Benefits of OPEC
OPEC stands for the Organization of Petroleum Exporting Countries and it is an international alliance that is responsible for coordinating the policies related to petroleum in its member states. The first five member nations of OPEC are Kuwait, Iraq, Venezuela, Iran and Saudi Arabia. OPEC offers the following important benefits.
1. Unifies different countries
The key objective of OPEC is to join together various countries with similar interests in the petroleum industry. In fact, it was established to unite against Western oil companies who were lowering oil prices. OPEC member nations produce about 45% of the total crude oil production in the whole world. This means that any actions that are going to be taken by this particular organization are going to be felt in the entire world.
2. Regulates oil prices
Since OPEC member nations produce high amounts of crude oil, OPEC has a strong effect on the overall oil market, particularly on the price of oil. The member nations usually meet each year and make important decisions regarding oil production. They usually take into account the current conditions of the oil market. Moreover, they also consider demand and supply issues among many other issues so as to regulate oil prices.
3. Enables economic growth
OPEC is devoted to ensuring the economic advancement of poorer countries and also environmental harmony. The unified policies enforced across the member nations makes certain that people who invest in the oil industry are going to have fair returns on their respective investments. This means no country is going to be left behind with regards to economic advancement.
4. Ensures market stability
OPEC is also committed to ensuring market stability through secure supply at reasonable prices. It helps in maintaining an adequate amount of spare oil that is used for balancing the market as well as keeping it sufficiently supplied.
Since OPEC can easily flood the oil market using very cheap petroleum, it could lead to huge losses for Western oil firms.