OPEC (Organization for the Petroleum Exporting Countries) was founded in 1960 by 5 countries – Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Over time OPEC has expanded and its membership now includes 13 countries. Currently, they control approximately 35% of global oil supplies and approximately 80% of proven oil reserves. In 2016, 10 additional oil-producing countries joined the alliance in what is now called OPEC+ with Russia being the most notable.
OPEC and OPEC+ nations now control over 55% of oil supplies and 90% of the proven reserves, giving significant control over the cost of oil. Saudi Arabia and Russia are the biggest oil producers in this alliance. OPEC historically has said that they take economic-based decisions and are not a political alliance. However, I think it is hard to separate political calculations from economic decision-making.
2022 has been a challenging year for the world. In the US, with rising inflation and price at the pump at historic highs ($5-7/gallon). President Biden released some oil from the national strategic reserve to help with supply and during a much-publicized visit to Saudi Arabia this summer, extracted an important promise from Saudi Arabia that they would keep their production high and help alleviate supply concerns.
On the 3rd of October, a month before the midterm elections, Saudi Arabia broke its promise to keep up the supply and cut production. This indirectly also significantly boosted the Russian economy as oil supplies constitute the most significant revenue for that country. This decision from Saudi Arabia has been received badly and interpreted as a major letdown for the US.
It is hard to say what part politics played in this. For me, we should continue to diversify our energy supply, invest in greener energy at a more rapid pace and help the climate cause as our earth is suffering.
SOURCES
https://www.nytimes.com/2022/10/05/business/opec-russia-oil-output.html
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