Gas Face Nominee Profile: OPEC
Our next Gas Face Nominee: The Organization of Petroleum Exporting Countries.
OPEC was created in 1960, primarily to unify and protect the interests of oil-producing countries. In a nutshell, western oil companies wanted cheap oil, so some producing nations united to assure fair compensation for their product.
OPEC currently has thirteen member nations which hold over 2/3 of the world’s oil reserves and produce over 40 percent of the world’s oil exports.
OPEC members meet periodically to determine if oil production will be increased, decreased or unchanged. And when OPEC speaks, the U.S. listens. Here’s why…the United States is the world’s largest consumer of oil and more than half of its imported oil comes from OPEC nations.
Oil prices are a function of supply and demand. Excess supply leads to lower prices and shortages lead to higher prices.
So, is OPEC to blame for sky-high prices? OPEC’s current stance is that there is no shortage of oil, so its members are not to blame for the high prices. And relatively speaking, U.S. oil prices are still low.
Gas prices in the U.S. actually rank in the lowest third of the world. The most extreme countries are Eritrea and Venezuela, where a gallon of gas will cost about $8.45 and $0.14, respectively.
The next OPEC meeting is scheduled for September and lower gas prices could be on the way. That is, if OPEC decides to increase supply.
Whatever OPEC decides, the path to lower U.S. gas prices is one of decreased demand and increased domestic supply. I don’t think people will alter their driving habits enough to decrease consumption, so consumers need to push for alternative sources of energy.
BTW, I went to the gas station today. Didn’t make it inside for that Coke and a smile but I made a solid effort to fix my face while at the pump. Did I mention that Coke is switching its fleet to hybrid vehicles? :)
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POSTED IN: Commodities, Economy, Uncategorized
7 opinions for Gas Face Nominee Profile: OPEC
Kimberly Schloesser
May 20, 2008 at 11:48 am
I really did not know very much about OPEC in general until reading this blog! Also, the fact that Coke is switching to hybrid vehicles shows that the world is ready to make a change when it comes to environment. It is great to see that large corporations are energy concious these days.
Jordan Wolfson
May 21, 2008 at 2:02 pm
I dont care what OPEC says, gas reacing 4 dollars per gallon is a way out of hand considering it was cents about 20- years ago, inflaion isnt that bad. When OPEC meets prices should go down, because if they claim there is nos hortage why are prices so high domestically; unless the government changes the price for tax purposes? Gas prices should not be that high, but the change to hybrids could hekp the gas and environment as well.
Jonathan Wolf
May 21, 2008 at 3:54 pm
Before reading this I only knew a little about what was going on with the whole gas situation. After reading this blog I understand so much better the factors that have caused the fluctuations in gas prices because of OPEC. And also it ridiculous that countries gas prices are already exceeding $8 a gallon and that the US is actually in the lower third. I guess I should also not be upset the next time I go to fill up the tank because clearly it could be alot worse
John McMahon
May 21, 2008 at 11:45 pm
OPEC is a greedy cartel setup to receive profits only available under monopolistic conditions. They say that they are not the reason for the increase in price but if they didn’t restrict the supply of oil in the first place we would reach a market equilibrium and be able to have an efficient and fair price for gas. They can easily release more barrels to take some of the economics burden off of nations around the world but choose not to so they can reap the profits.
Ryan Eliasof
May 23, 2008 at 7:55 pm
I didn’t really understand everything that was going with OPEC and how they operated either. However, they do control the prices of oil and gas. Americans will not reduce their driving or stop driving gas guzzling SUV’s. So for as long as the U.S. needs oil, we will always have to succumb to whatever OPEC wants in terms of prices. Unless we find an alternate source of energy, we will soon have to pay these ridiculous prices of 8 dollars just like the other countries. I still think that gas prices are way too high and can be allowed to decrease in price. If anyone can remember, we started this semester when gas was 2.79 for regular, now it is approaching 4 dollars. How long did it take for gas to go from .05 to 2 dollars?
Aaron Chall
May 23, 2008 at 8:47 pm
I think it’s sad how a such a great country like ours is investing so much money into corn ethanol despite its negligible efficiency boost over conventional gasoline. I recently watched a special on CNN called “We Were Warned: Out of Gas.” Among many things shown, one thing in particular really struck me. Brazil is currently producing sugar cane ethanol domestically that is much more efficient than corn ethanol. Do you ever hear about the US exploring this option? The reality if that oil will not last forever. We need desperately to put more time and resources into researching and developing alternative sources of energy both for us and the planet.
Nicole Misarti
May 24, 2008 at 5:04 pm
I’ve learned a lot about the current gas problem in my International Economics class this semester, and unfortunately the situation isn’t simple enough to place the entire burden on OPEC. When they realized their cartel potential in the late 70’s/early 80’s, they cut back supply as a political statement. Nowadays, however, the jumps in prices are probably not because of OPEC since they’re supposedly producing at near capacity. Like you stated in your blog, changes in supply and demand conditions, especially with China consuming so much oil, is likely the cause of high gas prices today. While I wouldn’t place all the blame on OPEC, they are still a cartel, and will take advantage of their position to earn monopoly profits. Gas prices have been fluctuating for many years now, and our only chance of overcoming this is to invest in perfectly competitive alternative sources of energy.
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