Download File

OPEC
OPEC - Organization of
Petroleum Exporting
Countries
Purpose and origin:
In 1960, many oil-rich nations
joined together to control the
production and price of oil.
1st OPEC Conference, Baghdad, September 10–14, 1960
Original
Members
Iran
Iraq
Kuwait
Saudi Arabia
Venezuela
13
There are 12 member countries total:
5 4 in Africa, 2 in Latin America, and 6 in
the Middle East (Southwest Asia).
(That’s 3 different continents)
Saudi Arabia is the
biggest producer in
OPEC.
Together, OPEC
countries produce
about 40% of the
world's oil.
They have about 2/3 or
the world’s oil
reserves.
When OPEC decides to produce
less oil, the supply of petroleum
drops.
But the demand stays high, so the
price goes up since there’s less to
go around.
When they produce more, prices
go down.
That’s
explained by
the economic
law of “supply
and demand.”
LOW demand & HIGH supply =
very low price!
But HIGH demand & LOW supply =
very HIGH price!
Many wealthy countries depend on
other countries for the HUGE
amounts of energy they need.
Cartogram of energy consumption
In 1973, OPEC refused to ship oil
to countries that had supported
Israel in a war against Egypt and
Syria. The result here was the
“1973 energy crisis.”
1973 political cartoon
That led to a shortage of gas here.
The price of oil quadrupled. And
even with high prices, many gas
stations sold out of gas.
In recent years, oil prices around
the world continued to rise.
OPEC was only part of the cause.
Demand
for energy
was also
rising worldwide. That
brings
higher
prices.
The U.S. is the world’s biggest
energy consumer, using much
more energy than we produce. So
high oil prices hit us hard!
Cartogram of energy consumption
After the U.S., China is the biggest
consumer of energy. Since 2000,
there has been a huge boom in car
purchases in China. The same thing
seems to be happening in India.
Our government wants us to
become less dependent on foreign
energy sources.
But it’s
not a
simple or
fast
process.
We made some progress after 2010,
by producing more oil here in the U.S.
A method called hydraulic fracturing
(“fracking”) was helping the U.S.
produce more oil than ever before.
Traditional drilling is kind of
like drilling into a jelly donut.
There’s a big pocket of oil.
You just
drill down
and pump
it up.
Fracking is more like
drilling into a layer cake. Oil
is trapped in layers of rock.
You drill,
then you
have to
blast apart
the rock
before you
can pump it
up.
Fracking is MUCH more expensive
than traditional drilling.
But oil was selling at high prices, so
U.S. oil companies were willing to use
high-cost methods to get more oil.
OPEC was not happy about losing the
control it had on world oil prices.
So they have been
selling lots of oil, no
matter the price. This
has been forcing the
price of oil down since
2014.
Remember how “supply and demand” works?
OPEC’s plan worked. By mid-2015,
U.S. oil companies were cutting back.
Fracking was just too expensive when
oil sales prices were so low.
While the world depends on fossil
fuels, OPEC is a way for lesspowerful nations to band together
and use their economic power.
OPEC Headquarters in Vienna, Austria