OPEC at 50

On 14^thSeptember 2010, the Organization of Petroleum Exporting Countries (OPEC) will be fifty years old. It was formed in Baghdad with the main idea of collective action to increase the rent on oil by the five original member countries. In many respects, this is one of the most blatant forms of cartel organizations in the world and has significant power on energy prices.

My view of the OPEC is that its membership is entitled to control their petroleum and have often used petroleum resources and prices for political purposes too. The profile of its members is interesting because these tend to be hard core dictatorships who expect to use their vast resources as tools of foreign policy. The statement by the secretary General of OPEC here maintains its actions have contributed to faster recovery from recent economic trouble.

So its definitely an achievement for an organization to be alive for half of a century and with expanded membership. I am less confident that it claims to be a source of global supply and price stability because many low-income countries suffer the effects of coordinated petroleum price setting. I am certain that the nett effect of the existence of OPEC is not positive.