First and foremost, oil demand growth has been exceptional. Fuelled by high economic growth, global oil demand surged in by 2.
Such a high level of demand growth has not been seen since the early s. North America and the developing countries, in particular China, were at the centre of this remarkable spurt.
This is, in part, a delayed reaction to the lower oil prices witnessed at the end of the s, with the commensurate stalling of expenditure on exploration and development gradually being felt.
Slide 6 Next, there has been tightness in the downstream sector. In three key regions of the world — Asia, Europe and the United States — refineries have been operating at 90 per cent of capacity and above for much of the time.
In this situation, any disruption can create product shortages — whether from a maintenance shutdown or an emergency such as Hurricanes Katrina and Rita. There is also a lack of capacity to process heavier sour crudes, causing the prices of light sweet crudes to climb even higher and the differentials between crude grades to increase.
All these factors have contributed to downstream tightness, a situation that, based on the information available today, OPEC does not expect to ease in the near term. Slide 7 Also influencing price movements has been increasing activity in the futures market, with a new inflow of capital movements by hedge and pension funds.
Indeed, open interest contracts in the NYMEX passed the one million mark for the first time just last week. Add to this mix natural disasters and uncertainties stemming from other disruptive events across the globe, and it is understandable why there is so much volatility at the present time. Slide 8 OPEC has been responding as necessary to the need for additional oil, underlining its continued commitment to achieving market stability. Moreover, in September , OPEC additionally agreed to make available to the market spare capacity of around two million barrels a day in Member Countries, should it be called for.
On top of this, further increases in OPEC capacity are being implemented. It should be noted that, at all times, the market has been well supplied with crude oil. In addition to ensuring the stabilisation of prices in international oil markets, with a view to eliminating harmful and unnecessary fluctuations, OPEC aims to secure an efficient, economic and regular supply of petroleum to consuming nations and a fair return on their capital to those investing in the petroleum industry.
Slide 10 Looking at the United States, where gasoline prices have surged, we see that crude oil stocks have increased to their highest levels since Gasoline stocks, on the other hand, are declining, for several reasons.
First, there has been a heavy refinery maintenance schedule in the first part of this year. Secondly, and more importantly, the introduction of new specifications and the removal of the use of MTBE have created additional tightness in the downstream and more costs, in particular given the high price of ethanol and the logistical difficulties in transporting it. In addition to federal and state taxes, the diversity of specifications has created niche gasoline markets and made gasoline less fungible.
There is a need for harmonisation between environmental and energy policies. Very important, most of OPEC 's member countries are there. What happened at OPEC. What are the organs of opec. OPEC's population is ,, OPEC is an organisation, not a place, so no country is located in it.
Egypt is not a member of OPEC. OPEC is so silly. Opec had its headquater in Geneva and Switzerland. OPEC decides the price of oil. Log in. United States of America. United States. See Answer.
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