Position of OPEC Essay Example | Topics and Well Written Essays - 3750 words

Position of OPEC - Essay Example OPEC has found its geopolitical strength and has realized its power suddenly and has become an important force playing an important part in regions like Asia and Africa. It has brought the huge multinational oil companies under control who could have done so many wrong acts otherwise, but now they all are on their knees, OPEC has made them merely impotent in the decision-making process, which is a good sign as there aim of profitability can disturb many other economies. It has forced the Western nations to have its favor on numerous occasions. There is a growing recognition in the Western world that the industrialized countries cannot solve the problems of chronic inflation and economic stagnation permanently unless they force OPEC to abandon its stand of raising oil prices ever higher and disrupt supplies to the oil consuming nations, but imagine what they could have done if OPEC was not there. The dependence on OPEC increased considerably in the United States during the last decade and a half. According to a study by the Federal Energy Administration (FEA), U.S. oil imports raised 150 percent between 1968 and 1973, from about 2.5 million barrels a day in 1968 to 6.3 mb/d in 1973. Imports from the Arab oil producing countries were raised to 31.9 percent in 1976 from a negligible 2 percent of total U.S. oil imports in 1970. On the whole, the reliance of the United States on foreign oil had increased disturbingly. In 1970, the United States depended on foreign oil for 23 percent of its total oil consumption, which was quite clearly showing what could have happened in no oil situation. In 1974, the figure was raised to 37 percent, and in 1976, oil imports were about 44 percent of total U.S. consumption. In 1977, the oil imports reached the pinnacle at an average of 8.7 mb/d. That represented approximately 48 percent of the total domestic supply, which averaged 18.4 mb/d in th at year. The FEA's figures also showed that the consumption of oil in United States was raised by 3.7 percent in 1976 as compared to 1975, with gasoline use advancing at 6.7 percent and distillate by 7.9 percent. At the same time, the domestic production during 1975 and 1976 had decreased from 8.24 mb/d of crude oil to 7.93 mb/d. The nation's refineries ran at 86 percent of capacity in that period compared to 87.1 percent in 1975, which is a considerable difference in the short run. It has also been identified that the Arab nations and Nigeria were increasing their share of the U.S. market while the nation's traditional suppliers such as, Venezuela and Canada were contributing a smaller share, fundamentally because of the high price of Canadian oil and the restricted output of Venezuela. It was for the first time in 1976 that Saudi Arabia had overtaken Venezuela as the United State's chief overseas supplier of crude oil. On the other hand countries like Algeria and the United Arab Emirates (UAE) have all increased their shipments, while Canada is pointing out its shipments to the United States. The conditions took a big change during 1979-1981. Suddenly, the oil crisis gave a rise to the oil surplus, it was perhaps due to the remarkable changes in the balance between demand and supply which is the base of economics and also famous for changing any country's fate.