OPEC AND THE DWINDLING OIL PRICES IN THE WORLD
O.P.E.C which is popularly known as the Organization of Petroleum Exporting countries was set up on September 15 1960. This system was founded primarily by five countries in Iraq, Baghdad, namely Saudi Arabia, Irag, Iran, Venezuela, and Kuwait. They were subsequently linked up by Qatar in 1961, Indonesia in 1962, Nigeria in 1971, Libya in 1962 and others like that. Two major objectives indeed characterize the system which is (1) To stabilize oil prices eliminate unnecessary competition among all states and be able to bargain for good oil prices on the world marketplace. (2) To make the process of trading oil between countries who belong to OPEC easier. Since its inception, this organization has its ups and downs, this is ascribable to the sovereignty of the members who joined the organization voluntarily, for example Indonesia suspended its membership in 2009 and again reactivated it in 2016. So were others who did the same and their actions cannot be questioned. The voluntary exit and entrance of members as they desire, affected the stability of members and their decisions in the international community concerning oil prices
From the time of the establishment of O.P.E.C which started with five members the number of nations that holds petroleum in commercial quantity has indeed increased and not all of them are members of OPEC. These states are also entittled to sell their products also in the international marketin which the purchasers may prefer to buy from non OPEC members which will unquestionably make a tight competition among members. For example Sudan has oil in commercial quantity yet they are not members of the OPEC. Sao tome and Principe have oil in commercial quantity and are not members of OPEC. Where does their oil go? Who buys their oil?. If these oils are being sold in Europe and are being bought by the industrialized countries in Europe, then dwindling oil prices in the international market is not a surprise.
The degree of commitment among members is real low in OPEC. Refusal to abide by the decision of members in the establishment because of the financial need of their countries has indeed derailed the aims and objectives of OPEC in creating artificial scarcity to control price in the international grocery store. Thereby disobeying the quota given to them by selling more than the quota assigned to them and therefore creating more oil in the international market leading to the decrease of petroleum costs.
OPEC got a flat footed by the Asian crisis. They did live with the mistaken opinion that the world consumption would remain to increase at the same rate in 1998 which was wrongly projected by the system. Members of the industrialized nations never wanted to have the sanction OPEC made against the United States not to sell oil to them when U.S was in support of Isreal in the war against the Palestinians. This indeed led to the energy crisis in Europe and its environs. The United States will never want a repetition of such an experience again, therefore, all effort to get an alternative source of energy will be on deck to avoid energy crisis again in their country in particular and Europe in General.
Projecting into the future and in consideration of modern technology, which is fast developing like the nuclear power plant, the solar Energy, the wind energy and many other sources of energy being discovered by modern day technology the future of OPEC is bleak. The developed countries are always looking for ways to reduce the amount of goods or services imported into their country so as to increase their GDP are beginning to find a stable alternative to oil thereby reducing their dependence on oil. Even when OPEC was at its peak, it controls only 40 percent of its production in the international market, now that technology has made its own discoveries the 40percent of oil dominance in the market will definitely reduce, especially now, that the Unites States are producing “shale oil” which is an alternative to oil.
OPEC is an organization formed for a common purpose. To protect their interest on oil in the international market this interest can only be protected if it still has relevance in the international community. What relevance is an organization that cannot control its members who disobeys the instruction of the organization on the number of quota of oil to produce like Saudi Arabia. So also is Iraq and many other countries that have decided to follow their footsteps. The accumulation of these actions has indeed weakened OPEC and I don’t see them coming out of it in the next 20 years, at which time technology must have reached another dimension and many countries would have discovered more oil in commercial quantity. The oil glut is just the beginning of the end of OPEC. Most countries who solely depended on oil like Nigeria and Russia should start a diversification plan of their economy to other sectors, so as to avoid being taken unaware when oil finally losses his commercial value a word is enough for the wise.
