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The Organization of the Petroleum Exporting Countries (OPEC) is a group of 12 states made up of Iran,
Iraq, Kuwait, Qatar, Saudi Arabia, the United Arab Emirates, Libya, Algeria, Nigeria, Angola, Venezuela
and Ecuador.

Recently, Indonesia has decided to leave the organization, a move which will be completed by the end of
2008. The organization has maintained its headquarters in Vienna since 1965, and hosts regular
meetings among the oil ministers of its member states.
The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq,
with the signing of an agreement in September 1960 by five countries namely Islamic Republic
of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members
of the Organization.
These countries were later joined by Qatar (1961), Indonesia (1962), Socialist People’s Libyan
Arab Jamahiriya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971),
Ecuador (1973), Gabon (1975) and Angola (2007).
From December 1992 until October 2007, Ecuador suspended its membership. Gabon terminated
its membership in 1995. Indonesia suspended its membership effective January 2009.
Currently, the Organization has a total of 12 Member Countries.
The OPEC Statute distinguishes between the Founder Members and Full Members - those
countries whose applications for membership have been accepted by the Conference.
The Statute stipulates that “any country with a substantial net export of crude petroleum, which
has fundamentally similar interests to those of Member Countries, may become a Full Member
of the Organization, if accepted by a majority of three-fourths of Full Members, including the
concurring votes of all Founder Members.”
The Statute further provides for Associate Members which are those countries that do not qualify
for full membership, but are nevertheless admitted under such special conditions as may be
prescribed by the Conference.

According to its statutes, one of the principal goals is the determination of the best means for
safeguarding the cartel's interests, individually and collectively. It also pursues ways and means
of ensuring the stabilization of prices in international oil markets with a view to eliminating
harmful and unnecessary fluctuations; giving due regard at all times to the interests of the
producing nations and to the necessity of securing a steady income to the producing countries; an
efficient and regular supply of petroleum to consuming nations, and a fair return on their capital
to those investing in the petroleum industry.[4]
OPEC's influence on the market has been widely criticized, since it became effective in
determining production and prices. Arab members of OPEC alarmed the developed world when
they used the “oil weapon” during the Yom Kippur War by implementing oil embargoes and
initiating the 1973 oil crisis. Although largely political explanations for the timing and extent of
the OPEC price increases are also valid, from OPEC’s point of view, these changes were
triggered largely by previous unilateral changes in the world financial system and the ensuing
period of high inflation in both the developed and developing world. This explanation
encompasses OPEC actions both before and after the outbreak of hostilities in October 1973, and
concludes that “OPEC countries were only 'staying even' by dramatically raising the dollar price
of oil.”[5]
OPEC's ability to control the price of oil has diminished somewhat since then, due to the
subsequent discovery and development of large oil reserves in Alaska, the North Sea, Canada,
the Gulf of Mexico, the opening up of Russia, and market modernization. As of November 2010,
OPEC members collectively hold 79% of world crude oil reserves and 44% of the world’s crude
oil production, affording them considerable control over the global market.[6] The next largest
group of producers, members of the OECD and the Post-Soviet states produced only 23.8% and
14.8%, respectively, of the world's total oil production.[7] As early as 2003, concerns that OPEC
members had little excess pumping capacity sparked speculation that their influence on crude oil
prices would begin to slip.[8][9]
OPEC is a swing producer[28] and its decisions have had considerable influence on international
oil prices. For example, in the 1973 energy crisis OPEC refused to ship oil to western countries
that had supported Israel in the Yom Kippur War or 6 Day War, which Israel had fought against
Egypt and Syria. This refusal caused a fourfold increase in the price of oil, which lasted five
months, starting on October 17, 1973, and ending on March 18, 1974. OPEC nations then
agreed, on January 7, 1975, to raise crude oil prices by 10%. At that time, OPEC nations —
including many who had recently nationalized their oil industries — joined the call for a new
international economic order to be initiated by coalitions of primary producers. Concluding the
First OPEC Summit in Algiers they called for stable and just commodity prices, an international
food and agriculture program, technology transfer from North to South, and the democratization
of the economic system[citation needed]. Overall, the evidence suggests that OPEC did act as a cartel,
when it adopted output rationing in order to maintain price.[29]
Since currently worldwide oil sales are denominated in U.S. dollars, changes in the value of the
dollar against other world currencies affect OPEC's decisions on how much oil to produce. For
example, when the dollar falls relative to the other currencies, OPEC-member states receive
smaller revenues in other currencies for their oil, causing substantial cuts in their purchasing
power. After the introduction of the Euro, pre-invasion Iraq decided it wanted to be paid for its
oil in euros instead of US dollars causing OPEC to consider changing its oil exchange currency
to euros, although after Iraq's invasion, the interim government reversed this policy, and the
subsequent Iraq governments stuck to the US dollar.[30] Member states Iran[31] and Venezuela[32]
have undergone similar shifts from the dollar to the Euro.

Increase in Nigeria’s oil production may reduce pressure on premium benchmark prices and
cause a problem for OPEC members, according to an expert. An internationally acclaimed
energy expert, Mr. Vincent Lauerman, who is the President of the Calgary-based consultancy,
Geopolitics Central said that Nigeria’s oil production rebounded to 1.9 million barrels per day in
October, which is about 80,000 barrels per day more than its OPEC quota.
The energy expert, who pointed out that Nigeria’s oil production was a “nasty mess at midyear,”
as the insurrection in the Niger Delta drastically cut the country’s crude oil production and
caused it to lose its position among African oil producers, said that increased production could
lower crude oil prices.
Lauerman said: “Now, much to my surprise, the country may be turning the corner, with the
Niger Delta insurrection on the decline and oil production on the rise. If Nigeria’s oil production
continues to increase, it could lower crude oil prices and put the country on the wrong side of the
Organization of the Petroleum Exporting Countries (OPEC).”
According to him, International Energy Agency (IEA) had disclosed that Nigeria’s oil
production slipped to 1.68 million barrels per day in July 2009, which is about 46 per cent below
its total capacity, including 500,000 barrels per day of shut-in, compared with 1.7 million barrels
per day for Angola.
The international energy expert, who pointed out that Nigeria’s onshore production had fallen to
levels not seen since the 1960s, said that since the end of 2005, militant groups under Movement
for the Emancipation of the Niger Delta (MEND) had attacked oil infrastructure in the Niger
Delta, which had reduced oil production and revenues.
OPEC nations benefit from higher oil prices and can reduce production to keep demand strong.
However, the IEA warned that the cost of importing oil was now so high for consuming nations
that it risked damaging growth in those economies, which would reduce demand overall.
OPEC member countries are currently due to stage their next oil output meeting until June 2011.

OPEC’s mission to ensure market stability depends on the coordination and unification of the petroleum
policies of its Member Countries. One way this can be achieved is through agreement on each country’s
‘production allocation’. These are discussed at Meetings of the Conference. Existing production
allocations can be viewed