OPEC and the Global Market - Paper Example

2021-07-28 20:41:48
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Boston College
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Critical thinking
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The Organization of the Petroleum Exporting Countries (OPEC) has grown to an organization with significant influence in the world oil market and is a frequent topic of discussion. In the past ten years, the organization has faced various dynamic elements that have shaped it to the current household name that it has become. This essay will delve into some of the issues and dynamic features that have made the OPEC into what it is today. It will specifically focus on problems form the last ten years which are the most influential for its transformation and how they have influenced its position in the global market. Saudi Arabia will be used as an example member state of OPEC that will be analyzed to show the dynamic effects that have faced the organization in the global market over the past decade.

Gallo, Mason, Shapiro & Fabritius (2010) explain the need for petroleum to power vehicles, machines and homes make the petroleum market a valuable and lucrative one especially to countries that produce oil in large quantities. The authors also mention that OPEC is at a central position when it comes to controlling the global petroleum market since it manages all the member states that are among the most significant producers of oil in the world (Gallo et al., 2010). It is important to note that since the formation of the OPEC, two important objectives have been the focus of the organization which was aimed at building the foundation of the organizations development. Al-Rashed & Leon (2015) suggest that these include the creation and maintenance of a steady oil market with fair and rational prices both for produces and consumers. This is coupled with ensuring fair profits for producers and stakeholders involved in the sale of member countries oil (Al-Rashed & Leon, 2015). However, over the past ten years, many things have changed that have affected the control of the OPEC over the global petroleum market. The advance in technology is considered one of the most influential effects to OPEC (Al-Rashed & Leon, 2015). The development experienced in technology over the past decade has virtually transformed the day to day lives of all countries in the world. This has instigated a significant rise in global energy consumption which is evident in the increased number of vehicles, expansion of the airplane industry, and more consumer products in the worldwide market.

Undoubtedly, for the OPEC, the surge experienced in the global oil consumption over the past years has had a positive effect on its development and growth and also that of its member countries (Gallo et al., 2010). The increase in global oil consumption has been favorable to the well-being of the organizations member states, but the past decade should not be assumed as being easy for OPEC and its members (Gallo et al., 2010). The organization has faced many challenges that have limited its growth and its firm hold on the global petroleum market. Ramady & Mahdi, 2015The main challenged OPEC has faced in the past decade can be considered to be the series of price crises that have hit the global energy industry. Ramady & Mahdi (2015) argue that these disasters have caused fluctuations in gas prices which have negatively affected the global petroleum production and market. The authors also suggest that various conflicts have ensued among some members of OPEC both internally in civil disputes and externally with other nations (Ramady & Mahdi, 2015). In fact, many are times during various conflicts involving member states that the fall of OPEC was projected on multiple occasions (Campbell, 2012). One such case is the constant political instability experienced in Saudi Arabia on various occasions. Saudi Arabia being the major contributor to OPECs oil production is influential in its development or regress in the global market. However, the strength and unity among member states in the present times have significantly improved and therefore helped to boost OPECs development and stability in the global oil market.

Saudi Arabia, the most prominent producer of oil globally, accounts for almost 14 percent of all oil produced daily and is vital to OPECs development (Campbell, 2012). With the significant growth experienced in the global oil market, Saudi Arabia has had many benefits over the past ten years (Campbell, 2012). Campbell (2012) explains that the economy of the country has developed significantly and Saudi has enjoyed relatively constant prices in the oil market until the recent years when the prices have dipped. Over the past ten years, there have been some issues in the oil market that have caused significant adverse effects. Recently, there have been concerns by member state Saudi Arabia over the oil market experiencing a considerable decline which has prompted Saudi Arabia to try and stabilize oil prices. There has also been a recent oil price war between Saudi Arabia and Russia since Russia which is a non-member of OPEC has been competing stiffly with Saudi over the oil prices and ongoing cutbacks in oil production (Ramady & Mahdi, 2015). Russia has been striving to acquire a more substantial stake in the critical Saudi Arabia and OPEC client markets which has increased competition between the two countries and caused a global shift in the oil market.

Conclusion

It is evident and significant to note that the global oil market has had a general growth over the past ten years. However, there has also been a noteworthy regress in growth within the last ten years. This decrease has been driven by various factors, the main of which have been discussed in the essay. The decline experienced in the global oil market has been detrimental to the development of OPEC and member states mainly Saudi Arabia which is the most prominent oil producer in the world. The recent decline has caused a significant rise in prices that has currently not significantly affected the global economy, but if the surge continues, then it will be detrimental to global economic growth. It can be concluded that in recent years, despite the general growth of the worldwide oil market, there has also been a decline in the industry that has significantly affected OEPC and its member counties.

References

Al-Rashed, Y., & Leon, J. (2015). Energy efficiency in OPEC member countries: analysis of historical trends through the energy coefficient approach. OPEC Energy Review, 39(1), 77-102. doi:10.1111/opec.12041

Campbell, C. J. (2012). Saudi Arabia. Campbell's Atlas of Oil and Gas Depletion, 307-312. doi:10.1007/978-1-4614-3576-1_66

Gallo, A., Mason, P., Shapiro, S., & Fabritius, M. (2010). What is behind the increase in oil prices? Analyzing oil consumption and supply relationship with oil price. Energy, 35(10), 4126-4141. doi:10.1016/j.energy.2010.06.033

Ramady, M., & Mahdi, W. (2015). Facing Realities: OPEC Fiscal Stress and Break-Even Pricing. OPEC in a Shale Oil World, 131-145. doi:10.1007/978-3-319-22371-1_5

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