What is OPEC Production and Why Is It Important?
OPEC is an abbreviation for Organization of Petroleum Exporting Countries. OPEC was founded in 1960 and consists of the membership of 13 oil-producing countries. The purpose of OPEC is to regulate the oil market, protect the interests of member countries and ensure the stability of oil supply.
OPEC production refers to the total oil production of OPEC member countries. OPEC production meets about 40 percent of world oil demand. OPEC production is an important factor affecting oil prices. When OPEC production increases, oil prices fall; When OPEC production declines, oil prices rise.
OPEC production varies depending on the decisions made by OPEC. OPEC meets several times each year to evaluate the state of the oil market and determine the oil quotas of member countries. An oil quota is a limit that indicates how much oil a country can produce in a given period. OPEC affects oil supply and prices by increasing or decreasing oil quotas.
OPEC production also depends on political and economic factors. Events such as conflicts, wars, sanctions, strikes or natural disasters between OPEC member countries can adversely affect oil production. For example, attacks on Saudi Arabia's largest oil facilities in 2019 reduced OPEC production by about 5 percent.
OPEC production is important to both oil consumers and oil producers. For oil consumers, OPEC production affects energy costs and economic growth. When oil prices fall, consumers spend less and save more; when oil prices rise, consumers spend more and save less. For oil producers, OPEC production affects their revenues and budgets. When oil prices rise, producers get more income and can increase public spending; when oil prices fall, producers get less income and can cut public spending.