On Friday 23rd June OPEC released their decision on oil production increases, the members have come to a conclusion of a 1 million barrel per day increase. The demand for oil has increased in the last few years and the supply has declined which lead to an increase in oil prices. OPEC has a lot of power in influencing the oil prices which is why their decisions are so important to general consumers. Who is OPEC and how are these decisions affecting us?
Who is OPEC?
OPEC stands for the organisation of the petroleum exporting countries and is an intergovernmental organisation. OPEC was founded in 1960 and is made up of 14 nations, the members include:
- Equatorial Guinea
- Saudi Arabia
- United Arab Emirates
OPEC members control two-thirds of the crude oil supply and supply 40% of all crude oil globally. The aim of the organisation is to stabilise oil markets and steady the supply of oil for the public.
What was the OPEC discussion about?
The 14 members of OPEC were discussing whether to raise the daily oil production. Each country got one vote towards the policy change. The decrease in production due to sanctions and the oil production collapse in Venezuela has led to a drop in oil supply, this resulted in a spike in oil prices seen in May 2018. As OPEC decides the oil prices based on production and supply, the lower the supply of oil the higher the oil prices will rise. The main disagreement in the meeting was between some OPEC members wanting to increase the amount of oil while others member wanted the oil production to stay as it is.
How OPEC decisions affect us?
The outcome of the OPEC meeting will lead to a 1 million a barrel a day increase in oil, some countries such as Russia and Saudi Arabia pushed for an increase in oil production. As many of the OPEC members do not have the resources or capability to increase oil production, Russia and Saudi Arabia will mainly benefit from the increase. Russia and Saudi Arabia rely largely on oil production for income, this increase in oil production will strengthen their economy.
The BoilerJuice heating oil chart shows the rise and fall in oil prices in the last month, there has been a decrease in the average oil price in the last few days. After the OPEC decision was announced to the public oil prices increased which was unexpected, from Sunday onwards we are now seeing the effect of the decision. Prices have now started dropping, the higher the oil production the lower price. Lower oil prices may lead to a drop in price for heating oil, petrol and possibly transport for consumers. This means you may see a difference with the pennies in your pocket, less spend on your weekly petrol run, lower household heating bills and possibly cheaper flights.