World crude oil prices have remained at low (to the mid 1970s to early 1980s period) levels (in the $14 to $22 per bar rel range) levels for the past three years. From time to time, the Organization of Petroleum Exporting Countries (OPEC) has adopted policies designed to stabilize crude oil production by member states, and to stabilize and/or increase world crude oil prices. These policies have been notably unsuccessful.
In recent months, however, demand for crude oil in the developed countries, particularly the United States, has begun to rise significantly, if not dramatically. Some economists and energy experts predict that a continuation of this demand trend will result in another energy crisis in the first half of the 1990s, wherein OPEC will be in a position to control supply and dictate prices. The projection by other economists of a global economic boom by the mid 1990s1 supports this the sis. Contradicting the thesis, however, are reports of contin ued increases in energy reserves, which hold the potential of creating an energy glut for decades to come.2
1C. R. Morris, "The Coming Global Boom," The Atlantic, October 1989, 51 58.
2M. L. Wald, "An Energy Glut in the Ground Imperils Ecological Hopes," The New York times, 15 October 1989, E5.
In the wake of recent experience, and with cognizance of future predictions, this research examines the role of OPEC in the world economy of the 1990s. Specifically, this research considers the viability of OPEC as an oil price stabilizing agent.
OPEC, ITS INTERNAL STRUCTURE AND ITS EXTERNAL ACTIONS
OPEC was founded in Iraq in 1960.3 The founder members of the organization were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.4 The purpose of the organization was (1) to unify and coordinate the petroleum policies of the member states, and (2) safeguard the general interests of the member states.5 Eventually, 13 countries joined OPEC. The eight additional member sta...