Kamil Essay Plan

Introduction
Thesis: While many believe that OPEC influences oil prices, research shows that in many ways the influence of the organization is minimal in the actual prices charged for oil while the current high level oil prices are based not on OPEC but simple supply and demand among other non-OPEC influenced factors.

Body
OPEC and Oil Prices
-The organization has two annual meetings to coordinate oil produces based on the market and concepts including supply and demand.
-The organization does not “set” oil prices.
-As OPEC nations produce near half of the world’s oil the decisions related to production, not prices, can in turn impact the price of oil.
-OPEC sets the oil production quotas to gain stability in the market for the consumers and producers. Such efforts might include increasing production to prevent a major rise in oil prices.

The Diminishing Role of OPEC
-OPEC conferences have had a major impact on oil prices in the past.
-However, research has shown that the role of OPEC has decreased over time due to factors such as oil being available from non-OPEC source.
-Research has shown that the meetings of OPEC have had a weak impact on subsequent market developments related to oil.

What Accounts for the Oil Prices?
-Several factors play a role in oil prices that again OPEC does not set.
-Market fundamentals that have a major impact on the price of oil include supply and demand.
-Financial markets and decision-makers/speculators also impact the price of oil based on their predictions of oil prices.
-Numerous additional external factors play a role in the cost of oil including taxes, marketing efforts, etc.
-World events including wars and political fears/threats have also led to oil price increases despite lack of evidence that such issues would adversely affect the ability to gain oil.

Why Oil Prices Should Be Stable
-There are several compelling arguments as to why oil prices should be stable such as the price being affected by factors such as speculators who make money based on the price changes.
-Speculation can affect the prices more so than competition. In fact, with the case of the 1973 oil crisis the problem was less about supply of oil than it was about speculation.
-Even if the cut of oil production that leads to lowering of inventories and thus higher prices occurs due to OPEC, there has been an increase in oil production of non-OPEC nations.
-In fact, despite the fact that OPEC does have an estimated two thirds of the world’s oil reserves it currently makes up only and estimated thirty-five percent of the oil production.
-As a result of the numerous producers of oil, it can be argued that such production should lead to stable prices.

The Current Oil Prices: Too High
-The current price of oil can be deemed to high as several factors, not related to supply and demand, are playing a role in the high cost.
-Two major non-supply and demand factors contributing to the high price of oil include the nationalization in Venezuela, a major oil producer, and concerns over the nuclear program of Iran.
-Some believe that OPEC, through its production decisions, has made efforts to keep oil prices under $30 per barrel.
-Many believe that there is a larger supply of oil than most contend and that due to its abundant nature should cost much less than the current price per-barrel.

The Effects of High Oil Prices
-High oil prices lead to lower demand.
-High oil prices can lead to effects in other financial realms such as the stock market and global economy.
-The high cost of oil might lead to more efforts towards conservation as well as increase the motivation to find alternative energy forms.