Set up in 1960 Principal Aim- coordination & unification of petroleum policies of member countries & the determination of the best means for safeguarding their interests, individually & collectively’ 40% of the worlds crude oil production Exports represent 55% of the crude oil traded internationally
Before 1970 No major role played by OPEC countries During 1970 Power of price setting shifted from MNC oil companies to OPEC By 1973 OPEC countries changed the pricing system 1975-1985 Oil production increased from 48% to 71% Mid-1980 Survival became Uncertain Market share fell from 52% to 30% in 1985
Quota set by OPEC Production ceiling set up was violated 1985-Oil prices dropped from $28 to $12 1990s- $30 per barrel 1993- $15 per barrel
Pricing data collected March 2000 –Set a Price Band mechanism in the range of $22-$28 per barrel Production adjustments on basket price Jan 2005 – suspended price band mechanism Market was tight in its price band Unable to defend by cutting its production
Price being affected due to speculation Fluctuation due to changes in quota decisions 1980- OPEC made a mistake by increasing oil prices to $40 / barrel Reduction in demand – reduction in prices Problem with cartel Maintaining the right price Allocate sales among OPEC countries Growth expectation in 2008-2009
Lifting costs incurred in extraction 1999-less than $1.50 a barrel Persian countries have incurred lowest replacement cost and U.S incurred highest costs Cost for setup maybe around $19-$25 pb still the oil price rises up to $100
OPEC produced 28-29mbpd in 1971 Still producing the same amount Prices rocketing due to surging demand In 2008 oil ministers declined to increase production. Extraction costs $1.50 pb. PB price $100 OPEC maintained that surging prices were due to Hedging and mere Speculation
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