OPEC is an intergovernmental organization of twelve developing countries made up of
AlgeriaAlgeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
,
AngolaAngola, officially the Republic of Angola , is a country in south-central Africa bordered by Namibia on the south, the Democratic Republic of the Congo on the north, and Zambia on the east; its west coast is on the Atlantic Ocean with Luanda as its capital city...
,
EcuadorEcuador , officially the Republic of Ecuador is a representative democratic republic in South America, bordered by Colombia on the north, Peru on the east and south, and by the Pacific Ocean to the west. It is one of only two countries in South America, along with Chile, that do not have a border...
,
IranIran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
,
IraqIraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
,
KuwaitThe State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...
,
LibyaLibya is an African country in the Maghreb region of North Africa bordered by the Mediterranean Sea to the north, Egypt to the east, Sudan to the southeast, Chad and Niger to the south, and Algeria and Tunisia to the west....
,
NigeriaNigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...
,
QatarQatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
,
Saudi ArabiaThe Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
, the
United Arab EmiratesThe United Arab Emirates, abbreviated as the UAE, or shortened to "the Emirates", is a state situated in the southeast of the Arabian Peninsula in Western Asia on the Persian Gulf, bordering Oman, and Saudi Arabia, and sharing sea borders with Iraq, Kuwait, Bahrain, Qatar, and Iran.The UAE is a...
, and
VenezuelaVenezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
. OPEC has maintained its headquarters in
ViennaVienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...
since 1965, and hosts regular meetings among the oil ministers of its Member Countries.
IndonesiaIndonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
withdrew in 2008 after it became a net importer of oil, but stated it would likely return if it became a net exporter again.
According to its statutes, one of the principal goals is the determination of the best means for safeguarding the organization's interests, individually and collectively. It also pursues ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations; giving due regard at all times to the interests of the producing nations and to the necessity of securing a steady income to the producing countries; an efficient and regular supply of
petroleumPetroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
to consuming nations, and a fair return on their capital to those investing in the petroleum industry.
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 WarThe Yom Kippur War, Ramadan War or October War , also known as the 1973 Arab-Israeli War and the Fourth Arab-Israeli War, was fought from October 6 to 25, 1973, between Israel and a coalition of Arab states led by Egypt and Syria...
by implementing oil embargoes and initiating the
1973 oil crisisThe 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC proclaimed an oil embargo. This was "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With the...
. 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 changesThe Nixon Shock was a series of economic measures taken by U.S. President Richard Nixon in 1971 including unilaterally cancelling the direct convertibility of the United States dollar to gold that essentially ended the existing Bretton Woods system of international financial exchange.-Background:By...
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.”
OPEC's ability to control the price of oil has diminished somewhat since then, due to the subsequent discovery and development of large
oil reservesThe total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is...
in
AlaskaAlaska is the largest state in the United States by area. It is situated in the northwest extremity of the North American continent, with Canada to the east, the Arctic Ocean to the north, and the Pacific Ocean to the west and south, with Russia further west across the Bering Strait...
, the
North SeaIn the southwest, beyond the Straits of Dover, the North Sea becomes the English Channel connecting to the Atlantic Ocean. In the east, it connects to the Baltic Sea via the Skagerrak and Kattegat, narrow straits that separate Denmark from Norway and Sweden respectively...
,
CanadaCanada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, the
Gulf of MexicoThe Gulf of Mexico is a partially landlocked ocean basin largely surrounded by the North American continent and the island of Cuba. It is bounded on the northeast, north and northwest by the Gulf Coast of the United States, on the southwest and south by Mexico, and on the southeast by Cuba. In...
, the opening up of Russia, and market modernization. As of November 2010, OPEC members collectively hold 79% of world crude oil reserves and 44% of the world’s crude oil production, affording them considerable control over the global market. The next largest group of producers, members of the OECD and the
Post-Soviet statesThe post-Soviet states, also commonly known as the Former Soviet Union or former Soviet republics, are the 15 independent states that split off from the Union of Soviet Socialist Republics in its dissolution in December 1991...
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.
History
Venezuela and Iran were the first countries to move towards the establishment of OPEC in the 1960s by approaching Iraq, Kuwait and Saudi Arabia in 1949, suggesting that they exchange views and explore avenues for regular and closer communication among petroleum-producing nations. The founding members are Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Later members include Algeria, Ecuador, Gabon, Indonesia, Libya, Qatar, Nigeria, and the United Arab Emirates.
In 10–14 September 1960, at the initiative of the Venezuelan Energy and Mines minister
Juan Pablo Pérez AlfonzoJuan Pablo Pérez Alfonso , was a prominent Venezuelan diplomat, politician and lawyer primarily responsible for the inception and creation of OPEC.-Early career:...
and the Saudi Arabian Energy and Mines minister
Abdullah al-TarikiAbdullah ibn Hamoud al-Tariki was a Saudi politician and government official. He was the first Saudi oil minister appointed by King Saud, and co-founder of Organization of Petroleum Exporting Countries along with Venezuelan Juan Pablo Pérez Alfonzo.-Early life:Tariki was born in 1918 in Al Zulfi...
, the governments of Iraq, Iran, Kuwait, Saudi Arabia and Venezuela met in
BaghdadBaghdad is the capital of Iraq, as well as the coterminous Baghdad Governorate. The population of Baghdad in 2011 is approximately 7,216,040...
to discuss ways to increase the price of the crude oil produced by their respective countries.
OPEC was founded to unify and coordinate members' petroleum policies. Original OPEC members include Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Between 1960 and 1975, the organization expanded to include
QatarQatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
(1961),
IndonesiaIndonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
(1962),
LibyaLibya is an African country in the Maghreb region of North Africa bordered by the Mediterranean Sea to the north, Egypt to the east, Sudan to the southeast, Chad and Niger to the south, and Algeria and Tunisia to the west....
(1962), the
United Arab EmiratesThe United Arab Emirates, abbreviated as the UAE, or shortened to "the Emirates", is a state situated in the southeast of the Arabian Peninsula in Western Asia on the Persian Gulf, bordering Oman, and Saudi Arabia, and sharing sea borders with Iraq, Kuwait, Bahrain, Qatar, and Iran.The UAE is a...
(1967),
AlgeriaAlgeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
(1969), and
NigeriaNigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...
(1971).
EcuadorEcuador , officially the Republic of Ecuador is a representative democratic republic in South America, bordered by Colombia on the north, Peru on the east and south, and by the Pacific Ocean to the west. It is one of only two countries in South America, along with Chile, that do not have a border...
and
GabonGabon , officially the Gabonese Republic is a state in west central Africa sharing borders with Equatorial Guinea to the northwest, Cameroon to the north, and with the Republic of the Congo curving around the east and south. The Gulf of Guinea, an arm of the Atlantic Ocean is to the west...
were early members of OPEC, but Ecuador withdrew on December 31, 1992 because it was unwilling or unable to pay a $2 million membership fee and felt that it needed to produce more oil than it was allowed to under the OPEC quota, although it rejoined in October 2007. Similar concerns prompted Gabon to suspend membership in January 1995.
AngolaAngola, officially the Republic of Angola , is a country in south-central Africa bordered by Namibia on the south, the Democratic Republic of the Congo on the north, and Zambia on the east; its west coast is on the Atlantic Ocean with Luanda as its capital city...
joined on the first day of 2007. Norway and Russia have attended OPEC meetings as observers. Indicating that OPEC is not averse to further expansion, Mohammed Barkindo, OPEC's Secretary General, recently asked Sudan to join. Iraq remains a member of OPEC, but Iraqi production has not been a part of any OPEC quota agreements since March 1998.
In May 2008, Indonesia announced that it would leave OPEC when its membership expired at the end of that year, having become a net importer of oil and being unable to meet its
production quotaA production quota is a goal for the production of a good. 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...
. A statement released by OPEC on 10 September 2008 confirmed Indonesia's withdrawal, noting that it "regretfully accepted the wish of Indonesia to suspend its full Membership in the Organization and recorded its hope that the Country would be in a position to rejoin the Organization in the not too distant future." Indonesia is still exporting light,
sweet crude oilSweet crude oil is a type of petroleum. Petroleum is considered "sweet" if it contains less than 0.5% sulfur, compared to a higher level of sulfur in sour crude oil. Sweet crude oil contains small amounts of hydrogen sulfide and carbon dioxide. High quality, low sulfur crude oil is commonly used...
and importing heavier, more sour crude oil to take advantage of price differentials (import is greater than export) due to
Air pollutionAir pollution is the introduction of chemicals, particulate matter, or biological materials that cause harm or discomfort to humans or other living organisms, or cause damage to the natural environment or built environment, into the atmosphere....
in Indonesia still being low as compared to China or The United States.
1973 Oil Embargo
The 1973 Oil Embargo happened in October following the United States' and Western Europe's support of Israel against Arab nations in the
Yom Kippur WarThe Yom Kippur War, Ramadan War or October War , also known as the 1973 Arab-Israeli War and the Fourth Arab-Israeli War, was fought from October 6 to 25, 1973, between Israel and a coalition of Arab states led by Egypt and Syria...
of 1973. Iran being chief among those angered by western support of Israel. As a nation Iran stopped providing oil to the United States and Western Europe. In doing so, the oil pricing for the United States went from 3 dollars a barrel to 12 dollars a barrel, spurring gas rationing. U.S. stations put a limit both on the amount of gas that could be dispensed, closed on Sundays, and limited the days it could be purchased based on licence plates. For example if the last digit on a car's license plate was even gas could only be purchased on even days. Prices continued to rise after the Embargo ended.
The Oil Embargo of 1973 had a lasting effect on the United States. U.S. citizens began purchasing smaller cars that were more fuel efficient. The embargo also forced America to reevaluate the cost and source of energy which previously receive little consideration. The Federal government got involved first with President Nixion recommending citizens reduce their speed for the sake of conservation, and later Congress issuing a 55mph limit at the end of 1973. This changed decreased consumption as well as crash fatalities. Daylight savings time was extended year round to reduce electrical use in the American home. Nixon also formed the Energy Department as a cabinet office. People were asked to decrease their thermostats to 65 degrees and factories changed their main energy supply to coal.
One of the most lasting effects of the Oil Embargo of 1973 was an economic recession throughout the world. Unemployment flew to the highest percentage on record while inflation did the same. In Detroit, consumer interest in large gas guzzling vehicles fell and production dropped. Although the embargo only lasted one year, oil prices had quadrupled and a new era of international relations was opened. Arab nations discovered that their oil could be used as both a political and economic weapon against other nations.
1975 hostage incident
On 21 December 1975
Ahmed Zaki YamaniAhmed Zaki Yamani is a Saudi Arabian politician who was Minister of Oil and Mineral Resources from 1962 until 1986 for his country, and a minister in OPEC for 25 years....
and the other oil ministers of the members of OPEC were taken hostage by a six-person team led by terrorist
Carlos the JackalIlich Ramírez Sánchez , better known as Carlos the Jackal, is a Venezuelan pro-Palestinian currently serving a life sentence in France for shooting to death two French secret agents and a Lebanese informer in 1975....
(which included
Gabriele Kröcher-TiedemannGabriele Kröcher-Tiedemann was a West German political militant associated with Movement 2 June and the Second Generation Red Army Faction. She was the wife of the J2M terrorist Norbert Kröcher.-Early life:...
and
Hans-Joachim KleinHans-Joachim Klein is a former member of the German left-wing militant group Revolutionary Cells . In 1975 Klein participated in an attack on OPEC headquarters in Vienna organized by Carlos the Jackal, in which he was seriously injured. He publicly renounced political violence two years later...
), in Vienna, Austria, where the ministers were attending a meeting at the OPEC headquarters. Carlos planned to take over the conference by force and kidnap all eleven oil ministers in attendance and hold them for ransom, with the exception of Ahmed Zaki Yamani and Iran's
Jamshid AmuzegarDr. Jamshid Amouzegar is an Iranian economist, artist and politician who was Prime Minister of Iran from 7 August 1977 to 27 August 1978 when he resigned. Prior to that, he was Minister of Interior and Minister of Finance in the cabinet of Amir-Abbas Hoveida...
, who were to be executed.
Carlos led his six-person team past two police officers in the building's lobby and up to the first floor, where a police officer, an Iraqi plain clothes security guard and a young Libyan economist were shot dead.
As Carlos entered the conference room and fired shots in the ceiling, the delegates ducked under the table. The terrorists searched for Ahmed Zaki Yamani and then divided the sixty-three hostages into groups. Delegates of friendly countries were moved toward the door, 'neutrals' were placed in the centre of the room and the 'enemies' were placed along the back wall, next to a stack of explosives. This last group included those from Saudi Arabia, Iran, Qatar and the UAE. Carlos demanded a bus to be provided to take his group and the hostages to the airport, where a DC-9 airplane and crew would be waiting. In the meantime, Carlos briefed Ahmed Zaki Yamani on his plan to eventually fly to Aden, where Yamani and the Iranian minister would be killed.
The bus was provided the following morning at 6.40 as requested and 42 hostages were boarded and taken to the airport. The group was airborne just after 9.00 and explosives placed under Yamani's seat. The plane first stopped in Algiers, where Carlos left the plane to meet with the Algierian Foreign minister. All 30 non-Arab hostages were released, excluding Amuzegar.
The refueled plane left for
TripoliTripoli is the capital and largest city in Libya. It is also known as Western Tripoli , to distinguish it from Tripoli, Lebanon. It is affectionately called The Mermaid of the Mediterranean , describing its turquoise waters and its whitewashed buildings. Tripoli is a Greek name that means "Three...
where there was trouble in acquiring another plane as had been planned. Carlos decided to instead return to Algiers and change to a Boeing 707, a plane large enough to fly to Baghdad nonstop. Ten more hostages were released before leaving.
With only 10 hostages remaining, the Boeing 707 left for Algiers and arrived at 3.40 a.m. After leaving the plane to meet with the Algerians, Carlos talked with his colleagues in the front cabin of the plane and then told Yamani and Amouzegar that they would be released at mid-day. Carlos was then called from the plane a second time and returned after two hours.
At this second meeting it is believed that Carlos held a phone conversation with Algerian President Houari Boumédienne who informed Carlos that the oil ministers' deaths would result in an attack on the plane. Yamani's biography suggests that the Algerians had used a covert listening device on the front of the aircraft to overhear the earlier conversation between the terrorists, and found that Carlos had in fact still planned to murder the two oil ministers. Boumédienne must also have offered Carlos asylum at this time and possibly financial compensation for failing to complete his assignment.
On returning to the plane Carlos stood before Yamani and Amuzegar and expressed his regret at not being able to murder them. He then told the hostages that he and his comrades would leave the plane after which they would all be free. After waiting for the terrorists to leave, Yamani and the other nine hostages followed and were taken to the airport by Algerian Foreign Minister
Abdelaziz BouteflikaAbdelaziz Bouteflika is the ninth President of Algeria. He has been in office since 1999. He continued emergency rule until 24 February 2011, and presided over the end of the bloody Algerian Civil War in 2002...
. The terrorists were present in the next lounge and Khalid, the Palestinian, asked to speak to Yamani. As his hand reached for his coat, Khalid was surrounded by guards and a gun was found concealed in a holster.
Some time after the attack it was revealed by Carlos' accomplices that the operation was commanded by Wadi Haddad, a Palestinian terrorist and founder of the Popular Front for the Liberation of Palestine. It was also claimed that the idea and funding came from an Arab president, widely thought to be
Muammar al-GaddafiMuammar Muhammad Abu Minyar Gaddafi or "September 1942" 20 October 2011), commonly known as Muammar Gaddafi or Colonel Gaddafi, was the official ruler of the Libyan Arab Republic from 1969 to 1977 and then the "Brother Leader" of the Libyan Arab Jamahiriya from 1977 to 2011.He seized power in a...
.
In the years following the OPEC raid,
Bassam Abu SharifBassam Abu Sharif is a former senior adviser to the late Yasser Arafat and press officer of the Palestine Liberation Organization ....
and Klein claimed that Carlos had received a large sum of money in exchange for the safe release of the Arab hostages and had kept it for his personal use. There is still some uncertainty regarding the amount that changed hands but it is believed to be between US$20 million and US$50 million. The source of the money is also uncertain, but, according to Klein, it was from "an Arab president." Carlos later told his lawyers that the money was paid by the Saudis on behalf of the Iranians and was, "diverted en route and lost by the Revolution".
The 1980s oil gluts
After 1980, oil prices began a six-year decline that culminated with a 46 percent price drop in 1986. This was due to reduced demand and over-production that produced a glut on the world market. Around this period, Iraq also increased its oil production to help pay for the
Iran-Iraq WarThe Iran–Iraq War was an armed conflict between the armed forces of Iraq and Iran, lasting from September 1980 to August 1988, making it the longest conventional war of the twentieth century...
. Overall OPEC lost its unity and thus its net oil export revenues fell in the 1980s.
Responding to war and low prices
Leading up to the 1990-91
Gulf WarThe Persian Gulf War , commonly referred to as simply the Gulf War, was a war waged by a U.N.-authorized coalition force from 34 nations led by the United States, against Iraq in response to Iraq's invasion and annexation of Kuwait.The war is also known under other names, such as the First Gulf...
, Iraqi President
Saddam HusseinSaddam Hussein Abd al-Majid al-Tikriti was the fifth President of Iraq, serving in this capacity from 16 July 1979 until 9 April 2003...
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. Once supply disruption fears that accompanied these conflicts dissipated, oil prices began to slide dramatically.
After oil prices slumped at around $15 a barrel in the late 1990s, concerted diplomacy, sometimes attributed to Venezuela’s president
Hugo ChávezHugo Rafael Chávez Frías is the 56th and current President of Venezuela, having held that position since 1999. He was formerly the leader of the Fifth Republic Movement political party from its foundation in 1997 until 2007, when he became the leader of the United Socialist Party of Venezuela...
, achieved a coordinated scaling back of oil production beginning in 1998. In 2000, Chávez hosted the first summit of heads of state of OPEC in 25 years. The next year, however, the
September 11, 2001 attacksThe September 11 attacks The September 11 attacks The September 11 attacks (also referred to as September 11, September 11th or 9/119/11 is pronounced "nine eleven". The slash is not part of the pronunciation...
against the United States, the following invasion
of AfghanistanThe War in Afghanistan began on October 7, 2001, as the armed forces of the United States of America, the United Kingdom, Australia, and the Afghan United Front launched Operation Enduring Freedom...
, and
2003 invasion of IraqThe 2003 invasion of Iraq , was the start of the conflict known as the Iraq War, or Operation Iraqi Freedom, in which a combined force of troops from the United States, the United Kingdom, Australia and Poland invaded Iraq and toppled the regime of Saddam Hussein in 21 days of major combat operations...
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.
Production disputes
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. 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."
One such production dispute occurred on September 10, 2008, when the Saudis reportedly walked out of OPEC negotiating session where the organization 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.”
OPEC aid
OPEC aid dates from well before the 1973/74 oil price explosion. Kuwait has operated a programme since 1961 (through the
Kuwait Fund for Arab Economic DevelopmentThe Kuwait Fund for Arab Economic Development , commonly known as the Kuwait Fund, is the State of Kuwait’s agency for the provision and administration of financial and technical assistance to developing countries...
). The OPEC fund became a fully fledged permanent international development agency in May 1980.
Current members
OPEC has twelve member countries: six in the Middle East, four in Africa, and two in South America.
| Country |
Region |
Joined OPEC |
Population
(July 2008) |
Area (km²) |
| |
Africa |
1969 |
33,779,668 |
2,381,740 |
| |
Africa |
2007 |
12,531,357 |
1,246,700 |
| |
South America |
2007[Ecuador initially joined in 1973, left in 1992, and rejoined in 2007.] |
13,927,650 |
283,560 |
| |
Middle East |
1960[One of five founder members that attended the first OPEC conference, in September 1960.] |
75,875,224 |
1,648,000 |
| |
Middle East |
1960 |
28,221,180 |
437,072 |
| |
Middle East |
1960 |
2,596,799 |
17,820 |
 Libya |
Africa |
1962 |
6,173,579 |
1,759,540 |
| |
Africa |
1971 |
158,259,000 |
923,768 |
| |
Middle East |
1961 |
824,789 |
11,437 |
| |
Middle East |
1960 |
28,146,656 |
2,149,690 |
| |
Middle East |
1967 |
4,621,399 |
83,600 |
| |
South America |
1960 |
26,414,816 |
912,050 |
| Total |
|
km² |
Former members
| Country |
Region |
Joined OPEC |
Left OPEC |
| |
Africa |
1975 |
1994 |
| |
South East Asia |
1962 |
2009 |
The United States was a
de factoDe facto is a Latin expression that means "concerning fact." In law, it often means "in practice but not necessarily ordained by law" or "in practice or actuality, but not officially established." It is commonly used in contrast to de jure when referring to matters of law, governance, or...
member during its formal occupation of Iraq via the
Coalition Provisional AuthorityThe Coalition Provisional Authority was established as a transitional government following the invasion of Iraq by the United States and its allies, members of the Multi-National Force – Iraq which was formed to oust the government of Saddam Hussein in 2003...
.
Indonesia left OPEC in 2008 because it ceased to be a net exporter of oil. It could not fulfill the demand of its own country's needs, as growth in demand outstripped output. The situation was made worse because of weak legal certainty and corruption that deterred foreign investors from investing in new reserves in Indonesia. In recent times, the government has increased financial incentives for foreign firms to invest in exploration and extraction but has found itself forced to import more supplies from the likes of Iran, Saudi Arabia and Kuwait. Indonesia's departure from OPEC will not likely affect the amount of oil it produces or imports. The country's growing dependence on imports is proving increasingly expensive as global prices soar.
Economics
OPEC is a
swing producerSwing producer is a supplier or a close oligopolistic group of suppliers of any commodity, controlling its global deposits and possessing large spare manufacturing capacity...
and its decisions have had considerable influence on international oil prices. For example, in the 1973 energy crisis some OPEC members refused to ship oil to western countries that had supported
IsraelThe State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
in the
Yom Kippur WarThe Yom Kippur War, Ramadan War or October War , also known as the 1973 Arab-Israeli War and the Fourth Arab-Israeli War, was fought from October 6 to 25, 1973, between Israel and a coalition of Arab states led by Egypt and Syria...
, which Israel had fought against
EgyptEgypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...
and
SyriaSyria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....
. This refusal caused a fourfold increase in the price of oil, which lasted five months, starting on October 17, 1973, and ending on March 18, 1974. OPEC nations then agreed, on January 7, 1975, to raise crude oil prices by 10%. At that time, OPEC nations — including many who had recently nationalized their oil industries — joined the call for a
new international economic orderThe New International Economic Order was a set of proposals put forward during the 1970s by some developing countries through the United Nations Conference on Trade and Development to promote their interests by improving their terms of trade, increasing development assistance, developed-country...
to be initiated by coalitions of primary producers. Concluding the First OPEC Summit in
Algiers' is the capital and largest city of Algeria. According to the 1998 census, the population of the city proper was 1,519,570 and that of the urban agglomeration was 2,135,630. In 2009, the population was about 3,500,000...
they called for stable and just commodity prices, an international food and
agricultureAgriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
program, technology transfer from North to South, and the democratization of the economic system . Overall, the evidence suggests that OPEC did act as a
cartelA cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
when it adopted output rationing in order to maintain price.
According to US government, in 2011 OPEC will break above the $1 trillion mark earnings for the first time at $1.034 trillion and it is beating the $965 billion peak set in 2008.
Sustainability
According to Mikael Höök, who researches the life cycles of oil fields, despite technological advances that increase the productivity of oil wells, the rate of decline of oil fields will eventually increase as time continues. Energy policy expert Joyce Dargay accuses OPEC, along with several other institutions, of drastically under predicting future oil demand by 2030 by more than 25%, a difference of 28 Moilbbl/d or about twice the current amount supplied by Saudi Arabia.
Quotas circa 2005
OPEC Quotas and Production in thousands of barrels per day
| Country | Quota (7/1/05) | Production (1/07) | Capacity |
|
10,099 |
9,800 |
12,500 |
|
894 |
1,360 |
1,430 |
|
1,900 |
1,700 |
1,700 |
|
520 |
500 |
500 |
|
4,110 |
3,700 |
3,750 |
|
|
1,481 |
|
|
2,247 |
2,500 |
2,600 |
|
1,500 |
1,650 |
1,700 |
|
2,306 |
2,250 |
2,250 |
|
726 |
810 |
850 |
|
2,444 |
2,500 |
2,600 |
|
3,225 |
2,340 |
2,450 |
| Total |
29,971 |
29,591 |
30,330 |
External links