OPEC’S ORGANIZATIONAL STRUCTURES, ITS STRATEGIC AIMS & OBJECTIVES, PRODUCTION QUOTA, INCOHESION WITHIN OPEC, (“BLACK LEGS’’) COUNTER MEASURES OF OIL IMPORTERS (ALTERNATIVE MEASURE) AND THE MANAGEMENT OF ITS STRATEGIC RESOURCES.

BY

CLIFFORD OGBEIDE

AAU/SPS/CSDS/2008/M.SC/2540

A SEMINAR PAPER PRESENTED AT THE CENTRE FOR STRATEGIC AND DEVELOPMENT STUDIES (CSDS), AMBROSE ALLI UNIVERSITY, EKPOMA, IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF M.Sc. DEGREE IN STRATEGIC STUDIES, NOVEMBER 2009.

LECTURER: DR. TONY OSAWE

Abstract:

This seminar paper takes a critical look at OPEC as a permanent, intergovernmental Organization primarily concerned with coordinating the crude-oil policies of its member states; its formation, organizational structure, functions, production quota, challenges, aims and objectives.

In the course of this research work, it was discovered that, some members of the organization are “black sheep” as they deliberately frustrate the objectives of the organization through some strategic partnership with major oil importers thereby compromising on production quota. These major oil importers are also implementing counter strategies and researching into alternative measures for sources of energy.

This paper establishes that, some non- OPEC members have managed adequately well with this strategic resource. while some OPEC members have used this God- given resource for the socio-economic advancement of its people and national development, others have remained ‘’laggards’’ being unable to utilize it for the overall economic growth and development of its people let alone distributing the income, as well as providing a stable industrial resource base for the country. Through official actions and defaults, widespread corruption exist among some OPEC members in the management of this resource amidst the euphoria of an oil boom.

To overcome all the above mentioned inadequacies, it is suggested that, unity and adherence to OPEC’S objectives, transparency and accountability as a veritable tool for the management of its strategic resource should be imbibe. Diversification of the economy should be intensified while, Investment into priority social sectors, especially education and health should be encouraged bearing in mind that these strategic resources are exhaustible, adequate provision should be made for the future generation.

Introduction:

Formation of OPEC:

Two series of events coincided to change this secure supply of cheap oil into an insecure supply of expensive oil. In 1960, enraged by unilateral cuts in oil prices by the seven big oil companies, the governments of the major oil-exporting countries formed the Organization of Petroleum Exporting Countries [1], or OPEC. OPEC’s goal was to try to prevent further cuts in the price that the member countries—Venezuela and four countries around the Persian Gulf—received for oil. They succeeded, but for a decade they were unable to raise prices. In the meantime, increasing oil consumption throughout the world, especially in Europe and Japan; where oil displaced coal as a primary source of energy, caused an enormous expansion in the demand for oil products. [2]

The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization primarily concerned with coordinating the crude-oil policies of its member states. It was established at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962) – suspended its membership from January 2009; Socialist Peoples Libyan Arab Jamahiriya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its membership from December 1992-October 2007; Angola (2007) and Gabon (1975–1994). OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965. [3]

The amount of oil produced worldwide was greater than demand. The price of oil, which was controlled by the oil companies, dropped and with it dropped the amount of money the oil companies paid the oil-producing nations. OPEC was formed in reaction to this drop in payments. In addition to joining OPEC, some oil-producing countries nationalized the oil production and refining equipment of the oil companies, which generated large amounts of income for those countries.

In the 1970s, as oil supplies in non-OPEC countries were reduced, the organization raised the price of oil. Another price-control tactic used by OPEC is to set production ceilings (Quota) that specify how much oil may be produced by each member country. In the 1980s some OPEC nations ignored the production ceilings and this resulted in overproduction and a drop in oil prices. The organization has also used the supply of oil as a political tactic—for example, stopping delivery of oil to nations supporting Israel in the Arab-Israeli War of 1973[4]a tactic that resulted in oil and gasoline shortages in many Western nations.

Organizational structure :

The Organization of the Petroleum Exporting Countries (OPEC) has three organs namely:

I. The ConferenceII. The Board of Governors

III. The Secretariat.

I. The Conference:

The Conference is the supreme authority of the Organization. The Conference, made up of high-level representatives of the member governments, which meets at least twice a year. However, an Extraordinary Meeting of the Conference may be convened at the request of a Member Country by the Secretary General, after due consultation with the President and approval by a simple majority of the Member Countries.

The delegation to the conference may consist of one or more delegates, as well as advisers and observers. When a delegation consists of more than one person, the appointing country shall nominate one person as the Head of the delegation. During meetings, deliberations take the following procedures:

A. Each Member Country should be represented at all Conferences; however, a quorum of three-quarters of Member Countries shall be necessary for holding conference.

B. Each Full Member Country shall have one vote. All decisions of the Conference, other than on procedural matters, shall require the unanimous agreement of all full Members.

C. The Conference Resolutions shall become effective after 30 days from the conclusion of the Meeting, or after such period as the Conference may decide unless, within the said period, the Secretariat receives notification from member Countries to the contrary.

D. In the case of a Full Member being absent from the Meeting of the Conference, the Resolutions of the Conference shall become effective unless the Secretariat receives a notification to the contrary from the said Member, at least ten days before the date fixed for publication of he resolutions.

E. A non-Member country may be invited to attend a Conference as observer, if the Conference so decides. [5]

FUNCTIONS OF THE CONFERENCE:

The Conference is responsible for:

1. Formulation of general policy of the Organization and determining the appropriate ways and means of its implementation;

2. Decide upon any application for membership of the Organization;

3. Confirm the appointment of Members of the Board of Governors;

4. Direct the Board of Governors to submit reports or make recommendations in any matter of interest to the organization;

5. Consider, or decide upon, the reports and recommendations submitted by the Board of Governors on the affairs of the Organization;

6. Consider and decide upon the Budget of the Organization, as submitted by the board f Governors;

7. Consider and decide upon the Statement of Accounts and the Auditor ’ s Report, as submitted by the board f Governors;

8. Call a Consultative Meeting for such Member Countries, for such purposes, and in such places, as the Conference deems it;

9. Approve any amendment of its Statute;

10. Appoint the Chairman of the Board of Governors and an Alternate Chairman;

11. Appoint the Secretary General; and12. Appoint the Auditor of the Organization for duration of one year.

ii. The Board of Governors:

A. The Board of Governors shall be composed of Governors nominated by the Member Countries and confirmed by the Conference.

B. Each Member of the Organization should be represented at all Meetings of the Board of Governors; however, a quorum of two-thirds shall be necessary for the holding of meeting.

C. When, for any reason, a Governor is prevented from attending a Meeting of the Board of Governors, a substitute ad hoc Governor shall be nominated by the corresponding Member Country. Such nomination shall not require confirmation by the Conference. At the Meetings which he attends, the ad hoc Governor shall have the same status as the other Governors, except as regards qualifications for chairmanship of the board of Governors.

D. Each Governor shall have one vote. A simple majority vote of attending Governors shall be required for decisions of the Board of Governors.

E. The term of office for each governor shall be two years.

Function of the Board of Governors:

1. Direct the management of the affairs of the Organization and the implementation of the decisions of the conference;

2. Consider and decide upon any reports submitted by the Secretary General;

3. Submit reports and make recommendations to the Conference on the affairs of the organization;

4. Draw up the Budget of the Organization for each calendar year and submit it to the conference for approval;

5. Nominate the Auditor of the Organization for duration of one year;6. Consider the Statement of Accounts and the Auditor’ s Report and submit

them to the conference for approval;

7. Approve the appointment of Directors of Divisions and Heads of Departments, upon nomination by Member Countries, due consideration being given to the recommendations of the Secretary General;

8. Convene an extraordinary Meeting of the conference; and 9. Prepare the Agenda for the conference. [6]

III The Secretariat:

The Secretariat is responsible for the executive functions of the Organization in accordance with the provisions of establishing Statute under the direction of the board of Governors. The Secretariat of the Organization consists of the Secretary General and other Staffs as may be required. It functions is at the Headquarters of the Organization.

Duties of the secretary General :

A. The Secretary General is the legally-authorized representative of the Organization.

B. The Secretary General is the chief officer of the Secretariat, and in that capacity, shall have the authority to direct the affairs of the Organization in accordance with directions of the Board of Governors.

C. organizes and administers the work of the Organization;

D. Ensure that the functions and duties assigned to the different departments of the secretariat are carried out;

E. Prepares reports for submission to each Meeting of the Board of Governors concerning matters which call for consideration and decision;

F. Informs the Chairman and other Members of the Board of Governors of all activities of the Secretariat, of all studies undertaken and of the progress of the implementation of the Resolutions of the Conference; and

G. Ensures the due performance of the duties which may be assigned to the Secretariat by the Conference or the Board of Governors.

The secretary general of the organization, also co-ordinate activities of other departments. The other departments are; The Legal Office ,The Internal Audit, The Research Division (RD), The Support Services Division (SSD), The Data Services Department (DSD), The Petroleum Studies Department (PSD), The Energy Studies Department (ESD), The Multilateral Relations Department (MRD), The Public Relations and Information Department (PRID), The Finance and Human Resources Department (FHRD), The Administration and IT Services Department (AITSD). [7]

OPEC’s Strategic Aims & Objectives:

1. The principal aim of the Organization is the coordination and unification of the petroleum policies of Member Countries and the determination of the best means for safeguarding their Interests, individually and collectively, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.

2. The Organization devises ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations.

3. Due regard shall be given at all times to the interests of the producing nations

and to the necessity of securing a steady income for the producing countries; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.

4. Ministers of energy and hydrocarbon affairs of member countries meet twice a year to review the status of the international oil market and the forecasts for the future in order to agree upon appropriate actions which will promote stability in the oil market.

5. The Member Countries also hold other meetings at various levels of interest, including meetings of petroleum and economic experts, country representatives and special purpose bodies such as committees to address environmental affairs.

6. Decisions about matching oil production to expected demand are taken at the Meeting of the OPEC Conference. Details of such decisions are communicated in the form of OPEC Press Releases. [8]

Membership:

(A) Founder Members of the Organization are those countries which were represented at the First Conference, held in Baghdad, and which signed the original agreement of the establishment of the organization.

(B) Full Members shall be the Founder Members, as well as those Countries whose application for membership has been accepted by the conference.

(C) Any other country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries, may become a Full

Member of the Organization, if accepted by a majority of three-fourths of Full Members, including the concurrent vote of all founder members.

(D) Associate Members may be invited by the Conference to attend any Meeting of a Conference, the Board of Governors or Consultative Meetings and to participate in their deliberations without the right to vote. They are, however, fully entitled to benefit from all general facilities of the Secretariat, including its publications and library, as any Full member. [9]

OPEC’S Production Quota:

According to Wikipedia, a production quota is a goal for the production of goods. It is

typically set by a government or an organization, and can be applied to an individual

worker, firm, industry or country. Quotas can be set high to encourage production, or

can be used to limit production to control the supply of goods. The aim of restricting

supply is to maintain a certain price level. [10]

The OPEC Statute requires OPEC to pursue stability and harmony in the petroleum

market for the benefit of both oil producers and consumers. To this end, OPEC

Member Countries respond to market fundamentals and forecast developments by

coordinating their petroleum policies. Production regulations are simply one possible

response. If demand grows, or some oil producers are producing less oil, OPEC can

increase its oil production in order to prevent a sudden rise in prices. OPEC might

also reduce its oil production in response to market conditions. [11]

OPEC's influence on the market has been widely criticized, since it became effective in determining production and prices. Arab members of OPEC alarmed the developed world when they used the “oil weapon” during the Yom Kippur War by implementing oil embargoes and initiating the 1973 oil crisis. Although largely political explanations for the timing and extent of the OPEC price increases are also valid, from OPEC’s point of view, these changes were triggered largely by previous unilateral changes in the world financial system and the ensuing period of high inflation in both the developed and developing world. This explanation encompasses OPEC actions both before and after the outbreak of hostilities in October 1973, and concludes that “OPEC countries were only “staying even” by dramatically raising the dollar price of oil.” [12]

OPEC's ability to control the price of oil has diminished somewhat since then, due to the subsequent discovery and development of large oil reserves in Alaska, the North

Sea, Canada, the Gulf of Mexico, the opening up of Russia, and market modernization. OPEC nations still account for two-thirds of the world's oil reserves, and, as of April 2009, 33.3% of the world's oil production, affording them considerable control over the global market. The next largest group of producers, members of the OECD and the Post-Soviet states produced only 23.8% and 14.8%, respectively, of the world's total oil production. As early as 2003, concerns that OPEC members had little excess pumping capacity sparked speculation that their influence on crude oil prices would begin to slip. [13]

Criticism:

Quotas, like other trade restrictions, are used to benefit the producers of goods at the expense of all consumers in that economy. Possible effects are corruption (bribes to get a quota allocation) or smuggling (circumventing a quota) they are thought to be less economically efficient than tariffs which in turn are less economically efficient than free trade.

Production Disputes, Political Squabbles and Incohesion within OPEC: ‘Blackleg’’

The economic, needs of the OPEC member states often affects the internal politics behind OPEC production quotas. Various members have pushed for reductions in production quotas to increase the price of oil and thus their own revenues. These demands conflict with Saudi Arabia's stated long-term strategy of being a partner with the world's economic powers to ensure a steady flow of oil that would support economic expansion.[14] Part of the basis for this policy is the Saudi concern that expensive oil or oil of uncertain supply will drive developed nations to conserve and develop alternative fuels. To this point, former Saudi Oil Minister Sheikh Yamani famously said in 1973: "The stone age didn't end because we ran out of stones."[15]

One such production dispute occurred on September 10, 2008, when the Saudis reportedly walked out of OPEC negotiating session where the cartel voted to reduce production. Although Saudi Arabian OPEC delegates officially endorsed the new quotas, they stated anonymously that they would not observe them. The New York Times quoted one such anonymous OPEC delegate as saying “Saudi Arabia will meet the market’s demand. We will see what the market requires and we will not leave a customer without oil. The policy has not changed.”[16]

Leading up to the 1990-91 Gulf War, Iraqi President Saddam Hussein advocated that OPEC push world oil prices up, thereby helping Iraq, and other member states, service debts. But the division of OPEC countries occasioned by the Iraq-Iran War and the Iraqi invasion of Kuwait marked a low point in the cohesion of OPEC.

After oil prices slumped at around $15 a barrel in the late 1990s, concerted diplomacy, sometimes attributed to Venezuela’s president Hugo Chavez, achieved a coordinated scaling back of oil production beginning in 1998. In 2000, Chavez hosted the first summit of heads of state of OPEC in 25 years. The next year, however, the September 11, 2001 attacks against the United States, the following

invasion of Afghanistan, and 2003 invasion of Iraq and subsequent occupation prompted a surge in oil prices to levels far higher than those targeted by OPEC during the preceding period. Indonesia withdrew from OPEC to protect its oil supply interests. On November 19, 2007, global oil prices reacted strongly as OPEC members spoke openly about potentially converting their cash reserves to the euro and away from the US dollar.[17]

On October 10, 2008, oil traded below $85 on the New York Mercantile Exchange. In response OPEC has stated that it will meet November 18, 2008, a month ahead of their regularly scheduled meeting to discuss cutting production as oil experiences declining world demand.[18]

COUNTER STRATEGIES AND ALTERNATIVE MEASURES OF OIL IMPORTERS:

i. Strategic Partnership Policies:

As a result of oil discovery outside the major OPEC members and some deliberate polices coupled with possession of highly skilled manpower and technological advantage, major oil importing nations are seeking different alternative sources for their energy needs.

OPEC's ability to control the price of oil has diminished due to the subsequent discovery and development of large oil reserves in Alaska, the North Sea, Canada, the Gulf of Mexico, the opening up of Russia, and market modernization. The next largest group of producers is members of the Organization for Economic Co-operation and Development (OECD) and the Post-Soviet states produced only 23.8% and 14.8%, respectively, of the world's total oil production. As early as 2003, concerns that OPEC members had little excess pumping capacity sparked speculation that their influence on crude oil prices would begin to slip. [19]

The infiltration of the rank of OPEC’s group by the major oil importers with their trade and other deliberate policies has further weakened the cohesion within the cartel. Most of the technology and manpower needed to develop these oil fields of OPEC are sought from the western nations who are also the major oil importers. They could use the relationship to their advantage and further break the monopoly enjoyed by OPEC through granting of concession and waiver to them.

Saudi Arabia, Qatar, and Kuwait are major oil producers within the OPEC cartel and has a very strong cordial economic and diplomatic ties with the United States Of America and other western nations who are major importer of oil. These major oil importers could also use the relationship to strike a balance.

The Saudi Arabia's stated long-term strategy of being a partner with the world's economic powers to ensure a steady flow of oil that would support economic expansion has been an advantage to the major oil importers. Part of the basis for this policy is the Saudi concern that expensive oil or oil of uncertain supply will drive developed nations to conserve and develop alternative fuels. To this point, former Saudi Oil Minister Sheikh Yamani famously said in 1973: "The stone age didn't end because we ran out of stones."[20]

Since worldwide oil sales are denominated in U.S. dollars, changes in the value of the dollar against other world currencies affect OPEC's decisions on how much oil to produce. For example, when the dollar falls relative to the other currencies, OPEC-member states receive smaller revenues in other currencies for their oil, causing substantial cuts in their purchasing power and therefore producing more oil into the market in an attempt to make more earnings and thereby causing the oil price to drop in favour of the importers.

After the introduction of the Euro pre-invasion, Iraq decided it wanted to be paid for its oil in Euros instead of US dollars causing OPEC to consider changing its oil exchange currency to Euros, although after Iraq's invasion, the interim government reversed this policy, and the subsequent Iraq governments stuck to the US dollar.[21] Member states; Iran [22] and Venezuela[23] have undergone similar shifts from the dollar to the Euro. And owners of these currencies are major importers of oil.

Dispute among OPEC members on production quota, is quite alarming and causing problems within the cartel. One such production dispute occurred on September 10, 2008, when the Saudis reportedly walked out of OPEC negotiating session where the cartel voted to reduce production. Although Saudi Arabian OPEC delegates officially endorsed the new quotas, they stated anonymously that they would not observe them. The New York Times quoted one such anonymous OPEC delegate as saying “Saudi Arabia will meet the market’s demand. We will see what the market requires and we will not leave a customer without oil. The policy has not changed.”[24]

Alternative Energy Resources:

In an attempt to find alternatives source for their energy requirement, the major oil importer has gone into research and development for alternatives energy to meet their ever increasing demands.

Alternative energy is an umbrella term that refers to any source of usable energy intended to replace fuel sources without the undesired consequences of the replaced fuels.[25]

Over the years, the nature of what was regarded alternative energy sources has changed considerably, and today because of the variety of energy choices and differing goals of their advocates, defining some energy types as "alternative" is highly controversial.

Here are some definitions of alternative energy. According to Oxford Dictionary, alternative energy is energy fuelled in ways that do not use up natural resources or harm the environment.[26]

Princeton Word Net defined it as energy derived from sources that do not use up natural resources or harm the environment.[27] Responding to Climate Change 2007 group says it is energy derived from nontraditional sources (e.g., compressed natural gas, solar, hydroelectric, wind).[28]

Also in the views of Natural Resources Defense Council, alternative energy is energy that is not popularly used and is usually environmentally sound, such as solar or wind energy (as opposed to fossil fuels).[29]

Prior to shift to an alternative energy, supplies of the dominant energy type became erratic, accompanied by rapid increases in energy prices. The result of this research and development was a reaction to the monopolistic tendency of OPEC carte in the area of oil energy supplies to the world.

Alcohol as alternative to fossil fuels:

In 1917, Alexander Graham Bell advocated ethanol from corn and other foodstuffs as an alternative to coal and oil, stating that the world was in measurable distance of depleting these fuels. For Bell, the problem requiring an alternative was lack of renewability of orthodox energy sources[30].Since the 1970s, Brazil has had an ethanol fuel program which has allowed the country to become the world's second largest producer of ethanol (after the United States) and the world's largest exporter.[31] Brazil’s ethanol fuel program uses modern equipment and cheap sugar cane as feedstock, and the residual cane-waste (Bagasse) is used to process heat and power.[32] There are no longer light vehicles in Brazil running on pure gasoline. By the end of 2008 there were 35,000 filling stations throughout Brazil with at least one ethanol pump.[33]

Renewable Energy as Alternative To Non-Renewable Energy:

Renewable energy is energy generated from natural resources—such as sunlight [34] , wind, rain, tides and geothermal heat—which are renewable (naturally replenished). When comparing the processes for producing energy, there remain several fundamental differences between renewable energy and fossil fuels. The process of producing oil, coal, or natural gas fuel is a difficult and demanding process that requires a great deal of complex equipment, physical and chemical processes. On the other hand, alternative energy can be widely produced with basic equipment and naturally basic processes. All these put together are counter measures and strategy against the OPEC cartel for their ever increasing prices of oil.

OPEC’S MANAGEMENT OF ITS STRATEGIC RESOURCES

In the areas of management of its strategic resources, some members of OPEC have done credibly well through prudent, transparent and accountable distribution of these strategic wealth for the benefit of its citizenry, and the development of the socio- economic wellbeing of the nation through aggressive transformation of the social infrastructures within the country. Others remained a laggard within the cartel group in spite of good earnings accrued from oil revenue as a result of corrupt practices, mal-administration, cronyism, nepotism, bad leadership and un-patriotic act.

There are also some other fundamental issues like Production quota and disputes, Political intrigues, pricing problem, leadership selection and accession, alternative energy resource, and in- cohesion within the group have been militating against OPEC in its bid towards the management of its strategic resources.

Saudi Arabia is a founding member of OPEC. The most distinguishing features of the Saudi Arabian economy is the extent to which formal planning has determined the direction of the economy. Although the Kingdom's main source of revenue remains oil, great efforts have been made to diversify the economy, to reduce dependence on oil revenues. [35] The series of integrated economic and national planning and implementation process has attested to this fact. The Planning Policies has played a crucial role in the Kingdom's extraordinarily fast industrial development in the key sectors of agriculture, health, Education, transportation, communication, social development art and culture for the benefit of its citizenry.

Saudi Arabia is one of only a few fast-growing countries in the world with a high per capita income of $20,700 (2007). Saudi Arabia will be launching six "economic cities" (e.g. King Abdullah Economic City) [36] which are planned to be completed by 2020. These six new industrialized cities are intended to diversify the economy of Saudi Arabia, and are expected to increase the per capita income. The King of Saudi Arabia has announced that the per capita income is forecast, to rise from $15,000 in 2006 to $33,500 in 2020.[37] The cities will be spread around Saudi Arabia to promote diversification for each region and their economy, and the cities are projected to contribute $150 billion to the GDP.

Another formidable OPEC member-nation is Libya. Libyan economy depends primarily upon revenues from the oil sector, which constitute practically all export earnings and about one-quarter of gross domestic product (GDP). In the early 1980s, Libya was one of the wealthiest countries in the world; its GNP per capita was higher than that of countries such as Italy, Singapore, South Korea, Spain and New Zealand. [38]

Today, high oil revenues and a small population give Libya one of the highest GDPs per person in Africa and have allowed the Libyan state to provide an extensive level of social security, particularly in the fields of housing and education. [39] Many problems still beset Libya's economy however; unemployment is the highest in the region at 21% according to the latest census figures.[40]

Compared to its neighbours, Libya enjoys a low level of both absolute and relative poverty. Libyan officials in the past six years have carried out economic reforms as part of a broader campaign to reintegrate the country into the global capitalist economy. [41]

Libya has begun some market-oriented reforms. Initial steps have included applying for membership of the World Trade Organization, reducing subsidies, and announcing plans for privatization. [42] Authorities have privatized more than 100 government owned companies since 2003 in industries including oil refining, tourism and real estate, of which 29 are 100% foreign owned. [43] The non-oil manufacturing and construction sectors, which account for about 20% of GDP, have expanded from

processing mostly agricultural products to include the production of petrochemicals, iron, steel and aluminum.

In Nigeria, the case is completely different because of its endemic corruption and nepotism. During the oil boom of the 1970s, Nigeria joined OPEC and billions of dollars generated by production in the oil-rich Niger Delta flowed into the coffers of the Nigerian state. However, increasing corruption and graft at all levels of government squandered most of these earnings. [44] The northern military clique benefited immensely from the oil boom to the detriment of the Nigerian people and economy. As oil revenues fuelled the rise of federal subventions to states and precariously to individuals, the Federal Government soon became the centre of political struggle and the centre became the threshold of power in the country. As oil production and revenue rose, the Nigerian government created a dangerous situation as it became increasingly dependent on oil revenues and the international commodity markets for budgetary and economic concerns eschewing economic stability. That spelled doom to federalism in Nigeria. [45]

Beginning in 1979, Nigerians participated in a brief return to democracy when Obasanjo transferred power to the civilian regime of Shehu Shagari. The Shagari government was viewed as corrupt and incompetent by virtually all sectors of Nigerian society, so when the regime was overthrown by the military coup of Mohammadu Buhari shortly after the regime's fraudulent re-election in 1984, it was generally viewed as a positive development by most of the population. [46] Buhari promised major reforms but his government fared little better than its predecessor and his regime was overthrown by yet another military coup in 1985. [47]

The military regime of Ibrahim Babangida is adjudged to be at the apogee of corruption in the history of the nation as it was during his time that corruption became officially diluted in Nigeria. [48] When General Sani Abacha took power in another military coup. Abacha proved to be perhaps Nigeria's most brutal ruler and employed violence on a wide scale to suppress the continuing pandemic of civilian unrest. Money had been found in various western European countries’ banks traced to him. He avoided coup plots by bribing army generals. Several hundred millions dollars in accounts traced to him were unearthed in 1999. [49]

Ethnic violence over the oil producing Niger Delta region, inequitable distribution of the oil resources and inadequate infrastructures are some of the current issues in the country that lead to militancy in the Niger Delta at the moment which resulted to ‘amnesty’’ been granted when these militant were never tried in any court of competent jurisdiction. Nigeria is the 12th largest producer of petroleum in the world and the 8th largest exporter, and has the 10th largest proven reserves. Petroleum plays a large role in the Nigerian economy, accounting for 40% of GDP and 80% of Government earnings. However, agitation for better resource control in the Niger Delta, its main oil producing region, has led to disruptions in oil production and currently prevents the country from exporting at 100% capacity. [50]

Oil dominates the Nigerian economy and generates the vast majority of government revenues. At the same time, Nigeria is perceived as one of the world's most corrupt countries, and significant levels of corruption are said to exist within its oil sector. The complex and largely opaque operations of the oil industry make it difficult to

establish exactly how, when and to what extent corruption takes place. Public sector institutions governing the Nigerian oil sector permit the existence of corruption. Six areas of corruption risk are: the awarding of licenses; the awarding of contracts; bottlenecks and inefficiencies; the role of bunkering; the exportation of crude; and importing refined products.

One of the greatest threats facing the people of the Niger Delta in Nigeria has actually been their own government. A majority of every dollar that comes out of the ground in the delta goes to the government of Nigeria. As a result of the enormous amounts of crude that comes out of the delta every day, Nigeria has the second largest GDP in Sub-Saharan Africa [51] Despite the wealth flowing into the nation from oil revenues many of Nigeria’s socio-economic factors are worse now than they were 30 years ago [52]According to the World Bank, most of Nigeria’s oil wealth gets siphoned off by 1% of the population [53]. Corruption in the government is rampant, in fact since 1960 it is estimated that 300 to 400 billion dollars has been stolen by corrupt government officials [54]. The corruption is found at the highest levels as well. For example a former inspector general of the national police was accused of stealing 52 million dollars. He was sentenced to six years in prison for a lesser charge [55].

The people of the delta states live in extreme poverty even in the face of great material wealth found in the waters by their homes. According to Amnesty International 70% of the six million people in the Niger Delta live off of less than 1$ US per day. [56]

As the government officials siphon off all the money generated from oil sales the infrastructure suffers. Most of the villages do not have electricity or even running water [57]. They do not have good access to schools or medical clinics. For many, even clean drinking water is difficult to come by [58]. The deterioration of the infrastructure in the delta states is so severe it is even a problem in the more urban areas.

The new African oil boom -- centered on the oil-rich Atlantic waters of the Gulf of Guinea, from Nigeria to Angola -- is a moment of great opportunity and great peril for countries beset by wide-scale poverty. On the one hand, revenues available for poverty reduction are huge; Catholic Relief Services (CRS) conservatively estimates that sub-Saharan African governments will receive over $200 billion in oil revenues over the next decade. On the other hand, the dramatic development failures that have characterized most other oil-dependent countries warn that petrodollars have not helped developing countries to reduce poverty; in many cases, they have actually exacerbated it. [59]

Russia is known as an energy superpower, but not an OPEC member. The country has the world's largest natural gas reserves, the 8th largest oil reserves, the second largest coal reserves. Russia is the world's leading natural gas exporter and leading natural gas producer, while also the second largest oil exporter and largest oil producer, though Russia interchanges the latter status with Saudi Arabia from time to time.

Russia is the 4th largest electricity generator in the world and the 5th largest renewable energy producer, the latter due to the well-developed hydroelectricity production in the country. Large cascades of hydropower plants are built in European Russia along big rivers like Volga. The Asian part of Russia also features a number of major hydropower stations, however the gigantic hydroelectric potential of Siberia and Russian Far East largely remains unexploited [60]

Russia was the first country to develop civilian nuclear reactor and to introduce the first nuclear power plant. Currently, Russia is the 4th largest nuclear energy producer. Rosatom Nuclear Energy State Corporation manages all the nuclear plants in Russia. Nuclear energy is rapidly developing in Russia, with the aim of increasing the total share of nuclear energy from current 16.9% to 23% by 2020. The Russian government plans to allocate 127 billion rubles ($5.42 billion) to a federal program dedicated to the next generation of nuclear energy technology. About 1 trillion rubles ($42.7 billion) is to be allocated from the federal budget to nuclear power and industry development before 2015 [61]

Russia has a free education system guaranteed to all citizens by the Constitution [62]

and has a literacy rate of 99.4%. Entry to higher education is highly competitive. [63]

As a result of great emphasis on science and technology in education, Russian medical, mathematical, scientific, and space and aviation research is generally of a high order.[64]

Russia as a country has more higher education graduates than any other country in Europe. [65]

Norway is also a non OPEC member but rich in resources of oil and gas fields, hydropower, fish, forests and minerals. As a result of it prudent of its management of it strategic resource, Norwegians enjoy the second highest GDP per-capita (after Luxembourg) and third highest GDP (PPP) per-capita in the world. Norway maintained first place in the world in the UNDP Human Development Index (HDI) for six consecutive years (2001–2006 [66] and then reclaimed this position in 2009. [67

Norwegian export revenues from oil and gas have risen to 45% of total exports and constitute more than 20% of the GDP. [68 Norway is the world's 7th largest oil exporter and 3rd largest gas exporter but is not an OPEC member. To reduce over-heating from oil money and the uncertainty from the oil income volatility, and to save money for an aging population, the Norwegian state started in 1995 to save petroleum income (taxes, dividends, licensing, sales) in a sovereign wealth fund ("Government Pension Fund — Global"). This also reduces the boom and bust cycle associated with raw material production and the marginalization of non-oil industry.

By January 2006, the Government Pension Fund of Norway fund had reached a value of USD 200 billion. During the first half of 2007, the pension fund became the largest fund in Europe, with assets of about USD 300 billion (equivalent to over USD 62,000 per capita). The savings equal the Norwegian GDP and are the largest capital reserve per capita of any nation as of April 2007. Projections indicate that the Norwegian pension fund may become the largest capital fund in the world. Currently it is the second-largest state-owned sovereign wealth fund, second only to the Abu Dhabi Investment Authority; Conservative estimates tell that the fund may reach

USD 800–900 billion by 2017. As of November 2009, the size of the fund is approximately USD 455 billion, and it controls approximately 1.25% of all listed shares in Europe and more than 1% of all the publicly traded shares in the world. [69

Conclusion & Recommendation:

In conclusion, while some members of OPEC have managed their strategic resources adequately for the benefit of its citizenry, others has mismanaged their own strategic resources through wild spread corruption and maladministration at the detriment of its people.

Concerted effort must be put in place to ensure the realization of OPEC’S mandate, through a united front among member nations. While recommending transparency and accountability as a veritable tool for the management of its strategic resource, collaborative efforts with citizen groups monitoring the management and allocation of oil wealth is equally necessary. This could include the development of revenue oversight mechanisms involving both government and civil society in the management and allocation of oil revenues and also publish the results of regular independent audits of national oil companies with a view to ensuring accountability.

[70] Diversification of the economy should be intensified, while Investment into priority social sectors, most especially education, health, and the development of capable institutions should be encouraged since some of these strategic resources are exhaustible adequate provision should be made for the future generation.

References:

1. A Brief History of OPEC www.opec.org/aboutus/history/history.htm

2. Ibid3. Ibid

4. Ibid

5. The Statute of the organization of the Petroleum Exporting Countries (Chapter I, Article 2) www.opec.org/library/opec%20statute/pdf/os.pdg

6. Ibid

7. Ibid

8. ibid

9. Ibid

10. Quotation Definition www.wikipedia.org

11. The Statute of the organization of the Petroleum Exporting Countries (Chapter I, Article 2) www.opec.org/library/opec%20statute/pdf/os.pdg

12. Hammes, David and Wills, Douglas. “ Black Gold: The End of Breton Woods and the Oil-Price Shocks of the 1970s,” The Independent Review, v. IX, n. 4, spring 2005. pp. 501-511.

13. BW Online| Is OPEC About to Lose Control of the Spigot ? January 20, 2003 www.businessweek.com/magazine/content/03b3816074.htm

14. Speech by Minister of Petroleum and Mineral Resources Ali Al-Naimi: Saudi oil policy: stability with strength.

www.saudiembassy.nt/1999news/statement/speechdeatial.asp?cIndex=327

15. Washington diary: Oil addiction http://news.bbc.co.uk/2/hi/americas/7486705.stm 16. Saudis Vow to Ignore OPEC Decision to Cut Production www.nytimes.com/2008/11/business/worldbusiness/11oil.html

17. Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (Bradford: 1993)

18. ibid

19. Is OPEC Losing Control Over Oil Price? htt://english.aljazeera.english/archive?archiveId=6664 Al Jazeera English - Archive

20. Washington diary: Oil addiction http://news.bbc.co.uk/2/hi/americas/7486705.stm 21. Iraq: Baghdad Moves to Euro www.rferl.org/features/2000/11/01112000160846.asp 22. Iran's euro-denominated oil bourse to open in March: US Dollar Crisis on the Horizon www.globalresearch.ca/index.php?context=viewArticles&code=CLA20060210&articlesid1937

23. Bloomberg.com: Latin America www.blomberg.com/apps/news?=20601086&sid=aGBuWpZ19cPI

24. Saudis Vow to Ignore OPEC Decision to Cut Production www.nytimes.com/2008/11/business/11oil.html

25. On site renewable energy options http://www.icax.co.uk/alternative_energy.html 26. Oxford Dictionary http://www.askoxford.com/results/?view=dict&freeluv

27. Alternative Energy entry WorldNet.

28. Term Glossary www.rtcc.org /2007/html/glossary/html

29. Glossary www.nrdc.org/reference/glosarry/html

30. Alexander Graham Bell Prizes for the Inventor: Some of the Problems Awaiting Solution. ( National Geographic Society. 1917 ) p. 133. http://books.google.com/books/pdf/The_National_Geographic_Magazine.pdf?id=qBYSAAAAYAAJ&output=pdf&sig=ACfU3U2uIWshrshwvn-fwtHGhT5lzFHH4A. Retrieved 2008-12-14. Lay summary. "In relation to coal and oil, the world's annual consumption has become so enormous that we are now actually within measurable distance of the end of the supply. What shall we do when we have no more coal or oil! .... There is, however, one other source of fuel supply which may perhaps this problem of the future. Alcohol makes a beautiful, clean and efficient fuel, and where not intended for human consumption can be manufactured very cheaply ... from corn stalks and in fact from almost any vegetable matter capable of fermentation."

31. Renewable Fuels Association "Industry Statistics: Annual World Ethanol Production by Country".. http://www.ethanolrfa.org/industry/statistics/#E. Retrieved 2008-05-02

32. Macedo Isaias, M. Lima Verde Leal and J. Azevedo Ramos da Silva "Assessment of greenhouse gas emissions in the production and use of fuel ethanol in Brazil" (Secretariat of the Environment, Government of the State of São Paulo. 2004) http://www.eners.ch/plateforme/medias/macedo_2004.pdf. Retrieved 2008-05-09

33. Daniel Budny and Paulo Sotero, "Brazil Institute Special Report: The Global Dynamics of Biofuels" (Brazil Institute of the Woodrow Wilson Center. 2007-04) http://www.wilsoncenter.org/topics/pubs/Brazil_SR_e3.pdf. Retrieved 2008-05-03

34. Bruce Upbin Greenhouse Stocks. http://www.forbes.com/forbes/2007/1224/064.html. Retrieved 2007-12-24 (2007-12-24

35. http://www.saudinf.com/main/e1.htm

36. Six New Economic cities in Saudi Arabia www.sagia.sa

37. Construction boom of Saudi Arabia and the UAE www.professionaltcdtrade.com

38. Philips' Modern School Atlas, 1987, 1983 GNP per capita figures are quoted in a list

39. United Nations Economic & Social Council, " Libyan Arab Jamahiriya Report" , (Office of the United Nations High Commissioner for Human Rights. February 16, 1996), Accessed July 14, 2006. www.unhcr.ch

40. Reuters Africa Libya's Jobless Rate at 20.7 Percent,. (March 2, 2009 Accessed March 2, 2009) www.reuters.com

41. The World Factbook, "Economy - Libya", (CIA World Factbook. 2006 Accessed July 14, 2006) www.factbook.com

42. Reuters, "Libya to start WTO membership talks" (Trade Law Centre for Southern Africa, July 28, 2004 Accessed July 16, 2006) www.reuters.com

43. FDI Reuters “Africa Libya expects nearly $2 billion in new July 24, 2009 “ www.reuters.com (Accessed July 27, 2009)

44. Watts Michael, State, Oil and Agriculture in Nigeria, Berkeley, 1987. Retrieved February 22, 2007

45 ibid

46. AP Press International Nigeria, Military Faces Daunting Challenges. (AP Press International February 22, 2007. March 3, 1984) www.appressint.com

47. The Globe and Mail “Nigeria stays calms as leader toppled in bloodless coup” , www.globemail.com (The Globe and Mail August 28, 1985. )

48. Diamond, Larry, Kirk-Greene Anthoiny, Oyeleye Oyediran, Transition without End: Nigerian Politics and Civil Society under Babangida. (Boulder: Lynne Rienner Publishers, 1997)

49. Nigerian Lawyer: Abacha accounts apparently in Switzerland, Luxembourg, France, and Germany", (AP press, January 10, 2000)

50. Williams, Lizzie Nigeria: The Bradt Travel Guide. (New York Bradt Travel Guides. 2008 ) p. 26.

51 Boele, R., Fabig, H., Wheeler, D. Shell, Nigeria and the Ogoni: A Study in Unsustainable Development: I. The Story of Shell, Nigeria and the Ogoni People- Environment, Economy, Relationships: Conflict and Prospects for Resolution. Sustainable Development.(Surrey: John Wiley & Sons, 2001) 74-86

52. Carter, P. U.S. Department of State Remarks on U.S. and International Cooperation in the Niger River Delta. , http://www.state.gov/p/af/rls/rm/82010.htm (2007).

53. Junger, S. Blood Oil. http://www.vanityfair.com/politics/features/2007/02/junger200702

54. ibid

55. ibid

56. ibid

57. Egan, J. Troubled Times in the Niger Delta., http://news.bbc.co.uk/2/hi/programes/crossing-continents/325300.stm Retrieved May 8, 2009

58. Junger, S. (2007). Blood Oil. Vanity Fair.com. Retrieved May 2, 2007, from http://www.vanityfair.com/politics/features/2007/02/junger200702

59. Gary, Ian & Karl, Terry L. Bottom of the Barrel: Africa’s Oil Boom and the poor ( Baltimore: Catholic Relief services, 2003)

60. http://en.wikipedia.org/wiki/Russia#Economy 61. RIA Novosti http://en.rian.ru/russia/20070920/80058850.html

62. The Constitution of the Russian Federation". (Article 43 §1). http://www.constitution.ru/en/10003000-03.htm. Retrieved 2007-12-27

63. Smolentseva, A. "Bridging the Gap Between Higher and Secondary Education in Russia". http://www.bc.edu/bc_org/avp/soe/cihe/newsletter/News19/text13.html. Retrieved 2007-12-27.

64. "Russia Country Guide". EUbusiness.com. http://www.eubusiness.com/Russia/russia-country-guide/. Retrieved 2007-12-27

65. "CEE Biweekly (page 6)" UNESCO Institute for Statistics, UniCredit New Europe Research Network. http://www.unicredit-tiriac.ro/pdf/CEE-Biweekly_07-05-24.pdf. Retrieved 2008-03-28.

66. "Human development indices 2008". Human Development Report. hdr.undp.org. http://hdr.undp.org/en/media/HDI_2008_EN_Tables.pdf. Retrieved 2009-05-12

67. Ibid

68. "This is Norway — Secondary Industries" Norway's Bureau of Statistics. http://www.ssb.no/english/subjects/00/norge_en/sekundaer_en.pdf. Retrieved 2008-06-20

69. Ibid

70. Gillies, Alexandra; Reforming corruption out of Nigerian oil? Part one: Mapping corruption risks in oil sector governance (U4 Brief 2009) P.2