OPEC: As an Influence on the Price of Oil
SPEECH NOTES
1. Remember about a year ago when gas prices were ferociously high? In June of 2014, Canada saw its highest gas prices. It was just last year when I became somewhat enamored with the fluctuation of oil prices, after a family camping trip where my stepfather complained way too much about gas costs for the entire ride, but only after a few months the price dropped severely and then he literally became a “happy camper”. intro slide
2. Hi, my name is Jenifer, and I’m here today to talk to you about
OPEC’s history as an “oil cartel” and thus, their influence on the price of oil throughout history and today. 3. I will begin by talking about how OPEC came to be, then, why it is so powerful, and finally, implications on the cost of oil today. 4. The Formation of OPEC
1949 was the first interaction between the petroleum producing countries, when Venezuela (the world’s most oilrich country) and Iran (the world’s 3rd most oilrich country), approached Iraq, Kuwait, and Saudi Arabia. They suggested that better communication about production targets and the price of crude, were necessary to their success, in a predominantly
Westerncontrolled market. 5. It was in 1959 when the International Oil Companies (commonly referred to as Big Oil or the IOC now made up of: BP plc
,
Chevron Corporation
,
ExxonMobil Corporation
,
Royal
Dutch Shell plc and
Total SA
.),
which are the world’s five largest oil companies, prompted outrage among the nonWestern petroleum producers. They did so by setting a total price reduction by $0.25 less for
Venezuelan crude, and $0.18 less for all Middle Eastern crude, at the time when a barrel only cost about $3.00.
6. Thus, the Organization of the Petroleum Exporting Countries or
OPEC was formed in 1960 at a conference in Baghdad, after the Venezuelan and Iranian energy ministers met and bonded over their outrage of the West trying to control oil. Headquartered in Vienna, Austria, 7. the founding members were Venezuela, Iran, Iraq, Kuwait, and
Saudi Arabia. Other countries later joined, including: Indonesia in 1961, Libya in
1962, United Arab Emirates in 1967, Algeria in 1969, and Nigeria in 1971. Gabon and Ecuador were early members as well, although they left due to unwillingness to pay the $2 million dollar membership fee. Ecuador rejoined in October 2007. Indonesia left because it was not even able to meet it’s own countries energy requirements, and now imports oil from other close OPEC countries. 8. The member countries as of 2012, in order of their contribution to
OPEC production,
are: Venezuela at 24.7% of the worlds production, Saudi Arabia at 22%, Iran at 13.1%, Iraq at 12%, Kuwait at 8.4%, UAE at
8.1%, Libya at 4%, Nigeria at 3.1%, Algeria at 1%, Equador and
Angola, both at 0.7%. 9. OPEC’s efforts are lead by an elected president, which is currently
Diezani AlisonMadueke
,
first female president of OPEC, and Nigeria’s former transportation minister. She was recently in the news, giving a press conference about
OPEC’s high 2015 production rates to drive down the price of oil which brings me to my second main point 10. Why OPEC is Such an Influence on the Price of Oil OPEC’s member countries make up 81% of the world’s proven oil reserves, while they make up 40% of the production of all oil in the world today. 11. Saudi Arabia is it’s largest producer, and therefore is OPEC’s main influencing country. Saudi Arabia produces and stores 1.5 2 million extra barrels per day. 12. This is done to have the ability to flood the market with supply or withhold the crude at any time, which is the explanation for our currently low oil prices. During times of low production or crisis within producing countries, a rising risk premium in incorperated into
