Is OPEC a viable move for Ghana?

By 2010/2011 Ghana will join the list of nations producing the much converted nature's gift to Africa and the world at large, 'Crude Oil'. This is regardless of its crude quantity per-day.

Though various issues have sprung up, an important aspect being overlooked is whether the Organization of Petroleum Exporting Countries (OPEC) is of benefit to Ghana. What does OPEC do? Simple! It basically tries or influences the price of crude oil globally. It is a force to reckon in the petroleum industry.

Currently OPEC has 12 members namely, Saudi Arabia, Libya, Kuwait, Iran, Iraq, Nigeria, Angola UAE, Venezuela, Qatar, and Indonesia. OPEC was formed by Venezuela during the oil boom of the 1960s.

However its correct share reserves are not correctly known since from time of inception in the 1960s oil reserves increased from 67% -70% by 1993 and declined to 40% in the early 1990s.

Ghana outside OPEC
Being a small nation, Ghana cannot dictate the global crude oil prices alone. Thinking this way would only bring fringe benefits to Ghana. While its influence on the globally oil market would also be less than a fraction of whatever price oil would be by 2010-2011.

Ghana in OPEC
By joining OPEC, Ghana would lead its interest protected rising from its oil production. The organization will increase its development assistance to Ghana; this will lead to subsidy/ reduce oil revenue reduction that usually follows production cuts. This is the type of quota mechanism OPEC members derive benefits from.

What Ghana Should Watch Out For
Despite the benefits, it is important for Ghana in the global oil market/ industry. This also includes the murky international politics synonymous with the oil industry. OPEC has its own issues, reserves has not been stable in many members nations.

The industry is rapidly changing and very capital intensive, this leads to the problem debt OPEC members owe foreign multi-nationals. Quota Violations

OPEC members have been long known to violate oil quotas and this weakens the strength and position of the organizations. So far, there is no known mechanism in place to deal with this problem. There are also members who have determined production levels along non OPEC members; whose production are very competitive in the industry.

Production Cuts
The issues on OPEC production cuts are that its favours developed member countries. Angola and Nigeria and others that are not well developed, face the problem of having to raise their output for the sake of revenue.

This often places them at a disadvantage. Its should be noted, that when quotas are obeyed by countries such as Nigeria and Angola etc (less developed nations), development affairs in their home states suffers; there by increasing levels of poverty.

OPEC Lost Power
That OPEC has/is loosing its influence on the global oil industry /market is no understatement. OPEC could not stop the crude slump of $140.00 per-barrel -$75.00 per-barrel last year.

The slump continued further crude was selling for below $45.00. Also the extraordinary meeting last November 2008 that allowed 1.5 million barrels per-day did not solve the problem. Though there was also the global economic melt down same period.

Furthermore, OPEC countries might not benefit as non-OPEC member have their own methods of having a stake in oil prices.

Ghana in Global Oil Market
Though Ghana's crude has been linked to that of Nigeria, this means that the oil in Ghana is of quality and able to generate the much needed foreign exchange revenue. It also means that Ghana can sell irrespective of its joining OPEC.

The question here is thus, are countries will to pay more for oil when there are OPEC members whose crude oil might just be selling for fraction less than that of non OPEC members.

In addition, to call the bluff of OPEC; the amount of barrels per day it will be able to produce will see it having a due advantage. Joining OPEC will see its oil production fluctuate as OPEC members often se their quotas increased or reduced. This instability will more or less rub the nation of the much need revenues and lead to growth and development being delayed.

OPEC THREAT S
Multi –nationals emerging from countries such as China and India among other such countries contend with OPEC. These sort of corporations expand their operating bases to other countries (Out sourcing). They have joint exploration agreement with OPEC and non OPEC members. This acts as a big threat to OPEC powers because of unstable oil prices that arises from this sort of practices.

If Ghana for example, engages a corporation for say china, it is bound to reap from that agreement because china has continued to pledge massive financial support as well as infrastructural support to countries such as Ghana.

Hence, Ghana will witness rapid development in its oil sector due to foreign expertise and funding, it will also witness wide spread development for the oil communities and increased revenue to the state.

From the changes in the dynamic crude market/ industry Ghana to a large extent can call the bluff of OPEC but it will need to tread wisely and cautiously in the messy oil politics that has the big nations and multi-nationals corporation holding sway.