A Critique of OPEC, The Website Essay

The Middle East is one of the birthplaces of human kind’s civilization. Since the Ancient Egypt, Sumer, the Arab Empire, Turkey Empire, or even to present day, the Middle East has always been a valuable strategic point for not only because of its geographic location but also it full of petroleum and nature gas. According the OPEC (Organization of the Petroleum Exporting Countries) that 66% of the global oil reserves are in the Middle East and only 6% in North America, this makes a lot of powerful countries want to share a pieces of the Middle East, Stephen mentions “Much of the world 's oil wealth exists along the Persian Gulf, with particularly large reserves in Saudi Arabia, Kuwait

Several oil-countries have been facing economic and political turbulence as a result of the crash in oil prices, and there is disagreement among OPEC as how to handle the situation. (Krauss) While this is happening, America’s oil production continues to rise, as it inches closer to becoming an energy superpower in production and consumption; and countries that depend on their oil exports face recession.

In a revealing article by George Perry (2001) the author discusses the economic impact that a disruption in the oil supplies would have on world oil prices. He states “Currently 28 percent of the world's crude oil comes from the Organization of Arab Petroleum Exporting Countries (OAPEC) consisting of Arab Muslim nations, some of which are not part of the OPEC cartel. The governing regimes in all these countries are at some risk [due to the war on terrorism].” He goes on to state that in a worst case scenario the economic consequences of oil supply disruption would be “oil prices rise to $161 per barrel driving gasoline price to $4.84 per gallon. The increase in the nation's bill for products of crude oil rises by about 10 percent of GDP, which adds perhaps 15 percent to the inflation rate in the first year. And the recession is the steepest and deepest of the postwar period, with GDP declining nearly 5 percent the first year.”

Short-term: Cleary OPEC policy is to maintain the price down to crumble down the America production especially because of the hydraulic fracking boom. Thus, its goal is to increase production maintaining the oil price low.

Why should we worry about OPEC? Why do we need to get away from foreign oil? OPEC controls the oil prices on the world market. They can raise oil prices to benefit their bottom line. Last November crude oil prices went up 48 cents because Nigerian militants attacked a pipeline affecting oil production (“Oil Prices Find Floor”, n.d). It 's hard on Americans when the oil prices rise and it would be even harder if our foreign oil producers decided to stop trade with us. Not only would we be in danger of not being able to satisfy our wants, but our basic needs such as driving to work could be in danger. That is why this issue is a current geopolitical challenge for the United States.

OPEC has consistently held the U.S. hostage with fixed oil prices and the threat of embargos. Many of the countries that belong to OPEC are not friendly to the United States, including: Iran, Iraq, Saudi Arabia, Venezuela, Libya, and Algeria. (Weil) The U.S. has declared many of these countries to be “state sponsors of terror”; however we still purchase their oil. (Fueling Terror) Increasing the United States’ oil production would give OPEC less of an opportunity to fix prices because demand for their product would fall. The peak oil production of ANWR is estimated to be up to 1.45 million barrels per day; that’s 1.45 million barrels of oil that OPEC would have to find another buyer for. They would either have to lower prices or production as a result of the flooded market. (Hastings) Currently the United States imports 4.885 million barrels of oil from OPEC daily. If we produced 1.45 million more barrels of oil per day we could cut our OPEC imports by more than twenty-five percent. (Petroleum Statistics) At $100 dollars per barrel that would be 145 million dollars that would stay in the United States every day; instead of being sent to countries that sponsor terrorism and reject basic human rights. Oil is fifty percent of Iran’s gross domestic product, fueling their ability to procure

relations between Saudi Arabia and Iran has been considered the most significant, lasting effect of the Arab Oil Embargo. However, these changes were much less direct than those in the energy sector. Even though the embargo led to the United States allying with Saudi Arabia when they had previously been enemies, it can be argued that the embargo was not a direct cause of this shifting alliance (Myre). Furthermore, the fact that the United States is now rivals with Iran is more the result of the overthrow of the shah, who was effectively a puppet of the United States, than a consequence of the embargo itself (Myre). While, the effects of these changing dynamics are still seen today and are undoubtedly significant, the relationship between the embargo and the changing U.S. energy sector and policy is much more visible and direct. What’s more, the argument that the embargo most influenced U.S. energy is backed with an abundance of evidence, while the evidence suggesting the changing international relations resulted from the embargo is shaky and tentative at best. Due to this, it is apparent that the claim that the embargo affected U.S. energy policy most significantly is the correct

The first steps towards forming the Organization of the Petroleum Exporting Countries, (OPEC) began in 1949. Venezuela and Iran contacted Iraq, Kuwait and Saudi Arabia about

In 2014 the Organization of Petroleum Exporting Countries, or OPEC decided to lower the oil price. The reason the OPEC nations decided to overproduce and flood the market was to strangle the oil industry of the United States. This low price would force the oil businesses to lower their prices to compete and therefore income would be reduced. The OPEC nations would have a majority of control over the oil market if the US oil industry fades or is driven out of business. The OPEC nations, whose primary income is from petroleum, are fighting for more income from the US based

The various ties between the Organization of Petroleum Exporting Countries and the United States of America has always ebbed and flowed. American-OPEC relations have been strained by events such as the increase in oil prices in 1973 in retaliation of the American support of Zionist terrorists that the U.S. would call “Israel”, but now, the various economies of OPEC nations themselves could be under threat.

With various Arabic states realizing the potential for the United States to become involved, rather directly or indirectly, in the Yom Kippur War, a requirement to create a determent to that potential was the greatest option for the Arab world. Oil rich nations in the Middle East began to create and fan the flames of fear among various American oil companies, such as Exxon, during the Organization of Petroleum Exporting Countries (OPEC) negotiations in Vienna.

OPEC officials are discussing the details of their planned global oil production cut, which suggest progress being made on the deal before the cartel meets at the end of the month. At their September 28 meeting in Algeria, OPEC officials agreed to limit the global oil supply and would finalize the details at their November 30 meeting in Vienna. Oil prices have fluctuated since the announcement due to reports of

The oil embargo was imposed by Arab oil producers through the then-powerful cartel, the Organization of Petroleum Exporting Countries (OPEC)(Miller, 1998). OPEC was founded in 1960 with five members: Iraq, Kuwait, Saudi Arabia, and Venezuela. Six other nations had joined OPEC by the end of 1971. These included Qatar, Indonesia, United Arab Emirates, Algeria, and Nigeria. This cartel had experienced a decline in the real value of their product since the foundation of the Organization of Petroleum Exporting Countries (Williams, 1999). But in March of 1971, the power to control crude oil prices shifted from Texas and the United States

The 1973-1974 Oil Crisis was a result of a myriad of issues. The Organization of Arab Petroleum Exporting Countries (OAPEC) took concerted action in continuously reducing their oil production “until their economic and political objectives were achieved.” The production was reduced so much that in some areas the oil prices dramatically rose “six-fold.” The OAPEC countries production cuts disrupted the industrial countries’ necessary oil supplies and there was nothing that could be done to alleviate the price spike, thanks in large part to the industrial countries insufficient spare oil capacity (Scott 28). Moreover, the Yom Kippur War, the fourth of the Arab-Israeli wars, was waged, in which Egypt and Syria led a coalition of Arab states against Israel from October 6. Within a week, Iraq had “nationalized American interests in Basrah Petroleum’s southern Iraqi production” and three eastern Mediterranean pipeline terminals had been shut down. Furthermore, on October 27, ten Arab states had announced “a progressive step-by-step production cutback and embargoes” against the United States, the Netherlands, and Denmark due to their alleged support for Israel (Lantzke 219). Essentially, the embargoes were politically employed by the Arab producers’ as a weapon of coercion, in that the embargoes were designed to influence policy changes in the countries that were friendly to Israel.

Aramco, an oil company based out of Saudi Arabia, developed the idea that, “if you produce a lot of oil at once, price goes down and more workers get paid which leads to less profit”. Aramco then realized they needed to step away from the free-market and start to operate through a monopolistic sense. Mohammad Massadegh, the first democratic leader of Iran, wanted oil profits. Mohammad planned to use though profits efficiently through helping Iran. Retaining oil profits for Iran put their economy in much better shape. After Mohammad, Reza Palavi stepped in and was eventually overthrown due to reinstating profits for oil. On the other side, Iraq and Saudi Arabia nationalized oil in 1972 which eventually lead to Saudi Arabia taking full control over Aramco. OPEC, created in 1960 to generate tax revenues and “even the playing field”, goal was to build help stabilize world oil prices. In hindsight the Saudi connection was built on indirect and economic imperialism.