guardian.co.uk  Nov 21  Comment 
Brent crude bounces back above $80 a barrel as Opec members call for cartel to curb production and force up prices The price of North Sea oil has bounced back above $80 a barrel amid speculation that Opec will agree to cut production next week at...
Financial Times  Nov 18  Comment 
Cartel’s meeting next week must respond to falling price of crude
The Straits Times  Nov 5  Comment 
November 06, 2014 1:31 AM LONDON - Brent crude declined to its lowest price in four years amid speculation that the Organisation of Petroleum-Exporting Countries (Opec) will refrain from paring a global surplus.
Financial Times  Oct 29  Comment 
View at odds with US industry, which sees no pressure from lower oil price
Financial Times  Oct 29  Comment 
Sharp oil price drop not a problem as fundamentals are robust, says oil group’s secretary-general
guardian.co.uk  Oct 18  Comment 
Motorists, airlines and industry are enjoying low energy costs, the US is relishing its reduced reliance on the Middle East and Opec is wondering how to reassert its authority During a week of turmoil on the global stock markets, the energy...
Times Online  Oct 3  Comment 
The price of oil tumbled yesterday as Saudi Arabia fired the first shots in a battle for control of Opec....
Financial Times  Sep 17  Comment 
Analysts were sceptical that Opec members would agree to a collective production cut at the cartel’s forthcoming meeting in November
Financial Times  Jun 17  Comment 
Roughly 60% of the growth in the oil-producing cartel’s production capacity up until 2019 was expected to come from Iraq


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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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