OPEC- IF PROJECT

8/7/2019 OPEC- IF PROJECT

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PROJECT NAME:

ORGANIZATION OF THE PETROLEUM

EXPORTING COUNTRIES (OPEC)

GROUP MEMBERS:

NAME: ROLL NOS:

SMITA BANE 76

KOMAL SATVE 77

DARSHANA NAIK 78

RIA GUPTA 87JANHAVI RAUT 124

SNEHAL KHOND 128

SUBMITTED TO:PROF. GOVIND SOWANI

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OPEC MEANING:

The Organization of the Petroleum Exporting Countries (OPEC) is a permanentintergovernmental organization of 12 oil-exporting developing nations that coordinates andunifies the petroleum policies of its Member Countries. OPEC seeks to ensure the stabilization of

oil prices in international oil markets, with a view to eliminating harmful and unnecessaryfluctuations, due regard being given at all times to the interests of oil-producing nations and tothe necessity of securing a steady income for them. Equally important is OPECs role inoverseeing an efficient, economic and regular supply of petroleum to consuming nations, and afair return on capital to those investing in the petroleum industry.

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OBJECTIVES:The organizations principal objectives are:

1. To co-ordinate and unify the petroleum policies of the Member Countries and todetermine the best means for safeguarding their individual and collective interests;

2. To seek ways and means of ensuring the stabilization of prices in international oilmarkets, with a view to eliminating harmful and unnecessary fluctuations; and

3. To provide an efficient economic and regular supply of petroleum to consuming nationsand a fair return on capital to those investing in the petroleum industry.

GOALS:1. The OPEC goal countries can take perfect stability in the market.

2. The oil supply/delivered to the supplier is steady.

3. The prices of oil are reasonable and fare to the consumers.

4. To obtain these goals OPEC voluntarily produce less oil.

TERMS OF MEMBERSHIP OF OPEC:

The OPEC 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 distinguishes between three categories of Membership: Founder Member,Full Member and Associate Member. Founder Members of the Organization are those countriesthat were represented at OPECs first Conference, held on 1014 September 1960 in Baghdad,Iraq, and that signed the original agreement establishing OPEC.Full Members are the Founder Members, plus those countries whose applications forMembership have been accepted by the Conference. An Associate Member is a country that doesnot qualify for Full Membership, but that is, nevertheless, admitted under such special conditionsas may be prescribed by the Conference. There are currently 12 OPEC Member Countries.

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HEADS OF DELEGATION OF OPEC:

The Heads of Delegation are the official representatives of each Member Country to the OPECConference. They are normally Ministers of Oil, Energy or equivalent portfolio.

TRANSPORTATION USED FOR OIL AND PETROL:

The various transportation used by various countries all over the world are:

Road Transport

Air Transport

Water Transport

Pipeline Transport

OPEC CONTROLS THE OIL MARKET:

Iran, OPEC's second-largest oil producer, is using 20 tankers to collect and store crude,according to vessel-tracking service Petro Logistics Ltd.OPEC does not control the oil market.OPEC Member Countries produce about 40 per cent of the worlds crude oil and 15 per cent ofits natural gas. However, OPECs oil exports represent about 55 per cent of the oil tradedinternationally. Therefore, OPEC can have a strong influence on the oil market sometimes,depending upon the overall conditions.OPEC seeks stability in the oil market and aims to deliver steady supplies of oil to consumers atfair and reasonable prices. The Organization has achieved this in a number of ways byvoluntarily producing more or less oil in response to demand and supply dynamics.

OPEC SET OIL PRODUCTION QUOTAS:

The OPEC Statute requires OPEC to pursue stability and harmony in the petroleum market forthe benefit of both oil producers and consumers. To this end, OPEC Member Countries respondto market fundamentals and forecast developments by coordinating their petroleum policies.

Production quotas are one possible response. If demand grows, or some producers supply lessoil, OPEC can increase its oil production to prevent a sudden rise in prices or shortfall in supply.

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OPEC might also reduce its oil production in response to market conditions, as a means ofcountering falling prices or a glut on the market.

It does this by setting a new group production ceiling or adjusting an existing one. This ceiling isdivided into individual Member Country quotas, as agreed by the Conference.

However, when OPEC makes its production agreements, it does so with the expectation that non-OPEC producers will actively support the Organizations measures, since this will ensureOPECs decisions are more effective and benefit everyone.

World crude oil production, 19602008

The impact of OPEC output decisions on crude oil prices must be considered separately from theissue of changes in the prices of oil products, such as gasoline or heating oil. There are manyfactors that influence the prices paid by end-consumers for oil products. In some countries, taxescomprise 70 per cent of the final price paid by consumers, so even a major change in the price ofcrude might have only a minor impact on consumer prices.

OPEC INFLUENCES THE WORLD ECONOMY:

OPEC plays an important role in promoting and sustaining world economic growth by ensuringsteady supplies of oil at reasonable prices. OPEC provide the required amount of oil to all partsof the world to help their economies

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However, OPEC has long been aware of the need for improvements in world trade. In 1975, theOrganization backed calls for the creation of a new international economic order based onjustice, mutual understanding and a genuine concern for the well-being of the entire worldspeople. OPEC also called on industrialised and developing countries to come together to solvethe problems facing poor countries and to look for ways of establishing a better economic system

by allowing increased trade and exchange of knowledge.

OPEC HELPS OTHER COUNTRIES:

In 1975, OPEC also called on industrialized and developing countries to come together to solvethe problems facing poor countries and to look for ways of establishing a better economic systemby allowing increased trade and exchange of knowledge.

OPEC established the OPEC Fund for International Development (OFID) in January 1976(originally called the OPEC Special Fund) to promote cooperation between OPEC MemberCountries and other developing states. In particular, OFID aims to help poorer, low-income non-OPEC countries in their pursuit of social and economic advancement. OFID is active in manyregions, including Africa, Asia, Europe and Latin America. It has supported a wide range ofprojects, from providing clean water and energy to remote communities, to building schools,Hospitals and roads and developing industry, farming and trade opportunities. Since itsestablishment, it has made commitments totalling nearly US $10.1 billion, two-thirds of whichhave already been disbursed.

The Third Summit of OPEC Heads of State and Government in 2007reaffirmed OPECscommitment to energy for sustainable development. The concluding Riyadh Declaration statedthat energy was essential for poverty eradication, sustainable development and the achievementof the Millennium Development Goals. It associated Member Countries with all global effortsaimed at bridging the development gap and making energy accessible to the worlds poor.

OPECS ATTITUDE TOWARDS FUEL-EFFICIENCY:

OPEC fully supports technological improvements that make transportation cleaner, safer andmore efficient. The Organization would like more people to enjoy the benefits of personalmobility in an environmentally sustainable manner.

OPEC has always recognized that crude oil is a finite resource. By managing its production, theOrganization aims to enable many generations to benefit from its use. During the 20th century,oil dramatically transformed the world for industrialized countries. Increasingly, it is doing thesame for developing countries. Technologies that enhance fuel efficiency are, therefore,welcome.

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OPEC SUPPORT ENVIRONMENTAL POLICIES:

OPEC is concerned about the environment and wants to ensure that it is clean and healthy forfuture generations. In fact, all OPEC Member Countries have ratified the Kyoto Protocol to theUnited Nations Framework Convention on Climate Change. OPEC considers that the

development of technology is important for limiting or reducing greenhouse gas emissions. Inthis regard, the Secretariat is exploring options to participate in international collaborative effortsin research and development programmes geared at improving carbon capture and storagetechnology. OPEC Member Countries are also investing heavily to improve the environmentalcredentials of oil by tackling gas-flaring and promoting safer and cleaner drilling, transportationand refining processes. In addition, OPEC participates in many international meetings to remindgovernments and others debating environmental policies that they must consider the needs ofdeveloping countries, especially those that rely on oil for their income.

To demonstrate its commitment, at the 2007 Third Summit of Heads of State and Government ofOPEC Member Countries in Riyadh, Saudi Arabia, a number of OPEC Member Countries

pledged a total of $750 million to help fund research and development into the environmentalchallenges facing the energy industry.

OPEC CONCERNED ABOUT HIGH OIL TAXES:

Many countries have introduced heavy taxes on oil products. In some countries, the price thatmotorists pay for gasoline is three or four times higher than the price of the original crude oil.Taxes can account for as much as 70 per cent or more of the final price of oil products. As aresult of these oil taxes, some governments in oil-consuming countries (especially in Europe,where taxation levels are highest) receive much more income from oil than OPEC MemberCountries.

OPEC is concerned that many of the so-called green taxes that are currently levied on oil do notspecifically help the environment. Instead, they are simply added to government budgets andspent on other items.

Several industrialized countries are developing policies to limit the use of fossil fuels as a way ofreducing their emissions of carbon dioxide (CO2). Many are already imposing heavy taxes, particularly on oil products, while subsidizing alternative fuels whose sustainability andenvironmental impact remains unknown. Yet, studies have shown that the industrialized nationsof the Organization for Economic Cooperation and Development could cut their CO2 emissionsby12 per cent by 2010 and still maintain their tax revenues without concentrating taxes on oil alone.This could be achieved by adopting pro rata tax system that levies tax on all forms of energy,according to differing carbon contents.

OPEC is concerned that some countries may introduce environmental and taxation policies thatare harmful to those who rely on fossil fuels for a substantial part of their income. Also, some

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Such a downturn could also negatively impact oil installations. Some facilities, such as thoseoperating in the oceans, are very difficult and expensive to shut down. When productiondeclines, oil producers might be forced to lay off staff. Downstream operators, such as gasolineretailers, refiners and transport companies, would also suffer accordingly.

If oil producers receive lower incomes, they spend less money and import fewer goods from oilconsumers. If investors are unsure about the risks and the likely returns from petroleuminvestments, they may not invest. If producers do not invest enough money, or do not do so earlyenough, the world could face a future shortage of oil supplies.

However, if oil producers continue to see reasonable prices and stable demand, they willmaintain their production and invest on time to meet demand. Thus, security of oil supply reliesupon security of oil demand. Oil producers and oil consumers need to work together to preserveboth.

OPEC LONG-TERM STRATEGY:

OPECs Long-Term Strategy provides a coherent framework and consistent vision for the futureof the Organization. The culmination of more than two years of preparation, the Strategy isprepared every five years by the OPEC Secretariat under the guidance of the Deputy Ministers ofPetroleum and Energy of Member Countries.The Strategy analyses factors that may affect the Organizations efforts to ensure market stabilityand fair prices, and also analyses global trends that may have an impact on the security of worldoil demand. In line with OPECs fundamental mission, the Strategy considers the overallconditions which are necessary for the regular supply of petroleum to consumers.

THE VARIOUS PROBLEMS FACED BY OPEC:

1. Worldwide oil sales dominated by U.S. dollars -Since the beginning of 2003, Iran has required euro in payment of exports towardAsia and Europe, though prices are still expressed in US dollars. And Venezuelaalso accepted euro as a trading currency. Iraq also trying to trade in euro but itwas not able sustain. When dollar falls, purchasing power of OPEC member statesfalls

2. Negative results of increasing oil prices

Increase in oil prices decreases consumption and could cause net decrease inrevenue.Extended rise could encourage change to alternative energy or increasedconservation

3. Oil price rise due to recession -

In a developed nation like the United States, every single aspect of business andlife requires some or the other form of oil. As per the current scenario, crude oil is

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OPEC- IF PROJECT

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