Oil and gas supply influences — and is influenced by — the global economy and geopolitics. Producing and consuming countries have set up international organizations to address energy, business and climate issues that require concerted governmental action.
The Organization of the Petroleum Exporting Countries (OPECCreated in 1960, OPEC currently has 12 members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia... ) was created in 1960 by five countries: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.1 In 2010, it had 12 member countries — the founders plus Algeria, Angola, Ecuador, Libya, Nigeria, Qatar and the United Arab Emirates. Together, these countries hold 78% of proved oil reserves worldwide. OPEC’s role and strategy have evolved over time, to reflect the global economic and political environment.
- At the time of its founding, the organization's main objective was to secure a more balanced distribution of oil revenue between producing countries and oil companies.
- In October 1973, during the Yom Kippur War opposing Israel and Egyptian and Syrian forces, OPEC supported the Arab states by halting oil shipments to Israel’s allies, including Portugal, the Netherlands, South Africa and the United States. As a result of the embargo, the price of oil quadrupled in the space of six months, giving rise to the first oil crisis.
- From that point onward, OPEC wielded significant influence on the global price of petroleum products. The organization employs a quota system that limits the amount of oil that members can produce. The goal is to stabilize prices, an objective that was achieved in the 1990s.
- Since 2004, OPEC’s ability to influence oil prices has diminished considerably. Due to a surge in demand in emerging economies, OPEC countries are producing at full capacity. Consequently, they no longer have any leeway to exert pressure on prices by increasing their supply. The price of oil reached a record high of $144 per barrelUnit of volume measurement for crude oil that is equivalent to approximately 159 liters (0.159 cubic meters)... in July 2008 before collapsing due to the global economic crisis. It subsequently rose back above $100 dollars per barrel.2
OPEC was created in 1973 and the IEA one year later, at the time of the first oil crisis
The International Energy Agency
Another organization that plays a key role in energy strategy is the International Energy Agency (IEA)An independent, intergovernmental organization founded within the framework of the OECD... , an association of oil-consuming countries that is linked with the Organisation for Economic Co-operation and Development (OECDFounded in 1960, the OECD promotes policies that will improve the economic and social well-being of people around the world... ). The agency was founded in 1974 at the initiative of the United States, in response to the 1973 OPEC oil embargo. The IEA has 29 members; all of which are industrialized nations and major consumers of petroleum products.3
The IEA coordinates its members’ energy policies by focusing on two main objectives:
- First, it strives to ensure secure energy supply. Member countries track the oil markets and share any pertinent energy information with the IEA. The primary goal is to be able to meet members’ oil and gas requirements in the event of an emergency.
- Second, it works to balance economic development and environmental protection. In 2005, the IEA published a report recommending that members limit their oil consumption and also made a number of suggestions on how to reduce their greenhouse gas (ghg) Gas with physical properties that cause the Earth's atmosphere to warm up. There are a number of naturally occurring greenhouse gases... (GHG) emissions. The IEA also seeks to broker compromises between member countries that have signed the Kyoto ProtocolInternational agreement linked to the United Nations Framework Convention on Climate Change... — an international production sharing contract (or agreement)Oil contract under which the oil that is produced is shared between the state and the oil company... to reduce greenhouse gases that came into force in 2005 — and those who have not.
Apart from OPEC and the IEA, other international organizations such as the World Trade Organization (WTO) deal with issues related to oil and gas trade. The United Nations, too, is involved in energy policy through the:
- United Nations Framework Convention on Climate Change (UNFCCC).
- United Nations Conference on Trade and Development (UNCTAD).
- Intergovernmental Panel on Climate Change (IPCC)Body established by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) in 1988... .
- International Maritime Organization (IMO).
(2) Business Insider