OPEC from myth to reality.

A truly supranational organization with powers to bind its members and capacity to play an important role in shaping the international relations of the 21st century is required to face many challenges, including the prevention of international wars for resources; securing the efficient exploitation of nonrenewable resources and preventing the unsustainable depletion of fossil fuel reserves; implementing mechanisms for more efficient energy consumption; addressing global environmental impact concerns; and promoting the stability of the world economy while protecting the wellbeing of its population.

OPEC has been vilified as responsible for petroleum price hikes and supply shortages. (91) Some refer to the Organization as a clumsy and "shortsighted cartel." (92) However, OPEC is far from being solely responsible for such price increases and has been a convenient scapegoat when someone must be blamed politically for inflationary trends. (93) Determining what really drives oil prices is not easy: "Big Oil is pointing fingers at hedge fund managers, who blame commodity index funds, who in turn cite surging demand in China, production losses in Nigeria and Iraq, and hostile regimes in Iran and Venezuela." (94) Japan's 2006 White Paper on International Trade and Economy concludes that the current level of crude oil prices, unlike the previous oil shocks, is not supply driven and is caused by the expansion of the U.S. and Asian economies (95) which creates an expansion of demand, anxiety about reduced surplus supply capacity of petroleum products, (96) reduced upstream investments in oil producing countries, (97) heavier crude oil trading to secure profits by purchasing crude oil in advance, (98) and poor energy saving investments by consumer countries. (99)

OPEC's history has a poor record of true organizational achievements. (100) Price increases may be attributed to speculation and OPEC's Conference has played a role in fueling speculators' predictions. (101)

Today, as in 1980, hydrocarbon reserves primarily in the Middle East are still a "vital interest[] of the United States."(102) Military intervention has already taken place to protect such interests. (103)

In the United Kingdom, energy demand and consumption has also grown steadily in the past decade confirming the importance of a stable oil supply. (104) The country's energy policy is based on "pursuing closer international relationships to promote region stability and economic reform in key energy producing areas." (105) At the same time "energy efficiency," ultimately meaning using less energy, is also the goal of the most important consumer countries. (106)

However, the end of the hydrocarbon era is in sight. The United States Geological Survey predicts that conventional oil will peak in 2037. (107) Determining objectively the world's undeveloped reserves, protecting and making available production surplus to adjust for contingencies, controlling consumption, improving energy efficiency, developing new technologies, reducing greenhouse emissions, and preventing resource wars are all issues that should be treated technically and through a multinational effort.

Among others, Lester Brown has noted that "the western economic model--the fossil fuel-based, auto-centered, throwaway economy--is not going to work for China and if it does not work for China it will not work for India which by 2031 is projected to have a population even larger than China's, nor will it work for the 3 billion other people in developing countries who are also dreaming the "America dream." (108)

OPEC's member resources, the Organization's history and experience, and foremost its potential, call it will play a decisive role. (109) OPEC may be the only realistic means through which countries that otherwise would have no voice in the international community of nations may be seriously taken into account.

The complexity of the many issues involved is well beyond the limited scope of this work, the main purpose of which is to stimulate and open the dialogue for the restructuring of the Organization and its conversion into a more powerful and effective international player. Obviously, any OPEC amendment is conditioned by the effective political will of its members. (110) Only if current members reach the necessary consensus to transform the Organization and have a basic agreement on its proposed new goals, would an amendment have any practical sense. This document addresses some of the most important topics of a proposed road map to be discussed among OPEC members to determine if such political will is possible. In reviewing this matter the following issues will be addressed.

1. Are OPEC's goals and structure outdated in view of the emergent trends in the international energy industry?

2. Do proposed amendments to the United Nations system and the economic realities of the twenty first century justify a rethinking of OPEC, its nature, objectives and role?

3. How can OPEC's Secretariat meet the challenges of the international oil industry in the 21st Century?

The many challenges of a truly global environment and issues that will affect every person living in the planet may not be adequately handled with a 1960's mindset. New effective institutions are required to deal with competing interests and complex issues. If the use of limited resources requires a world regulator, we need to empower it soon.

Ultimately, history and institutions are shaped by the character or lack thereof of individuals. True honest leadership and dedication may make the difference between an organization that plays a role in the lives of individuals or fades away as the burning flares of an extinguishing lamp. The stage is set for true honest leadership to make a difference in a world hungry for depth and values. Time will tell whether we were up to the task. The challenge is to transform the current OPEC into a coalition for change, both inside the Organization and most importantly for the benefit of the world's economy and as an effective instrument for peace. This may require creativity and the ability to use "loose and temporary global policy networks." (111)

II. ARE OPEC's GOALS AND STRUCTURE OUTDATED IN VIEW OF THE EMERGENT TRENDS IN THE INTERNATIONAL ENERGY INDUSTRY?

A. OPEC's Formation and Goals

When the OPEC was established in 1960 the petroleum industry was dominated by the Seven Sisters (112) and the producing countries were merely trying to avoid further reductions of their internal revenues through lowered posted prices established unilaterally by the multinationals. (113) The first OPEC Conference was far from being an act of war. Oil producing countries were only asking that the oil companies consult with them before unilaterally reducing posted prices. (114) At this time member states were primarily concerned with reductions of their national budgets, lacked the necessary petroleum exploration and exploitation technical know how (115) and were thus not fully aware of the nature and value of their resources. Many things have changed since then. Today, member countries own and control their hydrocarbon resources, operate national oil companies that develop them, (116) and prices are established by complex international market petroleum exchanges. (117) When OPEC was formed issues such as the scarcity of the oil wealth, rights of indigenous peoples, the environmental consequences of petroleum production and energy security were not contemplated. (118)

After more than forty-five years of searching for its identity the time has come for OPEC to affirm its role as a truly supranational power that may effectively enhance the sovereignty of its people and allow true economic development toward a post-hydrocarbon based economy.

Considering its important purposes, potential influence and goals, the public knows little about OPEC and its role. However, OPEC is vilified in the United States as responsible for the 1973 oil embargo, lines and no fuel at gasoline stations and even for not lighting that year's national Christmas tree. (119) In reality, OPEC may not be to blame for high oil prices. (120) Further, few are aware that using oil as a political weapon was "never discussed in OPEC Conferences or by other organs of the Organization." (121)

OPEC controls 902 billion barrels of oil or 75% of the world's proved reserves and 61% of the world's proved reserves are located in the Middle East. (122) According to OPEC's data, 78% of the total world's oil reserves (897 billion barrels) are located in OPEC countries, with 57% of those reserves concentrated in Iran, Iraq, and Saudi Arabia. (123) In 2005, OPEC produced an average of 30.7 million barrels a day while nonOPEC production averaged 41 million barrels a day. (124)

OPEC was formed as an instrument for its member countries not to "remain indifferent" to the unilateral conduct by the oil companies, to demand stable prices from them, (125) and to provide a forum for regular consultation among its members to unify and coordinate their policies. (126)

Article 2 of OPEC's Statute describes the Organization's principal aim as "co-ordination and unification of the petroleum policies of member countries and the determination of the best means for safeguarding their interests, individually and collectively." (127)

Today, OPEC's Statute includes as organizational goals the following:

a. Stabilization of prices in international oil markets. (128)

b. Securing steady income for producing countries. (129)

c. Securing an "efficient, economic and regular supply of petroleum to consuming nations." (130)