You've been hearing a lot about oil and gas lately...and about a squad called OPEC.
Stands for the Organization of the Petroleum Exporting Countries. It’s a group of 12 countries that together produce almost half of the world’s crude oil. Think: Mideast countries (like Iran, Saudi Arabia, and Iraq), African nations, and some spicy South Americans mixed in (Venezuela, Ecuador).
OPEC’s official mission is to keep oil prices stable by coordinating on policies and how much oil they produce at one time. But ever since OPEC formed in the 1960s, it has manipulated production to try to keep its own profits high, and sometimes for political reasons. Which has at times caused major headaches for the US and friends.
You might have noticed gas prices have been dropping like it’s hot. That’s because there is much more oil supply these days than demand, thanks in big part to fracking. Hint: the controversial way the US produces oil and gas at home (there’s a guide for that). Last year, OPEC discussed the problem at its regular team sleepover, and whether or not they should cut oil production to push up prices again. They decided ‘nah.’ Then they met again earlier this year and decided 'nah' again.
OPEC is not a fan of how much gas the US has been passing. In recent years, A LOT of new energy companies have popped up in the US to take advantage of the fracking boom. By keeping prices low, OPEC is betting a lot of those companies will decide the juice isn’t worth the squeeze, and fold up shop. So this is a stand off between Old School Oil (OPEC) and the New Kids on the Block (the US).
Not all OPEC countries are on board with keeping prices low. Countries like Venezuela and Algeria, that need higher oil prices to balance their budgets and fund their governments, have been trying to convince the others to cut production. No dice. Saudi Arabia is the OPEC ring-leader, and its economy is strong enough to hang in there and wait for a shake-out among US energy companies. But recently, prices have dipped low enough (and member countries have been hurting badly enough) that OPEC might be changing its tune.
It looks like OPEC might be willing to work with other producers (maybe even the US) to bring prices back up. Stay tuned.
OPEC decides more than how much you pay at the pump. Its decisions affect entire economies and the global oil industry, all of which are watching the group's moves closely.