OPEC+ GS: 3 "EMPOWER IAS"

In news:

• India has made a case for affordable oil prices in the backdrop of the Organization of the Petroleum Exporting Countries-plus (OPEC+) combine slashing production amid the COVID-19 pandemic.

 

Why a cause of worry?

• OPEC accounts for around 40% of global production.
• The OPEC accounts for 80% of India’s crude oil imports.
• Any production cut by the OPEC plus arrangement impacts India’s energy security efforts in the short run.

 

Impact on India

• India, which is one of the major OPEC consumers, has always stood for a global consensus on responsible pricing.
• Indian refiners have cut production as the lockdown has led to a sharp decline in demand for transportation fuels.
• Demand for domestic cooking gas has, however, increased as more people stay indoors during the lockdown aimed at containing the spread of the coronavirus.

 

Organization of the Petroleum Exporting Countries (OPEC)

 

 

• The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental organization, created at the Baghdad Conference in 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
• It aims to manage the supply of oil in an effort to set the price of oil in the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.
• It is headquartered in Vienna, Austria.
• OPEC membership is open to any country that is a substantial exporter of oil and which shares the ideals of the organization.
• Gabon terminated its membership in January 1995. However, it rejoined the Organization in July 2016.
• As of 2019, OPEC has a total of 14 Member Countries viz. Iran, Iraq, Kuwait, United Arab Emirates(UAE), Saudi Arabia, Algeria, Libya, Nigeria, Gabon, Equatorial Guinea, Republic of Congo, Angola, Ecuador and Venezuela are members of OPEC.

 

International Energy Agency

• The International Energy Agency (IEA) is an autonomous organisation which works to ensure reliable, affordable and clean energy.
• It was established in the wake of 1973 (set up in 1974) oil crisis after the OPEC cartel had shocked the world with a steep increase in oil prices.
• It is headquartered in Paris, France
• The IEA has four main areas of focus, i.e. 4Es:

 

• • Energy security,
  • Economic development,
  • Environmental awareness and
  • Engagement worldwide.
• India became an associate member of the International Energy Agency in 2017.
• Mexico officially became the International Energy Agency’s 30^th member country in February 2018, and its first member in Latin America.

 

ABOUT OPEC+

• It refers to the alliance of crude producers, who have been undertaking corrections in supply in the oil markets since 2017.
• Its countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.
• The Opec and non-Opec producers first formed the alliance at a historic meeting in Algiers in 2016.
• Its aim was to undertake production restrictions to help resuscitate a flailing market.

 

 

Why is OPEC+ more influential than OPEC?

• OPEC’s 14 members control 35 percent of global oil supplies and 82 percent of proven reserves. With the addition of the 10 Non-OPEC nations, notable among them Russia, Mexico and Kazakhstan, those shares increase to 55 percent and 90 percent respectively.
•  This affords OPEC+ a level of influence over the world economy never seen before.

 

Functions

Organization of the Petroleum Exporting Countries(OPEC) has a working methodology which is mentioned below.

• The OPEC Member Countries coordinate their oil production policies in order to help stabilise the oil market and to help oil producers achieve a reasonable rate of return on their investments.
• This policy is also designed to ensure that oil consumers continue to receive stable supplies of oil.
• The Ministers of energy and hydrocarbon affairs meet twice a year to review the status of the international oil market and the forecasts for the future in order to agree upon appropriate actions which will promote stability in the oil market.
• The Member Countries also hold other meetings at various levels of interest, including meetings of petroleum and economic experts, country representatives and special purpose bodies such as committees to address environmental affairs.