Petroleum or crude oil is a very valuable source of fuel in the world. However, oil can also be a tool or weapon of the world economy and politics that can trigger war.
But who is really responsible for controlling world crude oil prices? Before that, let us tell you about the early history of world oil trade.
Initially, the United States (US) became a country that pioneered oil trade with several companies such as Exxon and Shell.
As is well known, the three largest oil producing countries in the world are the US, Saudi Arabia and Russia. Although the US is the largest oil producer but Saudi Arabia is the largest exporting country with most countries in Asia relying on Saudi Arabia oil while Europe imports oil from Russia.
In the early 20th century, countries in the Middle East began to emerge after the discovery of crude oil from mining activities.
Around the 1950s, governments of oil-producing countries began to 'show' their power to control oil and gas resources.
In 1960, the world's five largest oil producers, Saudi Arabia, Iraq, Iran, Kuwait and Venezuela, merged to form an organization known as the Organization of Petroleum Exporting Countries or OPEC.
OPEC was established with the aim of monitoring the stability of oil prices in a market previously controlled by a group of oil production companies in the US.
During the period 1960 to 1975, OPEC was joined by other oil producing countries such as Indonesia, Qatar, Algeria, Nigeria, Ecuador and Gabon.
In the 1970s, oil prices began to soar above the US $ 100 a barrel.
Although the United Kingdom (UK) and Russia have abundant oil supply in their countries but the two countries do not want to be bound by OPEC price rules.
However, after the world oil supply increased, oil prices began to fall again.
Around the year 2000, the US, China and European economies were growing and their countries needed more oil supplies to cover their uses in the transportation, manufacturing and so on sectors. Until now, all these countries are indeed known as the largest oil consumers in the world.
Although the US is the largest oil producer in the world but due to the country's economy which needs more oil supply than they produce, the country needs to import oil from abroad.
Following this, commodity analysts will monitor the US crude oil inventory report released weekly. When the US crude oil supply decreases, then the country will import more oil. From there, analysts can expect oil prices to rise.
The rising demand for oil will cause oil prices to soar. So what is OPEC's role in re-stabilizing this crude oil market?
OPEC will reduce oil supply in the market through meetings with member countries to discuss reducing crude oil production.
If all member countries agree to reduce production, oil supply will be reduced, then oil prices will rise again.
