Petroleum or oil price in layman language, is one of the important source of daily basis. Malaysia is also a producer of this oil but not as large as other country. We are a very small oil producer. This oil is very important until it became a very large business and a very large source of income to the large producers. Basically the price of this oil will be determine by an organization called OPEC, to avoid the imbalance and unfair dealing. OPEC stands for The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members of the Organization.
These countries were later joined by Libya , the United Arab Emirates, Algeria, Nigeria , Gabon , Angola , Equatorial Guinea and Congo. This means that, currently, the Organization has a total of 14 Member Countries.
OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.
Up until the middle of the 20th century, the United States was the largest producer of oil and controlled oil prices. But now its seem like the US is not the largest producer anymore and also can’t control the prices of oil. And now the prices of the oil are on rise which make the president chair hot.
The price of the oil today are on the top of hill. It may a positive move on the side of the producer but as a consumer for daily basis just like you and me, it is definitely a rising burden. Oil is became one of the daily uses in today’s live as the world to moving forward to the technology way.
The United State was the first extracted oil user which lay them the power of pricing the oil. At that time the US was the largest producer of oil in the world. In general, oil prices were volatile and high during the early years because economies of scale during extraction and refining were not present. The price fell by more than 60% over the next 5 years and rose by 50% during the next 5 years.
However then, the supply and demand for oil rose additionally with the discovery of oil in Iran in 1908 and Saudi Arabia during the 1930s and World War I, respectively. The use of oil in weaponry and the subsequent European coal shortage further ratcheted demand for oil, and prices came crashing down to $40 in today's terms. Meantime, in response to U.S. support for Israel during the Yom Kippur War, OPEC and Iran stopped oil supplies to the United States. The crisis had far-reaching effects on oil prices. They have remained at high levels since. OPEC controls oil prices through its pricing-over-volume strategy.
Now currently the pricing the oil is on the hands of OPEC, which the prices are on rising, and poking the US. Although the organization’s charter doesn’t state this explicitly, fix prices but, by restricting production OPEC could force oil prices to rise, and thereby theoretically enjoy greater profits than if its member countries had each sold on the world market at the going rate. Throughout the 1970s and much of the 1980s, this was a sound if immoral strategy for OPEC.
According to the U.S. Energy Information Administration, OPEC member countries often exceed their quotas, selling a few million extra barrels and knowing that enforcers can’t really stop them from doing so. With Canada, China, Russia and the United States as non-members, OPEC is limited in its ability to, as its mission euphemistically states, “ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers.”
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