OPEC - what has it got to do with us? Quite a lot actually!
OPEC is a cartel of competing oil producing nations that stabilises oil prices and regulates supply; When OPEC makes a major announcement, Sea Bunkering’s day-to-day business is directly affected.
But why is this? In our last newsletter, we explained how it is the actions of global market speculators that cause the day-to-day fluctuations in the price of oil, and affect our fuel prices to you. The actions of speculators are influenced by many factors: political tensions, adverse weather conditions, currency fluctuations, industrial trading figures … and announcements by OPEC. For example, when OPEC announced in November 2007 that they wouldn’t consider increasing oil production ahead of the upcoming summit in Abu Dhabi, traders rushed to buy oil stocks and market prices suddenly shot up.
OPEC, or the ‘Organisation of the Petroleum Exporting Countries’, was founded in 1960 and is currently made up of 12 nations: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. The oil ministers of these countries meet regularly and collectively represent two thirds of the world’s oil reserves, giving them considerable influence over the global market. The internal politics behind changes in OPEC production quotas are often influenced by the economic needs of the individual member states: some push for reductions of quotas in order to limit supply, push up market prices and increase their own revenues; others, such as Saudi Arabia, favour more collaborative relationships with the world’s big economic powers, driven by the concern that uncertain or limited supply will cause wealthy oil-dependent nations to conserve oil or focus more keenly on renewable energy sources.
Although OPEC’s influence over the global oil market has diminished slightly since the 1970’s, with the discovery and development of large oil reserves in the North Sea, Alaska, Canada, the Gulf of Mexico and Russia, its power remains immense. So what has OPEC got to do with us? Plenty!
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