What is the significance of the Organization of Petroleum Exporting Countries (OPEC)?
Organization of Oil Producing Countries (OPEC) is a group of the chief oil-producing countries in the world. The actual membership varies, but currently OPEC has twelve member states. OPEC aims to ensure a continuous oil supply to consumers, and fair and steady returns to producers and investors. OPEC was formed in 1960, when the world's oil was roughly controlled by a group of multinational companies referred to as the Seven Sisters. OPEC broke their monopoly, nationalized oil production and gained a monopoly over oil production.
Since oil is a key energy source, OPEC wields wide influence on the world economy by being the major producer and exporter of oil. The energy crisis of the 1970s is a key example. OPEC increases or decreases the daily production targets to maintain the crude oil price at a desired level and this also causes fluctuations in the oil prices in the international market.
Thus OPEC can hold the world at ransom by manipulating oil production and supplies.
The major significance of OPEC is that it can at least try to control the supply of petroleum to the world. It can therefore affect oil prices which in turn affect the economies of just about every country in the world. In addition, the OPEC states have, in the past, used their control of oil supplies to try to make political points. For example, they cut off oil supplies to the West in the early 1970s in response to growing tensions between Arab countries and Israel, which was backed by the West.
So, the major significance of this organization is that it can try to affect the supply of oil in the world, thus affecting the global economy.