OPEC





OPEC:  The price of gasoline is a major interest to almost everyone in
the country and almost everywhere in the world. It seems that every month or
even more frequently, gas prices are either rising or dropping but never staying
stable. Gasoline prices are affected by many factors, including the price of
crude oil in the world market, supply and demand for gasoline, local market
competition, temporary supply interruptions, government regulations, or taxes.
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[Category]:
Business
[Paper Title]:
OPEC
[Text]:
Title : Gasoline
 
Description : 7page paper for Economics
 
Body of Essay :
 
The price of gasoline is a major interest to almost everyone in the country
and almost everywhere in the world. It seems that every month or even more
frequently, gas prices are either rising or dropping but never staying stable.
Gasoline prices are affected by many factors, including the price of crude oil
in the world market, supply and demand for gasoline, local market competition,
temporary supply interruptions, government regulations, or taxes. Gasoline is
produced by a distillation process where crude oil is heated and fumes are
captured and converted into many products such as kerosene, jet fuel, and
gasoline to name a few. Therefore the price of crude oil, which is extracted
from oil wells beneath the earth’s surface, is a major factor in gas prices.
The five leading oil producing countries and their approximate shares of the
world supply of oil are: Soviet Union 21%, Saudi Arabia 17%, The United States
15%, Venezuela 4%, and Mexico 4%. These five countries made up 61% of the worlds
oil production back in 1980. Even though the United States is a major producer
of oil, it does not make them self-sufficient. The United States uses more oil
than they can produce and must look toward foreign countries. Therefore, the
United States is forced to deal with an organization called O.P.E.C. The reason
the United States goes through O.P.E.C., is not only in its own interests, but
also in the interests of its allies and in the interest of maintaining world
peace. O.P.E.C. which stands for Organization of Petroleum Exporting Countries,
is made up of 13 countries: Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar,
Indonesia, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, and Gabon. It
controls approximately four fifths of the worlds oil reserves in the
non-Communist world. O.P.E.C. was founded in Baghdad, Iraq in September of 1960.
The headquarters were initially set in Geneva, but were later moved to Vienna in
1965. O.P.E.C. was organized in response to oil producing countries that did not
consult with the Middle Eastern oil states before lowering their crude oil
prices. The producers feared that other countries would establish monopolies.
The aim of O.P.E.C. was to create a universal price between the countries, in
order to ensure peace between oil producers throughout the world. O.P.E.C. also
wanted to provide its members with technical and economic support in times of
need, since not all the countries were completely stable. Even though the goal
of O.P.E.C. was to establish firmly unified prices among their members, the
organization was not always successful. In their quest for control over the
world market of oil production, they have run into several obstacles and
setbacks. O.P.E.C. has barely survived due to internal conflicts among its
members. Since O.P.E.C. almost has a complete hold on the worlds oil supply, the
United States is extremely concerned with the areas instability. The Middle East
and the Persian Gulf area, where most of the members are located, are extremely
prone to wars, both civil and cross borders. They are often plagued by religious
battles and positions of power are frequently overthrown, making it hard for any
stability to come out of the area. Anytime there is chaos in the Middle East,
the United States thinks back on "... memories of other troubles in the
Persian Gulf area: the Arab oil embargo in 197374, the Iranian revolution in
197980 and Saddam Hussein’s invasion of Kuwait in 1990" (Hancock 53). The
area is also vital to our allies, who would be crippled without Gulf oil, whose
livelihood we are dependent on. In 1973, O.P.E.C. raised oil prices 70%.
"The dominant Middle Eastern members of O.P.E.C. used succeeding price
increases as a political weapon. They aimed it at Western nations in retaliation
for their support of Israel against its Arab neighbors in the so-called Yom
Kippur War of October 1973. They accordingly raised prices another 130% at the
Tehran Conference of December 1973, and a temporary embargo was placed on the
United States and the Netherlands simultaneously. "Other price increases
followed in 1975, 1977, 1979, and 1980, which ultimately