What is OPEC?
OPEC, or the Organization of Petroleum Exporting Countries, is one of the most significant groups of nations in the world. The organization, unlike many others between nations such as the United Nations, NATO, ASEAN (Association of Southeast Asian Nations) and the African Union), is not a political one but one centered around economics--more specifically, around the exportation of petroleum. The organization itself was founded in 1960, and was founded by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela--the majority of which are from the oil rich Middle East. These five are still in the organization and are among its major players as well. While these are the most prominent members both now and historically, they are not the only ones in OPEC’s storied history--there are now 15 total Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Libya, Nigeria, Qatar and the UAE are members, while other nations such as Indonesia were members of the organization but left.
OPEC was formed at a time of political and economic change and instability, where oil production was controlled by seven multinational corporations called the “Seven Sisters” or by central economies of communist nations such as the Soviet Union. OPEC was formed with the goal of stabilizing and enhancing the oil market, making it better and more accessible. In 1968, to further back their principles of making the oil market better the organization established the “Declaratory Statement of Petroleum Policy in Member Countries” to help ensure that nations have the right over their own natural resources while working with OPEC.
The organization gained more influence in the 1970’s with a greater control over the oil market due to having a larger portion of it. This allowed the organization to have a much greater say over the global price of oil and act closer to how a monopoly would. The organization wielded this power several times to great effect, with perhaps no better example than the Oil Embargo of 1973. The embargo was a response to the United States’ support of Israel during the Yom Kippur War and inflated oil prices in an already fragile economy to the point where a major recession appeared imminent. Oil prices also drastically increased due to shortages during the Iranian Revolution of 1979.2
If the 1970’s reflected OPEC’s ability to hike prices, the 1980’s were the opposite as oil prices began to drop dramatically before cratering in 1986. The reasons for this, like for any economic issue, were numerous. First and foremost was the Iran-Iraq War that pitted two members of OPEC (two founding members no less) against each other for the first time in history, and the instability was massive. Concurrent with this was the use of alternate forms of energy, such as natural gas, coal and nuclear energy. All OPEC nations were affected, and a response to create more stability was the introduction of a group production ceiling shared by all members of the group.2
Stability was then achieved for a large time in the 1990’s and 2000’s, but the 2008 Recession and new forms of renewable energy have since brought forth a slew of new difficulties for OPEC. The modern situation from around this time onward is a big one, where solutions for the organization’s issues are still being looked into.
ISIS and OPEC
The Islamic State of Iraq and Syria, commonly known as ISIS, goes by several other names as well: ISIL, IS, and Daesh. All of these names seek to accurately describe the group, and are often used interchangeably. ISIS is a powerful group infamous for its use of violence and terror to further its ideologies.
ISIS has its beginnings in the US invasion of Iraq in 2003 when Sunni soldiers were removed from their service in Saddam Hussein’s army. Al Qaeda took this opportunity to encourage them to revolt against US troops and the Shiite government the US installed there, renaming themselves al Qaeda in Iraq. A few years later the government began encouraging people to reject al Qaeda in Iraq (AQI) and it seemed to be defeated until the Arab Spring. When A peaceful uprising in Syria devolved into civil war, AQI saw an opportunity, moved to Syria, and became ISIS.
One way that ISIS has become so powerful is by selling oil. ISIS operates in Iraq and Syria, where oil is plentiful and sold to create income for the group. The oil is typically sold to governments sympathetic to their cause. ISIS controls a large portion of Syria’s oil production, and puts out about 30,000-40,000 barrels per day, and before airstrikes on oil production fields by the US, they were estimated to earn about $1.5 million a day.
This is not the only way ISIS plays a role in the oil market. Controlling the production of oil is clearly a very effective way of exerting power. OPEC itself uses control of the production of oil to manipulate prices to their benefit through supply and demand. ISIS’s presence in Iraq has caused threats to the safety of Iraq’s oil industry. The most significant threats include a pipeline that runs through the country and a major oil field which the conflict has been approaching. Although the bulk of the conflict has not yet disrupted the largest oil-producing areas, oil markets are very volatile, so the conflict is cause for concern.
It is not clear how the future of ISIS and oil will play out, but it is likely that they will impact each other. If ISIS gains more control of Syrian oil markets or impacts or takes control of Iraq oil fields and markets, we could see drastic changes in price. Iraq is one of the founding members of OPEC and very influential in the global oil market, so ISIS’s presence there has the potential to greatly influence this industry.
1 Cassis, Tewfik. “A Brief History of ISIS.” The Week, November 21, 2015. http://theweek.com/articles/589924/brief-history-isis.
2 Graphics, FT Interactive. "Syria Oil Map: The Journey of a Barrel of Isis Oil." - FT.com. https://ig.ft.com/sites/2015/isis-oil/.
3 Jain, Surbhi. "Why the ISIS-Iraq Conflict Could Affect Global Oil Investments." Market Realist. June 27, 2014. Accessed July 09, 2018.https://marketrealist.com/2014/06/isis-iraq-conflict-affect-global-oil-investments.
OPEC, or the Organization of Petroleum Exporting Countries, is one of the most significant groups of nations in the world. The organization, unlike many others between nations such as the United Nations, NATO, ASEAN (Association of Southeast Asian Nations) and the African Union), is not a political one but one centered around economics--more specifically, around the exportation of petroleum. The organization itself was founded in 1960, and was founded by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela--the majority of which are from the oil rich Middle East. These five are still in the organization and are among its major players as well. While these are the most prominent members both now and historically, they are not the only ones in OPEC’s storied history--there are now 15 total Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Libya, Nigeria, Qatar and the UAE are members, while other nations such as Indonesia were members of the organization but left.
OPEC was formed at a time of political and economic change and instability, where oil production was controlled by seven multinational corporations called the “Seven Sisters” or by central economies of communist nations such as the Soviet Union. OPEC was formed with the goal of stabilizing and enhancing the oil market, making it better and more accessible. In 1968, to further back their principles of making the oil market better the organization established the “Declaratory Statement of Petroleum Policy in Member Countries” to help ensure that nations have the right over their own natural resources while working with OPEC.
The organization gained more influence in the 1970’s with a greater control over the oil market due to having a larger portion of it. This allowed the organization to have a much greater say over the global price of oil and act closer to how a monopoly would. The organization wielded this power several times to great effect, with perhaps no better example than the Oil Embargo of 1973. The embargo was a response to the United States’ support of Israel during the Yom Kippur War and inflated oil prices in an already fragile economy to the point where a major recession appeared imminent. Oil prices also drastically increased due to shortages during the Iranian Revolution of 1979.2
If the 1970’s reflected OPEC’s ability to hike prices, the 1980’s were the opposite as oil prices began to drop dramatically before cratering in 1986. The reasons for this, like for any economic issue, were numerous. First and foremost was the Iran-Iraq War that pitted two members of OPEC (two founding members no less) against each other for the first time in history, and the instability was massive. Concurrent with this was the use of alternate forms of energy, such as natural gas, coal and nuclear energy. All OPEC nations were affected, and a response to create more stability was the introduction of a group production ceiling shared by all members of the group.2
Stability was then achieved for a large time in the 1990’s and 2000’s, but the 2008 Recession and new forms of renewable energy have since brought forth a slew of new difficulties for OPEC. The modern situation from around this time onward is a big one, where solutions for the organization’s issues are still being looked into.
ISIS and OPEC
The Islamic State of Iraq and Syria, commonly known as ISIS, goes by several other names as well: ISIL, IS, and Daesh. All of these names seek to accurately describe the group, and are often used interchangeably. ISIS is a powerful group infamous for its use of violence and terror to further its ideologies.
ISIS has its beginnings in the US invasion of Iraq in 2003 when Sunni soldiers were removed from their service in Saddam Hussein’s army. Al Qaeda took this opportunity to encourage them to revolt against US troops and the Shiite government the US installed there, renaming themselves al Qaeda in Iraq. A few years later the government began encouraging people to reject al Qaeda in Iraq (AQI) and it seemed to be defeated until the Arab Spring. When A peaceful uprising in Syria devolved into civil war, AQI saw an opportunity, moved to Syria, and became ISIS.
One way that ISIS has become so powerful is by selling oil. ISIS operates in Iraq and Syria, where oil is plentiful and sold to create income for the group. The oil is typically sold to governments sympathetic to their cause. ISIS controls a large portion of Syria’s oil production, and puts out about 30,000-40,000 barrels per day, and before airstrikes on oil production fields by the US, they were estimated to earn about $1.5 million a day.
This is not the only way ISIS plays a role in the oil market. Controlling the production of oil is clearly a very effective way of exerting power. OPEC itself uses control of the production of oil to manipulate prices to their benefit through supply and demand. ISIS’s presence in Iraq has caused threats to the safety of Iraq’s oil industry. The most significant threats include a pipeline that runs through the country and a major oil field which the conflict has been approaching. Although the bulk of the conflict has not yet disrupted the largest oil-producing areas, oil markets are very volatile, so the conflict is cause for concern.
It is not clear how the future of ISIS and oil will play out, but it is likely that they will impact each other. If ISIS gains more control of Syrian oil markets or impacts or takes control of Iraq oil fields and markets, we could see drastic changes in price. Iraq is one of the founding members of OPEC and very influential in the global oil market, so ISIS’s presence there has the potential to greatly influence this industry.
1 Cassis, Tewfik. “A Brief History of ISIS.” The Week, November 21, 2015. http://theweek.com/articles/589924/brief-history-isis.
2 Graphics, FT Interactive. "Syria Oil Map: The Journey of a Barrel of Isis Oil." - FT.com. https://ig.ft.com/sites/2015/isis-oil/.
3 Jain, Surbhi. "Why the ISIS-Iraq Conflict Could Affect Global Oil Investments." Market Realist. June 27, 2014. Accessed July 09, 2018.https://marketrealist.com/2014/06/isis-iraq-conflict-affect-global-oil-investments.