Introduction
In history, there are three different periods in the revolution of the global oil industry. These periods are (a) the era of early oil agreement and oil cartel arrangements (1901-1949), (b) the era of evolution from oil cartel production and pricing to the market-controlled measures (1950-1973), and (c) the era of post-oil cartel and economic process of the oil market (since the oil crisis of 1973-74). It is disputed that these phases, distinguished by their historical implication in the development of the global oil market, make up an exceptional assumption appropriate to the global oil sector.
The OPEC “posted price” increase of the 1970s must be perceived as a reaction to the international reform of the industry, which resulted from a major increase in the scale of U.S. production price, and which ultimately led to a comparable increase in the number of global oil prices.
Discussion
The development of OPEC was a reaction to the one-sided decrease of the “posted price” by the TNOCs in the Persian Gulf oil area. This lessening brought about an immediate decline in the number of oil rents (per barrel) due to be collected by the oil-commercialism countries of the region. Likewise, there was a concurrent decline in the “posted price” of Venezuelan oil. This offered Venezuela and the Persian Gulf oil manufacturers a reason to unite forces in a collective manner that marked the beginning of OPEC in 1960 (Rouhani, 1971).
The entire history of OPEC stands out the reality that there has always been a possible or definite disagreement between the members of the organization and the controlling TNOCs since its foundation in 1960 (Rouhani, 1971). To be particular, the arrangement of OPEC itself was the very effect of such a disagreement. The main indication of this rivalry, though, relates to the different relationships between the owners of mineral deposits and those of the contracts or rents, for the exploration and production of oil may become tangled with the imposing obstruction of overhead ownership.
There are three different periods in the history of OPEC: (1) the early developmental years (1960-1969), (2) the evolution period of 1970-73, and (3) the era of global import and export and incorporation since 1974.
In the early developmental years, OPEC was directly under control by the TNOCs. In this era, even though worldwide oil was moving toward the end of its changing stage, the role of OPEC was inactive and the degree of its oil rent was not even to some extent reflective of the existing inter-regional degree of difference productivities. The OPEC members had no power over the production of oil or the conditions of agreements made with the TNOCs (Bina, 1985).
In the changing period of 1970-1973, the responsibility of OPEC was quickly changing. This was in part because of the growing purpose conditions linked with the global commercialism of the whole industry and somewhat due to the further progress of free enterprise in the economies of the member countries. The portion of the OPEC oil rent increased considerably in this era, as is designated by a successful two-stage quadrupling of “posted prices’ between October and December 1973 during the Arab oil restriction (Bina, 1985).
The predictability of a dynamic role on the part of OPEC in today’s oil market is certainly equivalent to the certainty of combined oil production on a completely capitalistic foundation. Therefore, the rivalry of OPEC and the TNOCs must be seen in the light of the domestic challenges of entrepreneurship on the global level, despite OPEC’s “nationalistic” viewpoint.
The age of global commercialism and incorporation is a stage in the growth of OPEC, as an organization of entrepreneur investor states, with power and limitations of its own. Furthermore, there are restrictions to the OPEC “posted price” or the OPEC production determination which form from the nature of worldwide incorporation under a united pricing system within the worldwide oil market. At the same time OPEC, as an essential part of the global oil financial system, must face the need for episodic oil emergencies, which are the typea steady of the present era of incorporation.
Conclusion
OPEC is a basic component of the age of transition in the global oil industry; changeover from the oil cartel system of direct political domination of a handful of TNOCs to the united structure of global market pricing since 1974. In this alteration, the basing-point pricing, long-term bonding, gentleman’s agreements, and the designation of lower “posted price’ for cheaper oil gave way to spot-market pricing, short-term and future contracting, and the decision of standardized “posted prices” for similar quality crude oil.
This changeover era brought about the progress of a changeable foundation for the collection of oil rent through the implementation of “posted prices.” This is an incomplete sign of the expansion of industrialist social relations in the global oil industry of this era. The very establishment of OPEC is certainly indicative of major growths within the global perspective in general and within the global oil industry in particular. In other words, the development of OPEC has not been a reason but a steady indication of progressing modern oil rent dealings. Therefore, OPEC itself must have gone through different developmental stages fairly in compliance with the changeover from the neo-cartelization to post-cartelization stages.
Reference
Bina, C. 1985. The Economics of the Oil Crisis. New York; St. Martin’s Press.
Rouhanni, F. 1971. A History of OPEC. New York; Praeger Publishers.