The Definition Of An Oil Cartel

A cartel is defined as a group of companies or nations, created to control the production and supply of a particular product. OPEC it the most renowned oil cartel. They supply most of the world's oil.

OPEC is a permanent group founded in Iraq during the September 10th - 14th, 1960 Baghdad Conference. It was founded by Saudi Arabia, Kuwait, Iraq, Venezuela, and Iran. Its first headquarters was located in Geneva, Switzerland, which was later on transferred to Vienna in Austria.

It was believed that their organization had strong ties with the oil industry, which allowed them to influence the price and supply of oil. This belief has diminished through the years. According to their statute, their mission is to bring unity and organization to the policies on oil distribution to their member countries.

They had to ensure that oil markets across the globe are stable. This secures consistent and dependable oil distribution to their customers around the world. It also guarantees a profitable return for their investors. Investing in the oil industry has always been considered rewarding and secure by most financial specialists.

A number of countries joined the organization after it was established in 1960. These are Indonesia, Qatar, Nigeria, the United Arab Emirates, Libya, Angola, and Gabon. The latter ended their membership in 1995. Indonesia suspended their membership on January 2009, while Ecuador suspended theirs from December 1992 up until October 2007. To date, the organization has 12 members.

An oil cartel can only be effective if the members control a large portion of the market. Because of this, OPEC can be considered as the only effective one in the world. Their member countries produce about 42 percent of the world's crude oil supply, and almost 20 percent of the world's natural gas. Their crude oil exports make up about 60 percent of it traded worldwide. This makes it difficult for anyone else to create a new oil organization.


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