OPEC was established in 1960 with the principal aim of coordinating petroleum policies and protecting the interests of member countries. It currently accounts for 40% of global crude oil production and 55% of internationally traded oil. Throughout its history, OPEC has shifted from having no major role in price setting before 1970 to gaining control of prices in the 1970s. It has faced challenges maintaining quotas and market share while balancing supply and demand fluctuations to keep oil prices stable.

2.  Set up in 1960
 Principal Aim- 'coordination & unification of
petroleum policies of member countries &
the determination of the best means for
safeguarding their interests, individually &
collectively’
 40% of the world's crude oil production
 Exports represent 55% of the crude oil traded
internationally

3.  Before 1970
 No major role played by OPEC countries
 During 1970
 Power of price setting shifted from MNC oil
companies to OPEC
 By 1973 OPEC countries changed the pricing system
 1975-1985
 Oil production increased from 48% to 71%
 Mid-1980
 Survival became Uncertain
 Market share fell from 52% to 30% in 1985

4.  Quota set by OPEC
 Production ceiling set up was violated
 1985-Oil prices dropped from $28 to $12
 1990s- $30 per barrel
 1993- $15 per barrel

5.  Pricing data collected
 March 2000 –Set a Price Band mechanism in
the range of $22-$28 per barrel
 Production adjustments on basket price
 Jan 2005 – suspended price band mechanism
 Market was tight in its price band
 Unable to defend by cutting its production

6.  Price being affected due to speculation
 Fluctuation due to changes in quota decisions
 1980- OPEC made a mistake by increasing oil
prices to $40 / barrel
 Reduction in demand – reduction in prices
 Problem with cartel
 Maintaining the right price
 Allocate sales among OPEC countries
 Growth expectation in 2008-2009

7.  Lifting costs incurred in extraction
 1999-less than $1.50 a barrel
 Persian countries have incurred lowest
replacement cost and U.S incurred highest
costs
 Cost for setup maybe around $19-$25 pb still
the oil price rises up to $100

8.  OPEC produced 28-29mbpd in 1971
 Still producing the same amount
 Prices rocketing due to surging demand
 In 2008 oil ministers declined to increase
production.
 Extraction costs $1.50 pb. PB price $100
 OPEC maintained that surging prices were
due to Hedging and mere Speculation