PROJECT NAME:

ORGANIZATION OF THE PETROLEUM

EXPORTING COUNTRIES (OPEC)

GROUP MEMBERS:

NAME: ROLL NOS:

SMITA BANE 76
KOMAL SATVE 77
DARSHANA NAIK 78
RIA GUPTA 87
JANHAVI RAUT 124
SNEHAL KHOND 128

SUBMITTED TO:
PROF. GOVIND SOWANI

1
OPEC MEANING:

The Organization of the Petroleum Exporting Countries (OPEC) is a permanent

intergovernmental organization of 12 oil-exporting developing nations that coordinates and
unifies the petroleum policies of its Member Countries. OPEC seeks to ensure the stabilization of
oil prices in international oil markets, with a view to eliminating harmful and unnecessary
fluctuations, due regard being given at all times to the interests of oil-producing nations and to
the necessity of securing a steady income for them. Equally important is OPEC’s role in
overseeing an efficient, economic and regular supply of petroleum to consuming nations, and a
fair return on capital to those investing in the petroleum industry.

2
OPEC FOUNDED:

OPEC was founded at a meeting held on 10–14 September 1960 in Baghdad, Iraq, by five oil-
producing developing countries: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. These
countries are referred to as the ‘Founder Members’. OPEC was registered with the United
Nations Secretariat on 6 November 1962 (UN Resolution No. 6363).
OPEC Member Countries

Ecuador suspended its Membership in December 1992 and reactivated it in December

2007.Gabon, which became a Full Member in 1975, terminated its Membership with effect from
1 January1995.
Indonesia, which became a Full Member in 1962, suspended its Membership in December 2008.

OPECS MISSION, OBJECTIVES AND GOALS:

MISSION:
In accordance with its Statute, the mission of the Organization of the Petroleum Exporting
Countries (OPEC) is to coordinate and unify the petroleum policies of its Member Countries and
ensure the stabilization of oil markets in order to secure an efficient, economic and regular
supply of petroleum to consumers, a steady income to producers and a fair return on capital for
those investing in the petroleum industry.

3
OBJECTIVES:
The organization’s principal objectives are:

1. To co-ordinate and unify the petroleum policies of the Member Countries and to
determine the best means for safeguarding their individual and collective interests;

2. To seek ways and means of ensuring the stabilization of prices in international oil
markets, with a view to eliminating harmful and unnecessary fluctuations; and

3. To provide an efficient economic and regular supply of petroleum to consuming nations

and a fair return on capital to those investing in the petroleum industry.

GOALS:
1. The OPEC goal countries can take perfect stability in the market.

2. The oil supply/delivered to the supplier is steady.

3. The prices of oil are reasonable and fare to the consumers.

4. To obtain these goals OPEC voluntarily produce less oil.

TERMS OF MEMBERSHIP OF OPEC:

The OPEC Statute stipulates that “any country with a substantial net export of crude petroleum,
which has fundamentally similar interests to those of Member Countries, may become a Full
Member of the Organization, if accepted by a majority of three-fourths of Full Members,
including the concurring votes of all Founder Members.”

The Statute further distinguishes between three categories of Membership: Founder Member,
Full Member and Associate Member. Founder Members of the Organization are those countries
that were represented at OPEC’s first Conference, held on 10–14 September 1960 in Baghdad,
Iraq, and that signed the original agreement establishing OPEC.
Full Members are the Founder Members, plus those countries whose applications for
Membership have been accepted by the Conference. An Associate Member is a country that does
not qualify for Full Membership, but that is, nevertheless, admitted under such special conditions
as may be prescribed by the Conference. There are currently 12 OPEC Member Countries.

4
OPEC FUNCTION:

Member Country Delegations meet at the OPEC Conference to coordinate and unify their national
petroleum policies, in order to promote stability and harmony in the international oil market. They are
supported by the OPEC Secretariat, which is directed by the Board of Governors and run by the Secretary
General, and there is assistance from other bodies, such as the Ministerial Monitoring Sub-Committee
And the Economic Commission Board.

Member Countries consider the current oil market situation and forecasts of market
fundamentals, such as economic growth rates and 5 petroleum demand and supply scenarios.
They then consider what changes, if any, should be made to existing production agreements, to
promote stable prices and steady supplies to consumers in the short, medium and long terms.

OPEC CONFERENCE:

The Conference is the supreme authority of the Organization. It consists of a Ministerial-level

Delegation from each Member Country. The Conference meets twice a year — in March and
September — and, in addition, holds Extraordinary Meetings when required. It operates on the
principle of unanimity. It is responsible for the formulation of the general policy of the
Organization and the determination of the ways and means of its implementation.

The Conference also decides on applications for Membership of the Organization, and reviews
the reports and recommendations submitted by the Board of Governors on the affairs of the
Organization. It approves the appointment of Governors from each Member Country and elects
the Chairman of the Board.
Moreover, the Conference directs the Board to submit reports or make recommendations on any
matter of interest to the Organization, and considers and decides upon the Organization’s budget,
as submitted by the Board.

5
HEADS OF DELEGATION OF OPEC:

The Heads of Delegation are the official representatives of each Member Country to the OPEC
Conference. They are normally Ministers of Oil, Energy or equivalent portfolio.

TRANSPORTATION USED FOR OIL AND PETROL:

The various transportation used by various countries all over the world are:
• Road Transport
• Air Transport
• Water Transport
• Pipeline Transport

OPEC CONTROLS THE OIL MARKET:

Iran, OPEC's second-largest oil producer, is using 20 tankers to collect and store crude,
according to vessel-tracking service Petro Logistics Ltd.OPEC does not control the oil market.
OPEC Member Countries produce about 40 per cent of the world’s crude oil and 15 per cent of
its natural gas. However, OPEC’s oil exports represent about 55 per cent of the oil traded
internationally. Therefore, OPEC can have a strong influence on the oil market sometimes,
depending upon the overall conditions.
OPEC seeks stability in the oil market and aims to deliver steady supplies of oil to consumers at
fair and reasonable prices. The Organization has achieved this in a number of ways — by
voluntarily producing more or less oil in response to demand and supply dynamics.

OPEC SET OIL PRODUCTION QUOTAS:

The OPEC Statute requires OPEC to pursue stability and harmony in the petroleum market for
the benefit of both oil producers and consumers. To this end, OPEC Member Countries respond
to market fundamentals and forecast developments by coordinating their petroleum policies.

Production quotas are one possible response. If demand grows, or some producers supply less
oil, OPEC can increase its oil production to prevent a sudden rise in prices or shortfall in supply.

6
OPEC might also reduce its oil production in response to market conditions, as a means of
countering falling prices or a glut on the market.

It does this by setting a new group production ceiling or adjusting an existing one. This ceiling is
divided into individual Member Country quotas, as agreed by the Conference.

However, when OPEC makes its production agreements, it does so with the expectation that non-
OPEC producers will actively support the Organization’s measures, since this will ensure
OPEC’s decisions are more effective and benefit everyone.

World crude oil production, 1960–2008

The impact of OPEC output decisions on crude oil prices must be considered separately from the
issue of changes in the prices of oil products, such as gasoline or heating oil. There are many
factors that influence the prices paid by end-consumers for oil products. In some countries, taxes
comprise 70 per cent of the final price paid by consumers, so even a major change in the price of
crude might have only a minor impact on consumer prices.

OPEC INFLUENCES THE WORLD ECONOMY:

OPEC plays an important role in promoting and sustaining world economic growth by ensuring
steady supplies of oil at reasonable prices. OPEC provide the required amount of oil to all parts
of the world to help their economies

7
However, OPEC has long been aware of the need for improvements in world trade. In 1975, the
Organization backed calls for the creation of a new international economic order based on
justice, mutual understanding and a genuine concern for the well-being of the entire world’s
people. OPEC also called on industrialised and developing countries to come together to solve
the problems facing poor countries and to look for ways of establishing a better economic system
by allowing increased trade and exchange of knowledge.

OPEC HELPS OTHER COUNTRIES:

In 1975, OPEC also called on industrialized and developing countries to come together to solve
the problems facing poor countries and to look for ways of establishing a better economic system
by allowing increased trade and exchange of knowledge.

OPEC established the OPEC Fund for International Development (OFID) in January 1976
(originally called the ‘OPEC Special Fund’) to promote cooperation between OPEC Member
Countries and other developing states. In particular, OFID aims to help poorer, low-income non-
OPEC countries in their pursuit of social and economic advancement. OFID is active in many
regions, including Africa, Asia, Europe and Latin America. It has supported a wide range of
projects, from providing clean water and energy to remote communities, to building schools,
Hospitals and roads and developing industry, farming and trade opportunities. Since its
establishment, it has made commitments totalling nearly US $10.1 billion, two-thirds of which
have already been disbursed.

The Third Summit of OPEC Heads of State and Government in 2007reaffirmed OPEC’s
commitment to energy for sustainable development. The concluding Riyadh Declaration stated
that energy was essential for poverty eradication, sustainable development and the achievement
of the Millennium Development Goals. It associated Member Countries with all global efforts
aimed at bridging the development gap and making energy accessible to the world’s poor.

OPEC’S ATTITUDE TOWARDS FUEL-EFFICIENCY:

OPEC fully supports technological improvements that make transportation cleaner, safer and
more efficient. The Organization would like more people to enjoy the benefits of personal
mobility in an environmentally sustainable manner.

OPEC has always recognized that crude oil is a finite resource. By managing its production, the
Organization aims to enable many generations to benefit from its use. During the 20th century,
oil dramatically transformed the world for industrialized countries. Increasingly, it is doing the
same for developing countries. Technologies that enhance fuel efficiency are, therefore,
welcome.

8
OPEC SUPPORT ENVIRONMENTAL POLICIES:

OPEC is concerned about the environment and wants to ensure that it is clean and healthy for
future generations. In fact, all OPEC Member Countries have ratified the Kyoto Protocol to the
United Nations Framework Convention on Climate Change. OPEC considers that the
development of technology is important for limiting or reducing greenhouse gas emissions. In
this regard, the Secretariat is exploring options to participate in international collaborative efforts
in research and development programmes geared at improving carbon capture and storage
technology. OPEC Member Countries are also investing heavily to improve the environmental
credentials of oil by tackling gas-flaring and promoting safer and cleaner drilling, transportation
and refining processes. In addition, OPEC participates in many international meetings to remind
governments and others debating environmental policies that they must consider the needs of
developing countries, especially those that rely on oil for their income.

To demonstrate its commitment, at the 2007 Third Summit of Heads of State and Government of
OPEC Member Countries in Riyadh, Saudi Arabia, a number of OPEC Member Countries
pledged a total of $750 million to help fund research and development into the environmental
challenges facing the energy industry.

OPEC CONCERNED ABOUT HIGH OIL TAXES:

Many countries have introduced heavy taxes on oil products. In some countries, the price that
motorists pay for gasoline is three or four times higher than the price of the original crude oil.
Taxes can account for as much as 70 per cent or more of the final price of oil products. As a
result of these oil taxes, some governments in oil-consuming countries (especially in Europe,
where taxation levels are highest) receive much more income from oil than OPEC Member
Countries.

OPEC is concerned that many of the so-called ‘green’ taxes that are currently levied on oil do not
specifically help the environment. Instead, they are simply added to government budgets and
spent on other items.

Several industrialized countries are developing policies to limit the use of fossil fuels as a way of
reducing their emissions of carbon dioxide (CO2). Many are already imposing heavy taxes,
particularly on oil products, while subsidizing alternative fuels whose sustainability and
environmental impact remains unknown. Yet, studies have shown that the industrialized nations
of the Organization for Economic Cooperation and Development could cut their CO2 emissions
by
12 per cent by 2010 and still maintain their tax revenues without concentrating taxes on oil alone.
This could be achieved by adopting pro rata tax system that levies tax on all forms of energy,
according to differing carbon contents.

OPEC is concerned that some countries may introduce environmental and taxation policies that
are harmful to those who rely on fossil fuels for a substantial part of their income. Also, some

9
countries with high oil taxes actually subsidize domestic coal production, despite the fact that
coal produces more CO2 than oil.

OPEC GUARANTEES SECURITY OF OIL SUPPLY:

OPEC will be called upon increasingly to supply the incremental barrel. The Organization has
both the capability and the will to do this. More than three-quarters of the world’s proven crude
oil reserves are located in OPEC Member Countries. Moreover, these reserves are more
accessible and cheaper to exploit than those in non-OPEC areas. In 2030, the OPEC Secretariat
reference case sees the Organization meeting almost half the world’s oil demand with supplies of
53.4 million barrels per day, including natural gas liquids.

Only OPEC nations have significant spare oil production capacity, which is why they are able to
increase output at relatively short notice. OPEC’s actions at critical times — such as during the
Gulf War in 1990–91, the invasion of Iraq in 2003 and Hurricanes Katrina and Rita in 2005 —
demonstrated the Organization’s ability to keep the oil market well-supplied in the face of natural
disasters and geopolitical
crises. Expanding capacity requires substantial investment and long lead-times. For this reason,
oil producers and investors are concerned about security of demand, just as consumers are
worried about security of supply.

OPEC recognizes the need for massive investment in exploration, production and the
construction of pipelines and other oil-related infrastructure. Its Member Countries are constantly
investing to ensure a continuous supply of oil to help fuel world economic growth. Consistency,
transparency and certainty within the international oil community — as well as a broad-based,
equitable approach — are
needed to plan for the future and meet the requirements of the global economy. The industry is
much better off if there is an underlying consensus on how to handle major issues, such as price
stability, security of supply and demand, investment, environmental issues and sustainable
development. This is why OPEC welcomes and encourages the big advances in producer-
consumer dialogue and cooperation that have occurred in recent years.

NEED FOR SECURITY OF OIL DEMAND:

Just as oil consumers need steady supplies of oil, oil producers rely on steady demand. Sudden
changes in demand can have a major financial impact on oil producers, their economies and, by
extension, the well-being of their people.

Oil production is a long-term affair. The oil industry works 24 hours a day, 365 days a year
(except when disruptions occur, due, for example, to maintenance or bad weather). Oil facilities
require huge investments and investors seek to earn a reasonable return on their capital. A
downturn in oil demand could force oil production to slowdown or stop. This could physically
damage oil fields, reducing the amount of oil that can be recovered in the future.

10
Such a downturn could also negatively impact oil installations. Some facilities, such as those
operating in the oceans, are very difficult and expensive to shut down. When production
declines, oil producers might be forced to lay off staff. Downstream operators, such as gasoline
retailers, refiners and transport companies, would also suffer accordingly.

If oil producers receive lower incomes, they spend less money and import fewer goods from oil
consumers. If investors are unsure about the risks and the likely returns from petroleum
investments, they may not invest. If producers do not invest enough money, or do not do so early
enough, the world could face a future shortage of oil supplies.

However, if oil producers continue to see reasonable prices and stable demand, they will
maintain their production and invest on time to meet demand. Thus, security of oil supply relies
upon security of oil demand. Oil producers and oil consumers need to work together to preserve
both.

OPEC LONG-TERM STRATEGY:

OPEC’s Long-Term Strategy provides a coherent framework and consistent vision for the future
of the Organization. The culmination of more than two years of preparation, the Strategy is
prepared every five years by the OPEC Secretariat under the guidance of the Deputy Ministers of
Petroleum and Energy of Member Countries.
The Strategy analyses factors that may affect the Organization’s efforts to ensure market stability
and fair prices, and also analyses global trends that may have an impact on the security of world
oil demand. In line with OPEC’s fundamental mission, the Strategy considers the overall
conditions which are necessary for the regular supply of petroleum to consumers.

THE VARIOUS PROBLEMS FACED BY OPEC:

1. Worldwide oil sales dominated by U.S. dollars -

Since the beginning of 2003, Iran has required euro in payment of exports toward
Asia and Europe, though prices are still expressed in US dollars. And Venezuela
also accepted euro as a trading currency. Iraq also trying to trade in euro but it
was not able sustain. When dollar falls, purchasing power of OPEC member states
falls

2. Negative results of increasing oil prices –

Increase in oil prices decreases consumption and could cause net decrease in
revenue. Extended rise could encourage change to alternative energy or increased
conservation

3. Oil price rise due to recession -

In a developed nation like the United States, every single aspect of business and
life requires some or the other form of oil. As per the current scenario, crude oil is

11
 trading at much higher than what it was last at $87.82 per barrel on December 10,
2010. Truth be told, this price is nowhere as high as that which caused the Great
Recession of mid 2008. The nation's economy is still recuperating from the
recession though. Even a comparatively lower oil price at $85-90 per barrel adds
to the heavy burden being lugged around by the consumers. It also adds to the
woes of the financial market. When it is considered that the United States
economy is still recuperating from the recession, the impact of rising energy
prices is amplified.

4. Increase in the production of Non-OPEC members -

The increase in the production of Non-OPEC members, the Drive for energy
conservation. It is obvious that if the drive for energy conservation strengthens,
OPEC members will start to lose money, their cartel will be of no use anymore
since people will start to buy alternative energy sources that are cheaper and
environmental friendly.

CONCLUSION:
The world now has a splendid invention that can convert plastic back to oil. The machine is
effective in recycling different kinds of plastic into oil. Akinori Ito says "If we burn the plastic,
we generate toxins and a large amount of CO2. If we convert it into oil, we prohibit CO2
production and at the same time, increase people's awareness about the value of plastic garbage".
It has perfect stability in the market. They also promise to deliver the oil to the customers in
reasonable price.
OPEC are working in partnership with each other when it comes to exploiting the world’s finite
petroleum resources, and so it is necessary to ensure that every effort is made to facilitate this
process, including the handling of issues of environmental and social concern.
OPEC clearly has the reserve strength to cope with the rising levels of demand for both oil and
gas that are expected in the early 21st century.

In investment terms, we are looking at very large sums of money. For OPEC oil alone, the
investment is estimated at nearly $100 billion by 2010 and as much as $200 bn by 2020. For the
more costly non-OPEC oil, the figures are much higher. And then there is gas, with the enormous
costs involved in developing its infrastructure, particularly for transporting it vast distances to
consumer markets.

The exploitation of the world’s finite oil and gas resources is a hazardous and risky business at
every level — the economic, the political, the legal, the social and the environmental. As oil and
gas producers, we have the responsibility to ensure that this task proceeds in a manner that is
conducive to the well-being of mankind.

12