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Because of Covid-19, the Organization of the Petroleum Exporting Countries (OPEC) has given up on commemorations planned for Baghdad in Iraq, where it was founded exactly 60 years ago, on September 14, 1960.
The Covid-19 has definitely spoiled the party for the 60 years of OPEC. For health reasons, the commemorations are canceled and postponed sine die in Baghdad. It was there that on September 14, 1960, five countries: Saudi Arabia, Iran, Iraq, Kuwait and Venezuela founded the Organization of the Petroleum Exporting Countries. It was then a question of rebalancing the powers between the multinational oil companies and the producing states, which then received only meager taxes and fees from the exploitation of their subsoil.
Peak in the 1970s
The pioneers were quickly joined by Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador and Gabon. Gone is the system of concessions, room for national companies which deal on an equal footing with private international companies. At its peak, in the 1970s, OPEC concentrated more than half of the world’s oil supply. A power that allows it to impose an embargo in 1973 against Israel’s allies. First oil shock: the price of the barrel climbs from 1 to 10 dollars. Six years later, the Iran-Iraq conflict brought them to $ 35 a barrel.
OPEC weighs only a third of the world’s oil
Since then, OPEC’s power has eroded. In the 1990s, the oil market became more financial. The futures markets trade in the form of paper contracts twice as much oil volume as the physical market.
More and more formidable competitors are emerging: Russia, Mexico, Norway, the United Kingdom. And of course in the 2000s, American shale oil. OPEC, which has 13 members today, today weighs only for a third of the world market. Venezuela, which had the idea of OPEC, exports almost nothing, Iran, sanctioned by the United States, is on the sidelines. Between diplomatic rivalries and everyone’s desire to keep their market shares, OPEC is more difficult to be a cartel than before. At the end of 2016, the organization must appeal to Russia and 9 other producing countries to redress prices. An OPEC + alliance which has struggled to maintain the barrel at 40 dollars since the Covid-19 caused the demand for crude to collapse.
But it’s still the cheapest oil to produce
However, has OPEC said its last word? No, not while we’re consuming oil. Its member countries have arguably the most abundant reserves and the cheapest crude to produce. OPEC can also take comfort in noting that this time it was asked to act by Washington, which had always opposed its existence.