OPEC in the 21st Century. What has changed and what have we learned?

This article examines OPEC in the present and the role of the organization in the future. First, Merino Garcia argues that OPEC's mission is not to maintain price stability as much as it is to maximize profit for its member nations from the sale of oil. He then examines factors that have affect...

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Bibliographic Details
Published in:Oxford Energy Forum 2005-02 (60), p.7-10
Main Author: Merino Garcia, Pedro Antonio
Format: Article
Language:English
Subjects:
Balance of payments
Cartels
Developing countries
Energy economics
Forecasts
History
International
Oil consumption
Organization of petroleum exporting countries
Petroleum industry
Petroleum production
Statistical data
Supply & demand
Supply and demand
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Summary:This article examines OPEC in the present and the role of the organization in the future. First, Merino Garcia argues that OPEC's mission is not to maintain price stability as much as it is to maximize profit for its member nations from the sale of oil. He then examines factors that have affected demand since 2000 and contends that demand for oil is and will continue to be strong as rapidly developing countries increase their oil needs. A look at the supply side of oil presents a different story. While, one would expect the entrance of non-OPEC member states into the market as oil prices rise, instead output has failed to keep pace with short term demand, as mature oil fields are less productive and there has been less investment in exploration. Merino Garcia argues that OPEC's aggressive strategy from 1977-1983 led to the entrance of other suppliers into the market, a drop in demand, and high spare capacity. A more moderate approach in the 1980's and 1990's led to a higher target price, facilitated economic development, and surpassed OPEC countries' spare capacity. Based on rising demand and falling supply, Merino Garcia argues that OPEC is entering into a new phase; however based on a review of the organization's press releases, OPEC appears focused on more traditional geo-political factors than changing supply and demand.
ISSN:0959-7727