International Energy Policy Oil Price in the Worldwide

Question: Discuss the following points.. Declining of Oil Price The Strategies taken by the Non OPEC Countries Improvement of Digging Sites and New Resources? Answer: Introduction: The declining of oil price in the worldwide have became one of the major issues in the global market. The economic conditions of the countries that use to sell the oil have fallen down. This is because the price of the oil in the market is decreasing day by day. The high volatility in the price of the oil has affect to the most of the people in the world. In this research, the research analyst will study the reasons of the recent declining of the oil price in the global market and how it made an impact on the OPEC member via both the oil industry and the economic conditions of the country who produce oil from non renewable energy and sell the oil in the global market. The research analyst also studies that what the steps are taken by the OPEC member to alleviate the impact of OPECs present trends. OPEC means the Organization of the Petroleum Exporting Countries Declining of Oil Price: After a long time, the price of the oil went volatile in the global market. For a long time, the price of the oil was stable in the global market but now days, the price of the oil is gradually decreasing in the global market. The oil is the largest traded commodity in the global market. Many countrys GDP growth is based on the price of the oil. The main reasons for declining the price of the oil are the exchange rate of United States Dollar rate is high in the global market. The US dollar has gained almost 3 % in the currency index (Aleksandrov, Espinoza and Gyurko, 2012). After 12 years, the United States Dollar rate has gained almost 3% in the currency index and when the dollar rate of United States of America goes up then the price of the commodities goes down in the global market. This is because the commodity usually traded in the United States dollar rate. Another reason of declining the price of the oil is the nuclear deal done between two countries United States of America a nd Tehran. The oversupply of the oil in the global market is the reason of declining the price of the oil in the world wide. OPEC: OPEC is known as the Organization of the Petroleum Exporting Countries (OPEC). It is a Government organization. This organization is founded in the conference of Baghdad on 14th September 1960.The conference is known as Baghdad Conference. The oil production countries are initially the members of the Organization of the Petroleum Exporting Countries (OPEC). The countries involved in the OPEC are Iraq, Iran, Kuwait, Venezuela and Saudi Arabia. In the year 1961, Qatar joined as the member of the OPEC in the year 1962 (Chalabi, 2010). After the joining of Qatar, Indonesia, Libya, UAE, Algeria, Nigeria, Ecuador, Angola and Gabon joined as the member of OPEC. The main aim of OPEC is to give synchronization and amalgamation in the policies of petroleum between the countries who are the members of OPEC. OPEC has the rights to control the price of the petroleum and to make the price of the oil stable. The OPEC organization always distributes the oil in the global market with fair amount of p rice. Non OPEC Members: The non OPEC members are the countries who produce the oil in their country but do not take part in the Government Organization. They are not the members of The Organization of Petroleum Exporting Countries. There are almost 30 countries who do not take part in the Organization of Petroleum Exporting Countries. The countries who are the members of non OPEC organization are United States of America, Tunisia, Gabon, Trinidad Tobago, Vietnam, Brunei, Yemen, Denmark, Australia, Congo Brazzaville, Sudan, Equatorial Guinea, Argentina, Colombia, India, Oman, United Kingdom, Brazil, Kazakhstan, Indonesia, Norway, Canada, China, Russia, Malaysia and Azerbaijan. It is observed that 60 percent of the production of oil traded from the Non OPEC members (Challoner, 2012). The Non OPEC countries also have largest demand of petroleum in the global market. The demand of the petroleum gets high in the global market but the supply of the petroleum remains unchanged in the worldwide market. The Strategies taken by the Non OPEC Countries: The Non OPEC Countries follow the rules made by the OPEC countries. In the initial stage, the OPEC countries traded the petroleum in the world wide market as monopoly organization. But recently the production of petroleum has been increased in the countries of Non OPEC members. The OPEC countries always estimate the quantity of petroleum will be produced by the Non OPEC countries. But last time, the production level of petroleum has beaten the estimation take n by the OPEC countries. In the year 2014, the Non OPEC countries has broken the record and produces more than the estimated oil and traded in the global market (Chatterjee, 2011). The Non OPEC countries are competing with the OPEC countries. The performances of Non OPEC countries are much better than the OPEC countries. The Non OPEC countries are trying to improve the process of digging the soil and fracturing the soil and producing the petroleum in the global market. It has been found that the Non OPEC countries are producing almost 2.04 million barrels per day. During the year 2015, the Non OPEC countries increase the production rate of petroleum by almost 0.85 million barrels per day (Dellecker and Gomart, 2011). During the year 2014, the average production rate of petroleum by the Non OPEC countries is 56.33 million barrels per day. The OPEC organization estimated that Non OPEC organization can produce petroleum at an average figure of 57.16 million barrels per day (Blanchet, 2015). But the Non OPEC organization produce more 0.85 million barrels per day. The high rate production by the Non OPEC organization helps the OPEC organization to stable the price of the petroleum in the global market. The OPEC organization shows that the Non OPEC organization raises their production of petroleum by around 18 % during the year 2002 to 2025 in the global market of crude oil. Major productions of petroleum are coming from the Non OPEC countries such as Russia and the African countries who are the members of the N on OPEC Organization. Still it records almost 30 % of petroleum shortage as compared to the demanded quantity of crude oil in the world wide market (Demirel, 2012). The Strategies taken by the OPEC countries: The most popular countries from the OPEC organization for producing the crude oil in the global market is Saudi Arabia. The OPEC organization forcing the Non OPEC organization to cut down the production rate of crude oil. The oil Minister of Saudi Arabia forcing the Non OPEC organization to cut down the production rate of crude oil (Dept, 2013). This shows that the OPEC members have pride on them for the production of huge amount of crude oil from their country. The OPEC countries got scared after observing the production rate in the Non OPEC countries. This causes the OPEC organization to invent new rules for the Non OPEC organization. Opposing the Market Price of Oil in the Global Market: One of the countries of OPEC organization gives threat to the Non OPEC organization that the production rate of petroleum will not be decrease from Saudi Arabia. They may cut down the prices of the crude oil but they will not decrease the production rate of the crude oil (Shihata, 2011). This shows that the OPEC organization do not want the Non OPEC organization to produce crude oil and will not allow trading the crude oil by the Non OPEC countries in the global market. The OPEC countries found that the Non OPEC countries are making huge amount of profit by producing and by trading huge amount of profit in the global market. The United States of America became one of the largest producers of the shale gas in the world wide market. So, the United States of America is giving tight challenges to the OPEC countries by trading the Shale gas in the global market. Canada has become one of the largest producers of petroleum in the global market. All these reasons are creating problem for the OPEC countries (Frick and Laugen, 2012). That is why the OPEC countries are making various rules for the Non OPEC countries. The Non OPEC countries are becoming well known for their crude oil production and this make the Non OPEC countries a little concern. Benefits of OPEC Countries: The countries under OPEC organization have lots of resources of the crude oil. The infrastructure of digging oil from the soil and fracturing the rocks to produce the crude oil is very precious (Schmidbaue and Rsch, 2012). This helps the OPEC countries to produce more oil in less time period. All these reasons for the production of crude oil among the countries of OPEC organization helps them to cut the down the price of oil by maintaining the production rate of crude oil same. The Non OPEC countries are facing this problem as they are not able to cut the price of the crude oil as the production of crude oil is very expensive in the Non OPEC countries (Galpern and Keefer, 2012). This forces the Non OPEC countries to hike the price of the crude oil while trading in the global market. This is the reason why the OPEC countries are ruling the world by producing the crude oil and trading the crude oil in the global market at very cheaper cost. The Non OPEC countries have more improved and developed machines and techniques to extract the crude oil. Improvement of Digging Sites and New Resources: The Non OPEC countries should find out new resources for producing crude oil in their own countries. This will help the OPEC countries to get more petroleum and crude oil, as the crude oil gets depleted from the old resources. The Government of the Non OPEC countries should invest their money to find out the new resources to extract petroleum and crude oil. This will help the countries to earn more profit by trading the crude oil in the world wide market. The Non OPEC countries should also invest their money for the new machines to extract petroleum from the crude oil resources (Hannesson, 2012). If the Government of the respective countries can buy new machines then the extraction process will take less time to extract the crude oil and can extract the crude oil by spending less amount of money. Reduction of Oil Production Cost: According to the Oil Minister of Saudi Arabia, the market price of the production of oil will decrease in North America. This will decrease the supply of oil in the global market by North America but the demand will be low as the price of the crude oil will be increased in the global market (Lewis, 2012). If this situation occurs then the Non OPEC countries will face some serious problems to export oil in the global market and this will lead the OPEC countries to export more crude oil in the global market. So, the Non OPEC countries should decrease the price of oil in the global market to compete with the Non OPEC countries. Non OPEC should build a good rapport with OPEC: To make success in the global market in trading of oil, Non OPEC countries should make a good rapport with the OPEC countries. This will help the OPEC countries to understand the trading process of oil (Mitchell, Marcel and Mitchell, 2012). A good relationship with the OPEC countries will give them a wealthy competition with the OPEC countries. This may help them to make success in the global market by trading crude oil in the global market. Conclusion: OPEC countries are dominating the global market in exporting crude oil. They follow some strategies to be a successful trader of crude oil in the global market. The OPEC countries keep the Non OPEC countries under some rules made by the OPEC countries. But the dominating situation is diminished in little order as the Non OPEC countries are exporting crude oil in the global market more than the estimated quantity. 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