Oil Saga - The OPEC Oligopoly

- by V. Venkata Raghvendra *

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Recently, the decline in oil prices is not only due to economical crisis around the world but due to impact of U.S.A. on Kuwait, which is one of OPEC country. Due to sub-prime crisis, U.S.A. faced lack of liquidity cash, then it forced Kuwait to increase the crude oil production, which is against the rules of OPEC, then the price of one barrel reduced almost to $ 100 from $ 147.

This will show us how OPEC countries has influence over the oil prices.

Factors Affecting Oil Prices

There are so many factors which influence oil prices. Industrialization, globalization, scarcity of crude oil resources are some factors.

Now we are going to analyze the availability of (capacity) crude oil resources and the demand for oil worldwide.

Source: Outlook Profit, Sep. 2008, Supplementary on OIL & GAS Reckoner

From the above graph, we are going to explain what the capacity of crude oil is from oil exporting countries (including non-OPEC). In the above graph, the blue line indicates what is the demand of oil from 2001 to 2008 and the bars indicate the capacity of OPEC and non-OPEC countries. From the graph, we can say that the demand for oil is going on increasing but the capacity of production of crude oil is comparatively less, which will cause increase in the oil prices.

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* Contributed by -
V. Venkata Raghvendra is an Engineering graduate with Electrical & Electronics as background. Currently working as sales promoter for MOTOROLA and pursuing Post Graduate Diploma in Management from Institute of Public Enterprise (IPE), Hyderabad.
Article posted on December 1, 2008.

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