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Economics – Opec Essay

Thus OPEC is of immense importance in world commerce. Purpose – Pope’s objective is to Co-ordinate and unify petroleum policies among Member Countries, in order to cure fair and stable prices for petroleum producers an efficient, economic and regular supply of petroleum to consuming nations, and a fair return on capital to those investing in the industry. Why do fuel prices vary in different countries? (Ref:- Shell. Mom/Linda) Cost of buying finished product in the country (country supplies usually cheaper than importing product) Government excise and tax rates Government subsidies for fuel Currency fluctuations Economics – Opec By Vindications OPEC Presented By Shoo, Viand and Pursuant regulated pricing as the Administered Pricing Mechanism was dismantled in 2001. However, the artificially low pump prices of petrol and diesel do not reflect the realities of the high crude and refined product prices.

The low prices are subsidized by the present government through the issuance of oil bonds, which are given exclusively to public sector fuel retailers in India. For Shell ,the pricing decision is influenced by a number of factors including: cost of bringing the fuel to the retail site (product and distribution costs) cost of running the service station (e. G. Salaries,

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rent, utilities) $1109-$832=$227 COED -Organization for Economic Cooperation & Development The graph here illustrates the inter-country variations in the price of one litter of oil across 67 countries during 2011.

It is important to note that these price variations are not due to differences in underlying crude oil prices (shown in brown) but to the widely varying levels of taxes (shown in red) imposed by major oil consuming nations. These can range from relatively modest levels – like in the USA and Canada – to very high levels in Europe. In the I-J, for example, the government in 2011 earned about 59% (about IIS$ 1. 30) of the price charged for every litter of pump fuel sold to nonusers.

Oil producing countries (including OPEC), meanwhile, earned only around 32% (IIS$ 0. 71) of the total pump fuel price. Natural Gas liquids (Angels). OPEC – Important Events Some Background OPEC – Oil cones OIL Crises effect on Global Economy Conclusions Background 0 After world war II, Jews form their Nation as Israel in 1950 with disputed land – Jerusalem 0 Jews, Islam and even Catholic were claiming the same land. 0 Israel will continue to move ahead as they right the rule of their own. Settlement was not quite between Israel and Arab countries.

Egypt and Syria attacked Israel in 1973 on their holy day – Yon-Kipper (before this, there were 3 wars between Israel and neighbor countries) OPEC – Oil Crises : 1973 – First Oil Shock 0 OPEC countries decided to cut off the oil supply as long as the territory occupied by Israel was not “free”. 0 Ten days after the outbreak of the war, the “Gulf Six” (Iran, Iraq, ABA Dhabi, Kuwait, SAA and Qatar) decided to raise oil process by 17 % from $3. 12 to $3. 65 per barrel and also announced cuts in production. 0 The first country that was embargoed by Saudi

Conclusion: 0 What all three crises have in common is that they are not really rooted in economics in a narrow sense of supply and demand, but to a larger extent in politics. The first oil crisis was triggered by the Yon-Kipper War, Second by the revolution in Iran and the war with neighboring Iraq, Third oil price peak examined was triggered by the annexation of Kuwait and the Gulf War. 0 Oil price developments since 2003 have spurred a discussion about a “new oil crisis”. 0 This would be different from previous crises, it would not be supervening, but mainly demand- river, especially by China and India. Continue…………. The latest issue is the crisis with Iran about its nuclear program. 0 Iranian leaders have very openly threatened to use the “oil weapon” in the event of any action against the country, drawing parallels with the first and second oil price shocks. ….. , in the medium to long term, it is more likely than not that political developments in or in connection with one or more oil supplier countries, especially in the strategically-important Middle East, could lead to a new politically-triggered oil crisis. Present and Future Relevance of OPEC today OPEC is now responsible for approximately 45% of global oil production.

It is less significant than it was thirty or even twenty years ago. But it doesn’t mean it has become insignificant now. 0 In 1973, OPEC first flexed its muscles to reveal how far its influence reached. Even today, some argue that Pope’s only weapon of influence now is the ability to cut supply. The international arena. The BBC in an article says that Pope’s aim is to endow oil producers with more power in the oil market. 0 Even if OPEC did not exist today, it would come into existence because it is vital to the countries involved.

On an economic note, some believe that without OPEC there would be mayhem within the oil market that of course affects all other markets. Perhaps it would also damage the future possibilities of oil supplies. 0 Western countries are however on quite the mission to decrease their reliance on OPEC countries for oil and to diversify their sources of oil. Some argue that these efforts have been unsuccessful as the same sentiment was bought up in 1973 with the first oil shocks. 0 OPEC had a relatively easy 2012 with oil prices holding above the $100/barrel mark spite a still fragile global economy.

Future Challenges 0 US net imports of oil have fallen by 40%, or 5 million b/d, over the past seven years. Having peaked at 12. 5 million b/d in 2005, net oil imports averaged Just 7. 5 million b/ d in 2012. By 2014, the EIA (US Energy Information Administration) expects US net imports to have fallen to 6 million bold. 0 Being the major producer of fossil fuels which are the single important contributor of carbon emissions, Pope’s role in climate change is pivotal. The key to reducing greenhouse emissions is less use of eluting fossil fuels.

Whilst OPEC has to ensure the future profitability of its oil revenue, it at the same time wants to be perceived to be an advocate of climate change issues. 0 The world is becoming more dependent on natural gas, particularly for electricity, and less dependent on oil. At the same time, befouls are making inroads and other forms of energy, from coal to nuclear and renewable energy like solar, wind, etc are making a return. 0 Volatile Middle East region POPE’S Future Plans 0 Pope’s focus has swung away from Washington and Brussels and it has slowly Ovid more towards China, India and other developing nations in Asia and Africa.

OPEC is aware that these nations will drive the demand for its oil in future. OPEC has also invested in revolutionary methods of producing oil and gas from unconventional energy sources such as “hydraulic fracturing” of shale, tar sands and rock oil. This has led to more options in oil sourcing. OPEC has adopted a $b climate especially in the area of enhanced oil recovery. This research is envisaged to reduce the carbon emissions from the use of fossil fuels and increase its attractiveness. Conclusion Thank you Feedback

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