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Energy Challenges and Dilemmas

OPEC, national governments and the oil and gas companies

  • 3 things to know
  • Component 3 Section B

Overview

National oil company, three international oil companies that operate globally and production sharing agreement.

What you need to know

Answer each one before you reveal it.

Your recallNot started
Numbers

When and by whom was OPEC founded?

Key term

What share of the world's oil does OPEC control?

Key term

How does OPEC attempt to manage the oil price?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    When and by whom was OPEC founded?

    Model answer

    OPEC was founded at Baghdad in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The stated aim was to coordinate petroleum policy among members.

  2. 2

    What share of the world's oil does OPEC control?

    Model answer

    OPEC members hold around 80% of the world's proven crude reserves. Members supply roughly 30% of world production.

  3. 3

    How does OPEC attempt to manage the oil price?

    Model answer

    OPEC sets production quotas for its members in order to raise or restrain total supply. A supply cut lifts the price provided members comply with their quotas.

  4. 4

    Why do OPEC quotas often fail to hold?

    Model answer

    Each member gains by producing above its quota while the others cut. Non-members outside the agreement can also expand output and take market share.

  5. 5

    What is OPEC+?

    Model answer

    OPEC+ is the wider grouping formed in 2016 that adds Russia and other non-OPEC producers. The alliance coordinates production cuts across a larger share of world supply.

  6. 6

    Describe the 1973 oil crisis.

    Model answer

    Arab producers cut output and embargoed states that supported Israel in October 1973. The oil price roughly quadrupled within months and triggered recession in importing countries.

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