Why Do The Members Of Opec Have To Control The Price Of Petroleum?


Sometimes countries that produce the same goods join forces to control how their product is bought and sold. Another word for a product or good that has value is commodity. Groups set up to control the buying and selling of a commodity are called commodity organizations. There are commodity organizations for such products as peanuts, iron, ore, rubber, copper, sugar and others. The most powerful of all commodity organizations is the Organization of Petroleum Exporting Countries, or OPEC. Its members are located in South America, Africa, and Asia. They produce oil and sell it to other countries.

The drive to form

OPEC began in Venezuela in 1946. A Venezuelan leader began talking with the leaders of other petroleum-producing countries about common problems. On November 14, 1960, OPEC was formed. Its members include Iran, Iraq, Kuwait, Ecuador, Gabon, Nigeria, Algeria, Libya, Indonesia, Qatar, Saudi Arabia, and the United Arab Emirates.

The main reason for forming OPEC was to protect the futures of the member countries. Many of the OPEC countries have no other important natural resources besides their oil. They believe they must not sell this resource too cheaply.

Every year or so OPEC leaders meet to decide what prices to charge for oil. In some cases they also decide how much oil they are willing to sell. They usually have difficulty deciding on the prices. But all must agree. Otherwise, the country charging lower prices would get the most of the world’s oil business, at least for a while.

OPEC members use some of their profits from selling oil to build industries. Some are building up other energy resources, such as nuclear and solar power. They think

that having industries and other resources will be necessary when their petroleum is used up.

Each time OPEC members raise prices; all the countries of the world are affected. The price of gasoline and everything made from petroleum rises. Because oil is used to provide much of the energy in factories, prices of many manufactured items go up. The cost of lighting and heat our homes goes up. So does the cost of fertilizer.

The countries hurt the most by higher oil prices are those that are the poorest. Many of them are struggling to build industry of their own. Without petroleum, they cannot make or transport their goods. They cannot improve the living conditions of their people. OPEC members know this. They now set aside some money to help these countries.

OPEC’s control of petroleum prices also causes other difficulties. Countries need oil products to run their tanks, battleships, airplanes, and trucks. When prices go up, defense costs go up too. Then governments need to collect more in taxes to pay these costs.

One result of OPEC’s control of oil has been to make people realize that petroleum supplies are limited. Many people now try to use less petroleum than before. They are also looking for new ways to produce the energy needed for homes, factories, and defense. Another result is that many people now understand how interdependent the nations of the world are.

note: originally posted at Exposeknowledge.com under the same author.



Article Written By joeldgreat

Where I belong...New ways to contribute to humanity by posting relevant blogs and articles. Back from the grave..

Last updated on 19-06-2016 150 0

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