RECENT NEWS
Commodity Online  Jul 1 
Organization of the Petroleum Exporting Countries (OPEC) on Wednesday said the price of its basket crude inched towards the $70 mark Tuesday.
Commodity Online  Jun 30 
Organization of the Petroleum Exporting Countries (OPEC) on Tuesday said the price of its basket crude rose Monday.
Commodity Online  Jun 29 
Organization of the Petroleum Exporting Countries (OPEC) on Monday said the price of oil produced by its member countries climbed to $69.29 a barrel at the end of last week.
Commodity Online  Jun 29 
One of the world s top oil producers Russia yet again rejected OPEC membership and said it will continued to be an observer with the cartel.
Commodity Online  Jun 25 
Organization of the Petroleum Exporting Countries (OPEC) on Thursday said the price of oil produced by its member countries climbed back to $68.01 on Wednesday.
Bloomberg  Jun 23 
(Update1) Bjorn Moller, chief executive officer of shipowner Teekay Corp., expects rates to transport oil to be weak until the Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s crude, increases output as...
Upstream Online  Jun 23 
Oil markets risk another speculative bubble unless the financial sector is reformed and transparency increased, but prices are not yet a threat to economic recovery, the European Union and Opec said after joint talks today.
Commodity Online  Jun 23 
Organization of the Petroleum Exporting Countries (OPEC) on Monday said the price of oil produced by its member countries fell by nearly $3 a barrel Monday.
Upstream Online  Jun 23 
Commodity Online  Jun 22 
Organization of the Petroleum Exporting Countries (OPEC) on Monday said the price of its basket crude continued to hover above $70 a barrel on Friday.
Commodity Online  Jun 19 
Organization of the Petroleum Exporting Countries (OPEC) on Friday said the price of oil produced by its member countries rose above $70 again on Thursday.
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OPEC stands for the Organization of the Petroleum Exporting Countries, an international cartel consisting of Iraq, Indonesia, Iran, Kuwait, Libya, Angola, Algeria, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Prospective members include Bolivia, Canada, Sudan and Syria who have been inivted by OPEC to join. The recent discovery of a sizeable oil field in the South Atlantic supports Brazil's possible application. The organization is based in Vienna and controls over 40% of the world's total oil production, and its member nations account for over 60% of the world's estimated oil reserves. Although OPEC is slowly beginning to lose control over crude oil prices, its holdings still give it a large amount of weight in price determination.

Brief Economics of OPEC

Why was OPEC formed in the first place? What gave OPEC the power to hit the news with their every decision, and what do they have to gain?

Unlike competitive industries such as garment production, oil production belongs to what is known as an Oligopoly, in which only a few producers produce most of the output. Businesses or Nations in an oligopoly produce almost the same thing and sell it at a price determined by demand and the overall supply of all the producers. However, in order to maximize profit return on every unit of output (hence economic profit), businesses in an oligopoly need to collude and reduce output together so that prices rise and overall revenue rises. How does overall revenue rise when demand should naturally drop on higher prices? Well, the problem is that the demand for oil all over the world is fairly inelastic, which means that the drop in demand is lower than the rise in price! They would rather sell one unit at $100 then 2 units at $45 each.

So, that is what OPEC does and why it exists. OPEC nations are in an oligopolistic industry trying to maximize profits through production collusion. In a free market, collusion is naturally illegal (hence a cartel) but who is to control NATIONS forming a cartel?

 
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