OPEC turns 50 - celebrating its 50th anniversary amid speculations over its impact on oil markets

[pampango]

http://english.aljazeera.net//indepth/2010/09/201091484454366337.html

The Organisation of Petroleum Exporting Countries, as its known, is turning 50 today. It was founded in Baghdad, Iraq on September 14, 1960. The founding members were Iraq, Iran, Kuwait, Saudi Arabia and Venezuela as the five oil producing nations sought to control their crude output in a bid to increase prices and hence their revenues.

Today, OPEC has 12 members: Saudi Arabia, Iran, Iraq, Kuwait, Venezuela, United Arab Emirates, Algeria, Nigeria, Ecuador, Angola, Libya and Qatar. Indonesia joined in 1962 and withdrew in 2008 for not developing enough wells, and Gabon joined in 1975 and withdrew in 1996. OPEC members produce about 40 percent of the world's oil. The cartel meanwhile possesses about 60 percent of the world's proven crude oil reserves."

"World oil prices have traded between 70 and 80 dollars a barrel for a number of months - a range which OPEC members have deemed adequate. However two years ago the market was vastly different in the run-up to and during the financial crisis. Geopolitical tensions sent crude futures spiking to record highs above 147 dollars, before the economic crisis sent them tumbling to just 33 dollars a barrel. The slump in prices saw OPEC members cut their output quotas by about 20 percent - an unprecedented amount in the group’s history.

Looking ahead, OPEC could well see a spike in its production as Iraq seeks to lift output to 12 million barrels a day within six years, up from 2.5 million at present as the country recovers after years of conflict. That would catapult Iraq to the second largest oil producer in OPEC behind Saudi Arabia.

[rucky]

1. Happy Birthday, Oil Cartel!

Have a great day!

[happyslug]

2. One of the jokes about OPEC in the 1960s sound odd today

The Joke was OPEC was formed at the urging of the Seven Sisters (BP, Exxon etc) so that they would only have to go to one place, wherever OPEC was meeting, and tell them what the Texas Railroad Commission had decided would be the price of oil for the next year.

This reflected that from the 1930s till 1969 (when the Texas Railroad Commission let all of the oil fields in Texas be pumped at their maximum) the Texas Railroad Commission, through its power of setting how much oil any one pump in Texas could pump per year, sat the price of oil. If the Commission thought oil prices to low, it ordered a drop in production. If the price was to high, the Commission permitted higher production. This set the price of oil in the US and the World from the 1930s till 1969. In 1969 Texas production started to drop from natural causes (i.e. oil fields were past peak) and Texas lost its ability to set prices for it was no longer the "Swing producer". It took the 1973 Oil embargo for Saudi Arabia to realized it was the new "Swing Producer" i.e. that producer who can out produce any one else, but does not do so in an effort to keep the price of oil up. Texas had been the "Swing Producer" till the late 1960s, but then lost it and with that lost, lost the ability to set world wide oil prices. Arabia had it till recently (indications that Arabia can no longer produce the oil needed, that seems to be what happened in 2008, but the recession drop demand so some control exist today, but any increase in demand will lead to a clear showing that Arabia is NO longer the Swing producer).

The problem with any extraction industry without a "Swing producer" is that prices will go up and down more radically then with a swing producer controlling price, Esso (now Exxon) did so from the late 1860s till it was broken up (and Texas oil field founded) about 1912. Thus after WWII (Which saw a huge increase in oil demand), oil prices dropped in the 1920s and 1930s for no one had control till the Texas Railroad Commission took control during the Great Depression. The Commission worked to keep the price of oil stable till it lost control in 1969. After 1973 Saudi Arabia took over that function using OPEC as a front. Now it appears Arabia has lost control, and if that is the case be prepared for a ride. Price going up and down radically, $10 a gallon one month, $2 the next. It will be a bumpy ride, with the good possibility that we may stay in a recession for decades, i.e. economy boom, demand for oil goes up as does the price till the price gets to high and causes a new Recession that drops the price of oil. I can see this going up and down for decades till everyone accepts the idea of using something other then oil for transport. Given that over 90% of Transport is now Oil driven that will take decades (Electricity in the form of electric trains provides most of the transportation NOT provided by Oil).