[The Editors' Verdict] OPEC's Quiet 60th Anniversary

[Asia Economy Reporter Choi Il-kwon] The Organization of the Petroleum Exporting Countries (OPEC), known as the world's largest 'cartel,' celebrated its 60th anniversary, but the atmosphere was quieter than ever. In 2010, the 50th anniversary, a grand celebration was held in Vienna, Austria, where OPEC's headquarters are located. The situation now, 10 years later, is the complete opposite. The biggest reason was the practical difficulty of gathering in one place to celebrate due to the COVID-19 pandemic, but many also see it as reflecting OPEC's significantly diminished status compared to the past. On the homepage, only a separate page was created to celebrate the 60th anniversary, with no events held.

The 60 years of OPEC contain a lot of history. While it may not be described as the 'rise and fall' of the oil cartel, it is enough to feel its ups and downs. While it wielded great influence worldwide until the 20th century, in the 21st century, only its past glory is highlighted.

OPEC was formed on September 14, 1960, when five countries?Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela?gathered in Iraq for the founding conference. The stated purpose was to effectively control oil resources and maintain legitimate authority. At the time, Middle Eastern oil-producing countries used oil as a means to break free from the influence of major powers. Currently, the number of member countries has increased to 13, and the organization has grown to the extent that 10 non-OPEC countries cooperate with it.

OPEC's powerful influence can be said to have created the oil shocks of the 1970s. In particular, the first oil shock in 1973 made OPEC a symbol of the politicization of oil and the strengthening of resource nationalism. During a period of rapidly expanding oil demand, OPEC artificially controlled oil supply to maximize its market influence. Each OPEC meeting at the time was a major focus of media attention.

The heyday of OPEC can be considered the 50 years following its founding. Looking at oil price trends over the past 40 years, prices have been on a downward trend since June 2008, just before the financial crisis, when WTI crude oil reached $140 per barrel. In other words, OPEC's decline can be seen as just beginning. Qatar, an original member, recently announced its withdrawal, and U.S. President Donald Trump has accused OPEC of being a cartel in recent years.

The change in OPEC's status over 60 years is closely related to the shift in the oil market from a supplier-driven to a demand-driven market. Electric vehicles are becoming more popular, and aviation demand remains stagnant. Efforts to reduce oil demand are the trend. Especially since the outbreak of the COVID-19 virus this year, oil demand has further decreased. In the 1980s, the prediction that 'oil reserves would be depleted in 30 years' was widely circulated, but nowadays, few pay attention to claims that 'oil supply will be cut off.'

The problem is that despite these changes in the times, OPEC has not changed. It still clings to supply dominance. If it loses the ability to control supply, there is no reason to maintain a legitimate 'cartel.' Saudi Arabia's decision this year to increase supply in competition with non-member Russia is a clear example. The strategy to force opponents to submit through supply control has not changed. The result was an unprecedented event of negative oil prices, and the damage spread not only to oil drilling but also to the refining industry.

The Wall Street Journal (WSJ) described OPEC's status as "a source of fear facing a crisis." However, in its 60th anniversary statement, OPEC remained optimistic, stating it would "remain the central axis of the energy market." The time is gradually approaching when OPEC, now at its 'hwan-gap' (60th birthday), must seek survival.