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Introduction:

The OPEC (Organization of Petroleum Exporting Countries) was Iounded in 1960 in
Baghdad, Iraq. It is organization oI 12 countries which regulates the oil production round the
world & thus manages oil prices and supply through corporation among the member countries.
The OPEC headquarter is in Vienna, Austria. According to the charter oI OPEC, it works to
regulate price & supply oI oil Ior the betterment & development oI world.

Following are the group members oI OPEC;
O Saudi Arabia
O Iran
O Iraq
O Algeria
O Angola
O Ecuador
O Kuwait
O Libya
O Nigeria
O Qatar
O United Arab Emirates
O Venezuela

According to expert although they have many problems in between & also in their regions but
still they are doing great job in maintaining the world economy on a better place but on the other
hand some experts say that it is a cartel (Cartel is a formal agreement among competing firms.
It is a formal organi:ation of producers and manufacturers that agree to fix prices, marketing,
and production) and controlling the whole world`s economy by direct regulating the price &
supply oI the world which has sometimes adverse eIIects on diIIerent countries & ultimately on
the world. OPEC members have 79 crude oil reserves oI the world and controls 40-44 oil
market supply & enjoying billions oI proIits.

ennnlion:
Oil is one oI the most heavily traded commodities in the world.Fluctuating prices have important
eIIects Ior oil producers/exporters and many countries that remain dependent on oil as a key
input in their energy, manuIacturing and service industries. As majority oI world is dependent on
oil Ior their growth and development so oil has direct eIIect on these countries & on large the
world`s economy.Oil is precious as many experts call it black gold or black diamond.

OPEC (Organization of Petroleum Exporting Countries)is an international organization or
cartel oI 12 developing mentioned nations. All are heavily dependent on oil revenues Ior their
main source oI income. All the member nations have their speciIic quota in production & export
oI oil and they have to Iollow the constitution. As they have 45 oil market share so they have
huge impact on world`s economy on a large because every country oI the world is trying to
increase their exports & maximize the Ioreign reserves and per capita income. For all this they
have to produce more & more product and services through their industries and majority oI
global industries are working on oil cartel usually do decision Ior the Iavor oI organization & its
members.So OPEC has considerable eIIects on global economy.

0i 4ocq 0y 0Pe0 on o0n economy:

As OPEC is a swing supplier (close oligopolistic group oI suppliers) oI oil, controlling its global
deposits and possessing large spare manuIacturing capacity. So it is able to increase or decrease
oil supply at minimum additional internal cost, and thus able to inIluence prices and balance the
oil markets, providing downside protection in the short to middle term. In the long term,
however, the price oI oil is subject to major changes over time. So any decision regarding oil has
considerable eIIects on oil prices & global economy. Like in 1973 the $ix Day War oI Israel with
Egypt & Syria gave rise to crucial oil crises round the world by stopping sale oI oil to European
Countries who were supporting Israel. AIter that in 1975 they increased the prices by 10. The
second OPEC oil shock took place in 1979 in the wake oI the Iranian Islamic Revolution. Then
O USSR invasion oI AIghanistan
O Iraq on Kuwait in 1990
O Israel attack on Iraqi power plant
O 9/11 terrorist attack on US
O US occupation on AIghanistan & then Iraq
O Hezbollah & Israel conIlict
O Middles east unrest
O 2008 recession
All these events directly aIIect the oil production oI OPEC & Non-OPEC oil producers and the
most importantimporters oI oil countries round the world by importing the oil through more than
$100/barrel.
According to IMF report oI 2001-02 an increase in price oI oil by $5/barrel can
O TransIer the wealth oI importer country to oil exporters up to $65b
O Increase the input cost oI industrial goods and services
O Increase the inIlation rate oI the country
O Direct & indirect impacts on diIIerent Iinancial markets
O would reduce the level oI global output by around 0.25 point over the Iirst 4 years
O impact on industrial countries larger than developing nations
O Increase the current account deIicit oI third world nation
O Finally producers surplus that they can reinvest in oil sector to increase the supply
As member countries oI OPEC are on quota system in relation with its production & capacity.
Over the past 30 years world annual consumption oI petroleum products has increased by
almost40 per cent, Irom 57.4 million barrels per day in 1973 to about 78.7 million barrels per day
in2003. So it shows the importance oI oil & OPEC. They have considerable eIIects on the
world`s economy.
The Iollowing table shows the production & quota value oI each country in 2005.
OPEC Quotas and Production in thousands of barrels per day
COUNTARY QUOTA PRODUCTION CAPACITY
Saudi Arab 10,099 9,800 12,500
Iran 4,110 3,700 3,750
Venezuela 3,225 2,340 2,450
UAE 2,444 2,500 2,600
Nigeria 2,306 2,250 2,250
Kuwait 2,247 2,500 2,600
Angola 1,900 1,700 1,700
Libya 1,500 1,650 1,700
Algeria 894 1,360 1,430
Qatar 726 810 850
Ecuador 520 500 500
Iraq - 1,081 -
TOTAL 29,971 29,591 30,330

0Pe0 oi uy nnd demnnd:
The Iollowing graph shows the OPEC oil supply & market demand Irom 1990-2006 on the
basis oI per day and it shows clearly that OPEC has the capability to IulIill the oil market
demand. The table shows constant increase oI oil demand in the world & the supply capability oI
OPEC in that regard. In 2005 the demand oI oil is 83.5m barrels per day which show constant
increment in oil consumption round the world.









Nel income o( 0Pe0:

The Iollowing graph shows the net income oI OPEC per year. Although it has ups &
downs but still they are enjoying huge net income others than Non-OPEC country. In 1980 the
net revenue oI OPEC was 572bwhich was a huge income Ior OPEC at that crucial time. Then
Irom 1988-1998 the oil prices was Iluctuating in between $30-$50/ barrel but aIter that the
consumption is constantly growing up and up which shows economic growth oI the world.




















0Pe0, k8A & qo0n economy:


US ure LIe bIggesL oII ImporLer counLry. L ImporLs more LIun 6o percenL oI ILs oII,
uImosL IuII oI wIIcI IssuppIIed by member sLuLes oI LIe OrgunIzuLIon oI PeLroIeum
ExporLIng CounLrIes (OPEC). n June zo1o uIone, US ImporLed 6z mIIIIon burreIs Ior u
LoLuI prIce oI $z; bIIIIon, uccounLIng Ior % oI LIe $qq.q bIIIIon Lrude deIIcIL LIuL
monLI. n JuIy zo1o, US ImporLed 88 mIIIIon burreIs oI oII, murkIng LIe sIngIe IurgesL
ImporL monLI oI recenL governmenL. TIe US Ius consIsLenLIy ImporLed ubouL mIIIIon
burreIs oI oII per duy (bpd) Irom OPEC. L sIows LIe Iuge dependency reIuLIon oI US on
OPEC. AccordIng Lo US experLs & economIsLs, IL Is noL good Ior LIe counLry IIke USA
becuuse IL Is LIe economIc Iub oI LIe worId&mujorILy IIrms or IndusLrIes In USA use oII
Ior LIeIr energy producLIon und ouLpuL. RecenL recessIon In zoo8 cosL USA & ILs new
governmenL $,oob bule oot puckuge Ior dIIIerenL IndusLrIes oI USA. TIe recenL cuII
by Ibyu noL Lo exporL oII Lo US & EU counLrIes muke LIe oII prIce uguIn mounLuIn IIke &
reucIed prIces up Lo $1zo per burreI so IL Is IurLIng uII LIe economIes oI LIe worId
specIuIIy USA, EU und AsIun TIgers IIke CIInu, Jupun, Koreu, ndonesIu & ndIu eLc.

OPEC Is producIng Lwo mIIIIon bpd ubove ILs IormuI producLIon ceIIIng oI
zq.8q mIIIIon bpd (WSJ, MurcI 18, zo1o) buL sLIII pIeces ure goIng IIgI. n recenL
meeLIng on AprII 18, zo11 In CuIro, muny oIIIcIuIs oI OPEC suId DPEC is uorried cbout
the recent sure in lobcl oil prices cnd its potenticl impcct on the uorld econom, but
the mcrlet is otersupplied.BuL on LIe sume LIme OPEC members ure InvesLIng more &
more Lo dIscover new oII reservoIrs. SuudI Arub Is InvesLIng $ oB In LIe nexL IIve yeurs
In oII producLIon wIIIe run Is LukIng Iuge InILIuLIves Lo expIore more & more oII wILI
LIe coIIuboruLIon oI CIInu & RussIu. AIso LIe $zb InvesLmenL In LIree reIInerIes oI
NIgerIu by CIInu Is unoLIer good InILIuLIve.

ExperLs use Lo suy LIuL AmerIcu sIouId move Lowurds Non-OPEC oII producer
counLrIes und sIouId muke un uIIIunce wILI CIInu, ndIu und oLIer bIg oII ImporLer
counLrIes Lo secure ILs IuLure und cun conLroI LIe OPEC curLeI noL Lo ucL IIke u monopoIy.
TIey suy LIuL AmerIcu sIouId seek new wuys und uILernuLIves Ior LIeIr energy
producLIon oLIer LIun ImporLed oII. And LIey sIouId work on LIeIr own resources.
worq ciled:
1. .opec.org
2. .ikipedia.org
3. Article from Businesseek.com on 1uly 27, 2006 by Stanley Reed.
4. Article Irom Washingtonpost.com on April 18,2o11 by Associated Press.
Euclid A. Rose, (Summer, 2004), iddle East 1ournal: '!Cs Dominance of the
Global il Market. The Rise of the Worlds Dependency on il`
Report by IMF, Department oI Research, (December,2000) 'The Impact of Higher il
!rices on the Global conomy`
Dr. Nancy E.Brune, (September29,2010), 1ournal of Energy Security: ' Years Later.
!Cs Continuing Threat to American $ecurity`




Links of two mentioned cited works by Qaiserabbas.

http://www.ensec.org/index.php?optioncomcontent&viewarticle&id267:50-years-later-
opecs-continuing-threat-to-american-security&catid110:energysecuritycontent&Itemid366
http://www.washingtonpost.com/business/opec-concerned-about-prices-and-impact-on-global-
economy-but-market-oversupplied/2011/04/18/AFaxg8yDstory.html