Opec And Their Control On Oil Prices

1499 words - 6 pages

OPEC Controls PAGE \* Arabic \* MERGEFORMAT 1
OPEC and Their Control on Oil PricesJames R. HillAxia College of University of PhoenixOPEC and Their Control on Oil PricesThe sound of the ringing bell signals that the stock market is open for business. Shouting voices can be heard by the traders trying to buy or sell stocks on the market. For some, it will be a day of financial gains, and for others it will be a day filled with losses. There are many economic issues that are determined in the rise and fall of the American stock market; one of those issues is the price of oil. On many levels, the price of oil is dictated by groups of governments that have a stake in the success of the Organization for Petroleum Exporting Countries (OPEC). American consumers deserve to know how OPEC and its member countries influence the price of oil around the world.OPEC controls the price of oil around the world, and a majority of the world's oil reserves, producing 29.9% of America's imported oil ("How dependent", 2008). The Organization for Petroleum Exporting Countries, referred to as OPEC, was created in Baghdad, Iraq, in September of 1960. Baghdad is the location that was chosen for the original OPEC members, Kuwait, Saudi Arabia, Iraq, Iran, and Venezuela, to come together and discuss oil prices. Between 1961 and 2007, OPEC increased its membership when nine other countries joined their forces. Those countries, Angola, Indonesia, Socialists People Libyan Arab Jamahiriya, Qatar, Nigeria, Algeria, United Arab Emirates, Gabon, and Ecuador reportedly joined OPEC to help stabilize the oil market. OPEC's Headquarters were originally located in Geneva, Switzerland but in 1965, they were relocated to Vienna, Austria (Brief History, 2008).In 1973, the countries of Egypt and Syria invaded Israel. This attack started The Yom Kippur War. The invasion began on October 6, Yom Kippur, the Day of Atonement. Yom Kippur is considered the most sacred of the Jewish holidays, Israel's holiest day and is regarded as the "Sabbath of Sabbaths". On October 17, 1973, The Arab Oil Embargo went into effect. This enactment entitled OPEC to reduce the amount of oil exported to the United States and the other nations who were assisting with military supplies to Israel during the Yom Kippur War. This caused the price of oil to rise dramatically and greatly helped OPEC achieve their objectives. The Embargo ended in March 1974, and the price of oil has never returned to the pre-embargo prices ("Arab Oil Embargo", 2003). Prior to the enactment of the Arab Oil Embargo in 1973, oil was trading for around $3 a barrel. After the Embargo ended in 1974, the price of oil had risen to over $12 a barrel. When OPEC formed in 1960, the price for a barrel of oil was below $20. On October 17, 2008, the price ended at $69.85 ("Oil Price", 2008).At an OPEC meeting in September of 2008, members voted to cut production of oil, thinking that this would to help stabilize the price of oil. Saudi Arabian...

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