Abstract:

The global oil market and oil prices are largely shaped by the Organization of
the Petroleum Exporting Countries (OPEC). This study looks at how three
significant geopolitical events (the Gulf War, the Arab Spring, and the 2008
financial crisis) impacted OPEC’s decision-making. The paper employs a case
study methodology to examine OPEC’s reaction to these occurrences and
evaluates the effects of these actions on the world’s oil supply and prices.The
study also looks at how these incidents have affected OPEC’s decision-
making in the past. The results imply that OPEC’s decision-making has been
greatly influenced by geopolitical developments, with the group striking a
balance between member nation interests and market stability. While the Gulf
War significantly raised oil prices, the Arab Spring contributed to a decrease in
oil production. Oil demand declined as a result of the 2008 financial crisis,
and OPEC responded by reducing production to balance supply and demand.
The study also emphasizes the need for more investigation into how
geopolitical developments continue to influence OPEC’s decision-making and
how those developments affect the world oil market.
Introduction:
The Organization of the Petroleum Exporting Countries (OPEC) is a pivotal
player in the global energy market, accounting for approximately 40% of the
world’s total oil production. As a cartel of oil-producing nations, OPEC’s
decisions have far-reaching consequences for the global economy, energy
security, and environmental sustainability. The organization’s importance
extends beyond its significant market share, as its actions also influence oil
prices, energy policies, and geopolitical dynamics worldwide.

Geopolitical events, such as conflicts, sanctions, diplomatic tensions, and

regional instability, have the potential to significantly impact OPEC’s decision-
making processes and oil production policies. These events can create
uncertainty, disrupt oil supplies, and influence the global energy landscape,
ultimately affecting OPEC’s ability to achieve its objectives. However, the
impact of geopolitical events on OPEC’s decision-making remains
understudied and poorly understood.
This research aims to address this knowledge gap by exploring the following
research question: How do geopolitical events influence OPEC’s decision-
making processes and oil production policies? Through a case study
approach, this study will investigate the complex dynamics between
geopolitical events, OPEC’s decision-making, and oil production policies,
shedding light on the organization’s ability to adapt to changing geopolitical
landscapes.

The significance of this study lies in its contribution to existing literature on

OPEC’s decision-making and the impact of geopolitical events on energy
markets. By examining the intersection of geopolitics, energy markets, and
OPEC’s decision-making, this research aims to provide a comprehensive
understanding of the complex factors that shape the organization’s policies
and actions. The findings of this study will have important implications for
policymakers, energy analysts, and scholars seeking to understand the
intricate relationships between geopolitics, energy markets, and OPEC’s
decision-making processes.
Literature Review:
OPEC’s decision-making processes have been a topic of interest for scholars
and researchers, with a significant body of literature examining the factors
that influence the organization’s policies and actions. Existing research has
identified a range of factors that shape OPEC’s decision-making, including:
1. Economic interests (Kohl, 2017)
2. Political considerations (Colgan, 2014)

3. Geopolitical events (Yergin, 2012)

4. Institutional dynamics (Mommer, 2017)
5. Member states’ interests (Hart, 2017)
Geopolitical events have a profound impact on international relations, the
global economy, and energy markets. Research has shown that geopolitical
events can:

1. Disrupt oil supplies (Stern, 2016)

2. Influence oil prices (Kilian, 2017)
3. Shape global energy policies (Goldthau, 2017)
4. Impact international relations (Waltz, 2010)
Case studies on OPEC’s responses to geopolitical events offer valuable
insights into the organization’s decision-making processes. For example:

1. The 1973 oil embargo (Yergin, 2012)

- OPEC’s response to the Arab-Israeli War
- Embargo led to a significant increase in oil prices
2. Gulf Wars (Kohl, 2017)
- OPEC’s response to the Iraq-Kuwait conflict

- Organization’s ability to maintain oil production despite conflict

3. Arab Spring (Mommer, 2017)
- OPEC’s response to regional instability
- Impact on oil production and prices
These case studies demonstrate OPEC’s ability to adapt to changing
geopolitical landscapes and highlight the complex dynamics between
geopolitical events, OPEC’s decision-making, and energy markets.
Methodology
This study employs a case study approach to investigate the impact of
geopolitical events on OPEC’s decision-making processes and oil production
policies.
This research aims to address the following issues:
- How do geopolitical events influence OPEC’s decision-making processes?
- How do these events impact OPEC’s oil production policies?
Research questions
- What are the key geopolitical events that have affected OPEC’s decision-
making processes and oil production policies?
- How have these events influenced OPEC’s responses to changes in the
global energy market?
Historical background
OPEC was established in 1960 to coordinate the oil production policies of its
member states. Since then, the organization has played a crucial role in
shaping the global energy market.
Existing research has examined the impact of geopolitical events on
international organizations and global markets. However, there is a need for
more in-depth analysis of OPEC’s decision-making processes and oil
production policies in response to geopolitical events.

Theoretical framework
This study applies the Rational Choice Theory (RCT) to understand OPEC’s
decision-making processes and oil production policies. RCT assumes that
actors make rational decisions based on their preferences and interests.
Data presentation

The case studies selected for this research are:

- The 1973 Oil Embargo
- The Gulf Wars (1990-1991 and 2003-2011)
- The Arab Spring (2010-2012)

Data analysis:
The data collected from primary and secondary sources will be analyzed
using qualitative content analysis, focusing on the key themes and patterns
that emerge from the data.

Data Presentation
Role of Organization (OPEC):

OPEC plays a crucial role in shaping the global energy market through its
decision-making processes and oil production policies.

Case Study 1: 1973 Oil Embargo

Background:

The 1973 Oil Embargo was a pivotal event in the history of the oil industry,
marked by a five-month embargo on oil exports to the United States and other
countries that supported Israel in the Yom Kippur War. The embargo, led by
the Organization of Arab Exporting Countries (OPEC), had a profound impact
on the global economy and OPEC’s decision-making process.
Events Leading Up to the Embargo

- October 1973: Egypt and Syria launch a surprise attack on Israel, leading to
the Yom Kippur War.

- The United States and other countries provide military aid to Israel,
prompting Arab nations to retaliate.
- October 17, 1973: OPEC announces an oil embargo on the United States, the
United Kingdom, and other countries that supported Israel.
Impact on OPEC

- Oil production decline: OPEC reduced oil production by 5% per month,

leading to a significant decrease in global oil supplies.
- Price shock: Oil prices skyrocketed from $3 to $12 per barrel, causing a
global economic shockwave.
- cartel formation: The embargo marked the beginning of OPEC’s
transformation into a cartel, as member countries coordinated production
and pricing decisions.
Geopolitical Considerations

- Arab-Israeli conflict: The embargo was a political response to the Yom Kippur
War and the perceived pro-Israel stance of the United States and other
countries.
- Cold War dynamics: The embargo was also influenced by the Cold War, as
the Soviet Union supported the Arab nations and the United States backed
Israel.
OPEC’s Decision-Making Process
- Unity among member states: The embargo demonstrated unprecedented
unity among OPEC member states, as they coordinated their response to the
political crisis.

- Political considerations: OPEC’s decision-making process was heavily

influenced by geopolitical considerations, including the Arab-Israeli conflict
and Cold War dynamics.
- Economic interests: Member states’ economic interests also played a role,
as the embargo led to increased oil prices and revenue.
Key Findings
- The 1973 Oil Embargo marked a significant shift in OPEC’s decision-making
process, as geopolitical considerations became a dominant factor.
- The embargo demonstrated OPEC’s ability to coordinate production and
pricing decisions, solidifying its position as a cartel.
- The event highlighted the vulnerability of the global economy to oil price
shocks and the need for energy security.

This case study provides a detailed analysis of the 1973 Oil Embargo,
highlighting its impact on OPEC’s decision-making process, geopolitical
considerations, and the global economy. The embargo marked a significant
turning point in the history of the oil industry and continues to influence
OPEC’s actions today.

Case Study 2: Gulf War

Background:

- The Gulf War (1990-1991) was a military conflict between Iraq and a coalition
of countries led by the United States.
- The war was sparked by Iraq’s invasion of Kuwait on August 2, 1990.
- The United States and its allies launched a military operation, Operation
Desert Storm, on January 17, 1991, to liberate Kuwait and restore peace to the
region.
Impact on OPEC:

- Oil production decline: The war disrupted oil production in Iraq and Kuwait,
leading to a significant decline in global oil supplies.
- Price shock: Oil prices surged from $15 to over $40 per barrel, causing a
global economic shockwave.
- OPEC’s response: OPEC increased oil production to compensate for the loss
of Iraqi and Kuwaiti oil, but the increase was limited due to capacity
constraints.
Geopolitical Considerations:

- Political tensions: The war heightened political tensions between OPEC

member states, particularly between Iran and Iraq.
- Economic interests: Member states’ economic interests played a significant
role in OPEC’s decision-making process, as they sought to maximize oil
revenues.
- Global politics: The war highlighted the importance of the Middle East in
global politics and the need for diplomatic solutions to conflicts.
OPEC’s Decision-Making Process:

- Coordination: OPEC member states coordinated their response to the war,

increasing oil production to stabilize the market.
- Political considerations: Geopolitical tensions and economic interests
influenced OPEC’s decision-making process.
- Capacity constraints: OPEC’s ability to increase oil production was limited
due to capacity constraints, highlighting the need for investment in oil
infrastructure.
Key Findings:
- The Gulf War highlighted OPEC’s role in maintaining global energy security.
- The war demonstrated the importance of diplomatic solutions to conflicts in
the oil-rich Middle East.

- OPEC’s decision-making process was influenced by geopolitical tensions,

economic interests, and capacity constraints.

Case Study 3: Arab Spring

Background:
- The Arab Spring (2010-2012) was a wave of protests and uprisings across the
Middle East and North Africa.
- The movement aimed to bring about political and social change, sparked by
widespread discontent with authoritarian regimes.
- Key countries affected included Tunisia, Egypt, Libya, Bahrain, and Syria.

Impact on OPEC:

- Oil production decline: The Arab Spring led to a decline in oil production in
Libya and Syria due to conflict and political instability.
- Price volatility: Oil prices fluctuated in response to the geopolitical
uncertainty, reaching a high of $125 per barrel in 2011.
- OPEC’s response: OPEC increased oil production to compensate for the loss
of Libyan and Syrian oil, but the increase was limited due to capacity
constraints.

Geopolitical Considerations:
- Political instability: The Arab Spring led to political instability and regime
changes in several OPEC member states.

- Economic interests: Member states’ economic interests played a significant

role in OPEC’s decision-making process, as they sought to maximize oil
revenues.
- Global politics: The Arab Spring highlighted the importance of the Middle
East in global politics and the need for diplomatic solutions to conflicts.
OPEC’s Decision-Making Process:
- Coordination: OPEC member states coordinated their response to the Arab
Spring, increasing oil production to stabilize the market.

- Political considerations: Geopolitical tensions and economic interests

influenced OPEC’s decision-making process.
- Capacity constraints: OPEC’s ability to increase oil production was limited
due to capacity constraints, highlighting the need for investment in oil
infrastructure.

Key Findings:
- The Arab Spring highlighted OPEC’s role in maintaining global energy security
amidst political instability.
- The movement demonstrated the importance of addressing social and
economic grievances in the region.

- OPEC’s decision-making process was influenced by geopolitical tensions,

economic interests, and capacity constraints.

Data Analysis:
1. Oil production (mb/d):

a. 1973 Oil Embargo: 30.5 (decline)

b. Gulf War: 23.5 (decline)

c. Arab Spring: 31.5 (fluctuation)

1. Oil prices ($/barrel):

a. 1973 Oil Embargo: $12 (increase)

b. Gulf War: $40 (increase)
c. Arab Spring: $125 (increase)

1. OPEC’s response:

a. 1973 Oil Embargo: Coordinated production cut

b. Gulf War: Increased production to compensate for lost Iraqi and Kuwaiti oil
c. Arab Spring: Increased production to stabilize market amidst Libyan and
Syrian production decline.

Conclusion:

This research paper has examined the impact of geopolitical events on

OPEC’s decision-making process, analyzing three case studies: the 1973 Oil
Embargo, the Gulf War, and the Arab Spring. The findings demonstrate that
geopolitical events significantly influence OPEC’s ability to coordinate
production and pricing decisions, leading to fluctuations in oil production and
prices.
The analysis highlights the importance of considering geopolitical factors in
understanding OPEC’s behavior and the global oil market. The organization’s
decision-making process is shaped by political instability, conflicts, and
regime changes in member states, as well as economic interests and capacity
constraints.
The research concludes that OPEC’s actions have a profound impact on
global energy security, and understanding the geopolitical factors that
influence its decision-making process is crucial for predicting and mitigating
potential disruptions in the oil market.
Recommendations:

- OPEC member states should prioritize diplomatic solutions to conflicts and

invest in oil infrastructure to address capacity constraints.
- Global leaders should engage in dialogue with OPEC to address geopolitical
tensions and promote energy security.
- Further research should explore the role of non-OPEC countries in the global
oil market and the impact of geopolitical events on their production and
pricing decisions.
By acknowledging the intricate relationship between geopolitics and the oil
market, we can better navigate the complex landscape of global energy
security.