(a) What are the objectives of the Organisation of Petroleum Exporting Countries (OPEC) ? (b) What are the problems of the OPEC? (c) What remedies have been...

Answer Details

(a) Objectives of OPEC (Organisation of the Petroleum Exporting Countries).

• To co-ordinate and unify the petroleum policies of member countries.
• To stabilise oil prices in the international market and avoid harmful fluctuations.
• To secure a fair and stable income for the producing (member) nations.
• To ensure a regular and efficient supply of petroleum to consuming nations.
• To secure a fair return on capital for those investing in the petroleum industry.
• To protect members from exploitation by the large international oil companies and give them collective bargaining strength.

(b) Problems of OPEC.

• Disagreement over production quotas. Members dispute how much each may produce, weakening price control.
• Cheating and over-production. Some members exceed their quotas and sell secretly, undermining agreed prices.
• Competition from non-OPEC producers. Oil from non-member countries reduces OPEC's control of the market.
• Political differences and conflict among members (including wars) make co-operation difficult.
• Availability of substitutes. Development of other energy sources reduces demand for OPEC oil.
• Differences in economic needs. Members with large populations want higher output and revenue, conflicting with price-support cuts.

(c) Remedies adopted to curtail the problems.

• Fixing and enforcing production quotas for each member to control total supply.
• Regular meetings of members to agree and review output and prices.
• Monitoring of members' output to discourage cheating.
• Adjusting prices and production in response to market conditions to defend price levels.
• Encouraging co-operation and dialogue to resolve political differences and present a united front.

Examination takeaway. Match the remedies to the problems: quotas and monitoring answer over-production, while regular meetings and dialogue answer disagreement, so the three parts of the answer should read as a connected chain.