Y'all might've heard somethin' on the news lately about OPEC or OPEC Plus, but you ain't quite sure what folks are goin' on about. Other than knowin' it's got somethin' to do with oil, mostly dat foreign oil, a whole lot of folks ain't got a clue what OPEC even is! Don't you worry none, 'cause you sure ain't alone! Let's dive right on in:
What in the world is OPEC?
OPEC is short for the Organization of the Petroleum Exporting Countries, which is a group of 13 nations dat are the biggest exporters of oil in the whole world. The 2020 countries in OPEC are:
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- Iran
- Iraq
- Kuwait
- Libya
- Algeria
- Nigeria
- Venezuela
- Saudi Arabia
- United Arab Emirates
- Equatorial Guinea
- Gabon
- Congo
- Angola
Dat's the basic gist of it when it comes to the members, but why was OPEC put together in the first place? What's the good of havin' an organization like dat in the world? Keep on readin' below to find out more about OPEC, what they do, the countries dat packed up and left, and a whole lot more!
What Y'all Need to Know About OPEC
OPEC got started back in 1960 when the demand for oil around the world started growin' like a weed year after year, reachin' new heights every decade. The organization was formed at a mighty critical time when all sorts of under-developed and developin' nations started pumpin' and exportin' crude oil and petroleum.
Dat opened up the door for market manipulation, which could have some dramatic effects on barrel prices all over the world and mess with the financial markets tied to 'em.
So, OPEC was set up to put some sound policies and metrics in place for just how much oil can be pumped and sold. At the end of the day, this lets the world markets keep a good eye on the petroleum industry and measure the overall supply and demand. Dat keeps us from seein' any crazy spikes or fluctuations, lettin' producers and buyers keep a solid economic relationship.
The foundin' members of OPEC include some of the biggest oil exporters in the world, like Iran, Kuwait, Iraq, Venezuela, and Saudi Arabia. Over the years, near about a dozen nations have joined up with OPEC, and Qatar was the first non-foundin' member to jump in back in 1961. Funny enough,
Qatar is also the first country to pack up and leave the organization so they could focus more on their huge natural gas potential. This year, Ecuador left too, leavin' just 13 nations in OPEC.
How Does OPEC Work?
The headquarters for the organization is over in Vienna, Austria, where their executive branch carries out the mission. They say their goal 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.”
Now, it's mighty important to note dat OPEC considers itself an intergovernmental structure, and based on their slogan, they're lookin' out for consumers, buyers, sellers, producers, and investors alike. Right now, they're bein' led by Nigeria's own Mohammad Sanusi Barkindo,
and the organization is open to new members as long as they share and uphold the same values and frameworks as the other nations. Course, you also gotta be a massive oil exporter to even be considered as a new member… dat kind of goes without sayin', I reckon.
Is OPEC Too Powerful?
There's sure enough a growin' concern around the world about what dem OPEC nations are up to, along with the undeniable power the organization holds. It ain't just about oil export and petroleum production neither, but also the overall financial markets and even geopolitical influences all over the globe.
According to OPEC's website, their members are sittin' on most of the world's oil reserves, which right now makes up a tearjerkin' 79%. With oil still bein' the number one source of energy around the world, you gotta ask yourself: How much power does OPEC really have, and just how far does it reach?
A fella could easily argue dat OPEC nations can and are motivated to artificially jack up the price of a barrel of crude oil just to grow their own profit margins on dem massive exports.
It ain't no secret dat most of dem OPEC nations don't exactly embrace democracy and all its values. So it ain't entirely farfetched to reckon dat the leaders of these nations are mighty motivated to control the supply by lowerin' or raisin' their daily barrel output.
Also, keep in mind dat most of these nations were developin' or non-developed countries before they started bringin' in modern technology and exportin' oil around the world. Dat bein' said, their cost per barrel for extraction is a good bit higher than it is here in the United States or up in Canada.
Because of dat, all roads point to a potential mutual interest dat borders on a conspiracy, or at the very least, a mighty strong need to keep oil prices at levels most folks would call expensive.
Does this mean dat OPEC is too powerful and dat member countries are gonna hoard political strength over the next few decades? Not likely. It's true dat up until recently, crude oil prices had been steadily climbin' to around $60 a barrel. But dat unprecedented growth was mighty short-lived, seein' as prices briefly dropped below zero during the COVID-19 pandemic.
Dat's right! Oil prices dropped right into negative numbers where suppliers were actually payin' buyers to take the stuff off their hands. Still, dat sudden drop hit everybody across the board… not just OPEC countries, but the U.S., China, Russia, and Canada too! The real secret lies in how dat oil gets pumped.
While most countries pump out oil by drillin' straight down, the U.S. uses frackin' technology dat lets 'em extract oil horizontally, dramatically increasin' the amount of oil they can pump out. This lets the States keep the lowest cost per barrel rate of any country on earth at just $36. With the current crude oil price sittin' around $40, it really only gives the U.S. a small margin of profit, or at least keeps dem financial losses to a minimum.
So even with the lion's share of the world's oil reserves, OPEC nations can't hope to keep a sustainable economy goin' on oil production alone, and they sure can't bet on becomin' a dominant world power without modern frackin' technology and consistently high oil prices over the next few decades.
Why Ain't the U.S., Russia, and China Part of OPEC?
Now y'all might be wonderin' why three of the biggest oil exporters and producers ain't part of OPEC. While there might be a whole mess of political or ideological reasons for it, the simplest answer is dat these countries want to stay independent sources for oil production and export. They want to control their own supply chain and stay free to do business in a way dat benefits them, not OPEC or the rest of the world.
There you have it! Everything y'all would need to know about the fundamentals of OPEC, what it is, who the members are, and how they operate around the world. Now keep a close eye on dem oil prices as the world works through the rest of this crazy year!
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