OPEC's ministers will hold their regular semi-annual meeting in Vienna this month, which coincides with the 50th anniversary of the founding of the organization in 1960 in Baghdad. In the past half-century, the organization faced many challenges in its drive to achieve price stability and secure a fair and moderate price for crude oil. While some of these challenges were pivotal, others involved temporary changes. What matters then is to distinguish between major shifts that affect the markets over the long term and the changes that, in spite of their significance, have limited impact over a relatively short-term period, and emerge particularly from the fluctuations in the global economy, international politics, or shifts within the oil industry itself. Since its inception, OPEC witnessed three fundamental transformations, the first of which was the decision taken by its council of ministers, in the autumn of 1973, to have the member states take the initiative in determining production levels, and not leave this vital matter in the hands of international companies alone, as was hitherto the case. We find that as a result of this decision, crude oil prices did indeed rise gradually from their former level of one dollar per barrel to more than 10 dollars. The second transformation involved the sustained economic growth of emerging market countries in Asia (China, India and South Korea), in addition to Brazil. This helped create a highly populated large and growing market for energy use, raising the levels of oil consumption to new heights (to nearly 85 million barrels per day). In truth, a characteristic of this market is that it is detached from the factors of growth in the Western industrialized nations. As a result, the economies of these countries do not contract in tandem with the economic setbacks of the traditional industrialized countries, as evident during the recent global financial crisis. The third transformation materialized through OPEC's success in steering its ship in recent years in a rational and credible manner, despite the global economic challenges and the sharp political differences among some member states. These changes, among other things, led to the increase of prices to the 70-80 dollar per barrel range, at which they remained stable for relatively long periods. But despite this, and in spite of the important role played by these fundamental changes, we find that prices still deteriorated sometimes to their previous levels, ranging from 10 to 30 dollars, even for a few months only. The recent decline in prices was caused by the global financial crisis, which started following the U.S subprime mortgage crisis. However, besides this major event and other fundamental changes, there continue to be daily -and even weekly and seasonal- fluctuations, for reasons related to the levels of the commercial oil inventory of the United States in particular, and the industrialized countries in general. This in addition to the oil inventories stored on board tankers anchored at sea, and the devastating hurricanes in the Gulf of Mexico, as most U.S oil production takes place in the southern United States. A good example is the devastation caused by Hurricane Katrina. There is also the issue of large fluctuations in the value of certain hard currencies and inflation relative to other hard currencies, as is happening now with the value of the Japanese yen, causing a major crisis in the Japanese economy as a result of the decline in exports, which are otherwise the main engine of Japan's economy. Since Japan is one of the three most important consumers of oil worldwide, its petroleum imports were negatively affected. OPEC tries to deal with such shifts and changes by closely studying and observing global markets, before taking the necessary decisions at appropriate times. In truth, state institutions in some member states have acquired high-caliber skills in marketing and studies. This can be mainly attributed to the accumulated knowledge of some national oil companies in these member states, which market their oil in various world markets. Subsequently, the organization now cuts production at the onset of any major global economic crisis, and does not wait until matters deteriorate so that things do not get out of OPEC's control, and it becomes no longer possible to keep the markets in check, as was the case during the 1997 OPEC meeting in Jakarta. Back then, the Asian economic crisis was in its beginning, and instead of cutting production, OPEC increased production, leading to a collapse in prices. *. Mr. Khadduri is an energy expert
