Oil and Gas Institutions

Hydrocarbon supply is closely linked to worldwide economic and geopolitical stakes. Similarly, nations must respond to issues related to oil and gas consumption in a concerted manner; and then apply measures on a national scale. Therefore, producing and consumer countries have set up institutions to deal with energy issues.

What Is OPEC and What Is Its Role?

Hydrocarbon production, trade and distribution, energy policies, and the fight against global warming are organized on a global scale. This is why there are international organizations that specialize or are highly involved in these activities and policies.

Hydrocarbon trading, energy policies and the fight against global warming are organized on a global scale.

 

OPEC (Organization of the Petroleum Exporting Countries) is one of the largest of these institutions. It was founded in 1960 by 5 countries (Iraq, Venezuela, Saudi Arabia, Kuwait, and Iran). In 2010, it had 12 member countries (the founding countries plus Qatar, Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon, and Angola), who together hold 78% of proven oil reserves worldwide¹. OPEC's aim is to defend the interests of its members, but its role and actions have evolved over time, depending on the global economic and political context.  

   • When it was set up, the organization's main purpose was to rebalance the distribution of oil revenue between producing countries and oil companies in favor of the former.

   • In October 1973, during the Yom Kippur War, which opposed Israelis and Palestinians, OPEC countries sided with Palestinians. They used oil as a means of putting pressure on Israel's allies (including the United States, Portugal, South Africa, and the Netherlands) by stopping their oil exports. The effect of this embargo was that the price per barrel of oil increased 4-fold in the space of 6 months, giving rise to the first oil crisis in history.

   • Since 1973, OPEC has retained significant influence when it comes to setting the global price of petroleum products. For example, it requires its members to limit oil production through a quota system, defined according to the economic climate, and each member country's needs and reserves. These measures were designed to stabilize the price of oil, a target achieved in the 1990s.

Since the turn of the century, OPEC has continued to be a major influence in setting the price of petroleum products.

False. While OPEC has retained some influence on the setting of oil prices, it has lost a great deal of this influence since 2004.

Due to the significant rise in demand for oil from emerging countries, OPEC countries have stepped up production capacity to the maximum. Consequently, they no longer have any room to maneuver when it comes to increasing hydrocarbon supply and thus bringing down oil prices. It is against this backdrop that the price per barrel reached a record high of $132 in July 2008² before collapsing after the global economic crisis.

The International Energy Agency and Its Roles

Another organization that plays a key role in the field of hydrocarbons is the IEA (International Energy Agency), an association of oil-consuming countries attached to the OECD (Organization for Economic Co-operation and Development). This agency was set up in 1974 on the initiative of the United States in response to the OPEC's 1973 oil embargo. In 2010, it had 28 members- all industrialized countries and major consumers of petroleum products.

The IEA is an intergovernmental organization that coordinates energy policy with two main targets:

   • It works to ensure the security of energy supply. To do this, its member countries monitor oil markets and commit to sharing any information they have on energy with the IEA. The purpose of these measures is to respond to emergency situations in terms of oil and gas requirements.

   • The IEA works to reconcile economic development and environmental protection.
In 2005, it published a report recommending that its members limit their oil consumption.
This report made a number of suggestions on how to reduce greenhouse gas (GHG) emissions, including introducing a speed limit of 90km/h on highways, creating car pool lanes, reducing or eliminating public transport fares, restricting vehicle use to alternate days, and reducing business travel by promoting telecommuting. Finally, the IEA seeks to find compromises between member countries who have signed the Kyoto Protocol (an international agreement to reduce greenhouse gases set up in 2005) and those who have not.

Aside from OPEC and the IEA, other international organizations such as the WTO
(World Trade Organization) handle oil-related issues, although they do not necessarily specialize in these issues. The UN also has an interest in energy issues through:

   • UNFCCC (United Nations Framework Convention on Climate Change)

   • UNCTAD (United Nations Conference on Trade and Development)

   • IPCC (Intergovernmental Panel on Climate Change)

   • IMO (International Maritime Organization)

European and National Authorities

There are a number of authorities that deal with hydrocarbon issues under various headings (transport, climate, industry, etc.) within the European Commission.
The Directorate-General for Energy, set up in February 2010, focuses more particularly on drafting and applying policies regarding the following:

  • Oil and gas supply (pricing, making sure the energy market functions properly, energy independence, resource availability, and matching supply and demand)

  • Hydrocarbon use (by industry, individuals, etc.)

  • The fight against global warming (reducing consumption of and dependence on hydrocarbons, and developing renewable energy sources).

Similarly, there are authorities with a special remit to handle hydrocarbon issues at the national level:

  • In France, the General Directorate for Energy and Climate monitors the energy market, oversees the extraction of hydrocarbon deposits on French territory, manages strategic oil and gas stocks, and forms partnerships with oil-producing countries.

   • In the United States, the Department of Energy (DOE) is responsible for ensuring the security of the country's hydrocarbon supply, and as such it helps draft policies to combat global warming and supports energy-related research and innovation.

Moreover, a number of national, regional, and local agencies provide information to industry and consumers on how to make the most of hydrocarbons and reduce their environmental impact - for example:

  • ADEME (the French Environment and Energy Management Agency)
  • DENA (the German Energy Agency)
  • ABEA (the Brussels Energy Agency)

[1] Source: IFP
[2] Source: UNCTAD