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What is OPEC?

OPEC is an acronym for Organization of the Petroleum Exporting Countries. OPEC was formed in 1960 in Baghdad, Iraq with five founding member countries. Currently OPEC is a cartel composed of 11 oil producing countries. Current member countries include: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. OPEC's stated purpose is said to serve three main functions:
  1. Help stabilize world oil prices
  2. Ensure oil producers achieve a reasonable rate of return on production
  3. Ensure a stable supply of crude oil for consumer use. OPEC has a current goal of $27 US per barrel of oil.

How much crude oil do the OPEC countries produce?

Collectively these countries hold approximately 77% of known world crude oil reserves. In terms of daily crude oil production OPEC countries currently produce about 41% (24.2 million barrels per day) of the world's crude oil. The oil exported by the OPEC countries accounts for 55% of all oil traded internationally. OPEC countries also represent about 15% of total world natural gas production.

How does OPEC set oil prices?

OPEC does not "set" oil prices. OPEC manipulates the free market price of crude oil by setting caps on the oil production of its member countries. Twice each year, ministers from each OPEC country meet in Vienna, Austria to review the status of the international oil market and to forecast the future oil demands in order to agree upon an appropriate crude oil production level.