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OPEC
"OPEC." Global Issues in Context Online Collection. Detroit: Gale, 2014. Global Issues In
Context. Web. 11 Feb. 2014.
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The Organization of Petroleum Exporting Countries (OPEC) is one of the most powerful and
controversial global organizations in the world. It consists of twelve of the top twenty oil exporting
countries, which together hold nearly four fifths of the world's known oil reserves. Although many
Americans associate OPEC with the Middle East, the organization also includes countries such as
Venezuela, Ecuador, and Nigeria. OPEC's dramatic influence on world petroleum markets has led
many American politicians to call for energy independence from "foreign oil," through the
development of alternative energy sources or by attempting to increase drilling production within
the United States.
OPEC was created in 1960 by five founding member nations: Saudi Arabia, Iraq, Iran, Kuwait, and
Venezuela, which were all developing nations with extensive oil resources that understood the
importance of petroleum to the wealthiest nations of the world. They sought to form an alliance that
would allow them to maintain control of their country's oil reserves, rather than simply selling off
oil rights to global corporations. This arrangement also gave them greater control of oil prices
through coordinated production; at the time of OPEC's formation, the founding members controlled
just over one fourth of the world's oil supply. By limiting the amount of oil they produced, they
could potentially cause the price of oil to increase, thereby increasing their own profits.
As the organization grew in size, OPEC's power as a controlling force in the petroleum industry
became clear. In 1973, Arab members of OPEC placed an embargo on oil exports to the United
States, partly in response to U.S. support of Israel in its territorial dispute against Palestinians and
other Arab nations of the Middle East. OPEC members also sought to cut production and thus raise
oil prices for all their exports in an attempt to bolster their generally weak economies. The embargo
and production cut had a dramatic impact on oil prices, causing the cost of oil—and petroleumbased products like gasoline—to triple almost overnight. The crisis was fairly short-lived, though
oil prices remained elevated throughout the 1970s, and spiked in 1979 when one of OPEC's key
members, Iran, experienced a revolution that derailed the country's oil production for a time.
Oil prices fell throughout the 1980s and stabilized during the 1990s, but began to soar at the end of
the century. Between 2003 and 2008, the price of oil quintupled, reaching nearly $150 per barrel.
Although OPEC has often been blamed as the main culprit by consumers in the developed world,
its member nations as a whole increased production levels between 2003 and 2006 in an attempt to
ease the price spike. The group agreed to cut production in 2008 after prices finally began to fall,
but Saudi Arabia—by far the largest oil exporter in the organization—vowed to continue its high
production levels to satisfy global demand.
At a 2011 meeting, OPEC members could not agree on a plan to raise production levels in the face
of continued high oil prices. Some members argued that the global supply was adequate and that
the high prices were the result of other factors. Indeed, at a time when OPEC production remained
fairly steady, oil prices rose and fell dramatically; one possible explanation is the interference of
commodities speculators, who had recently been granted greater access to participate in oil
markets.
Politicians in the United States have frequently criticized OPEC for allowing politics to play a role
in their decisions. Some OPEC nations, such as Venezuela and Iran, have poor relations with the
United States; indeed, the United States has maintained a trade embargo against Iran for more than
fifteen years. When U.S. Special Forces killed terrorist Osama bin Laden in Pakistan in 2011,
Venezuela was the only country to officially condemn the action. In contrast, OPEC's most
important oil producer, Saudi Arabia, has maintained close economic relations with the United
States.
Another OPEC rival of the United States was Libya, led by longtime dictator Muammar Gaddafi.
In 2011, when Libyan citizens began to protest the Gaddafi regime and call for a democratic
government, the leader destroyed his own country's largest refineries and essentially shut down its
oil industry—presumably to punish foreign nations that relied on its exports. Gaddafi was
overthrown and killed in late 2011, and the country's new leaders quickly went about the business
of once again ramping up oil production.
Some analysts have argued that OPEC is already operating near peak production, and that as its oil
reserves decline, so too will its influence on the world oil market. The recent success of other, nonOPEC oil producers—including Russia and Canada—have also led some to suggest that OPEC's
importance as a "swing supplier" is fading. However, world oil consumption continues to grow
each year, and without affordable alternative energy solutions, OPEC seems likely to play a key
role in the oil market for decades to come. In fact, far from declining, OPEC's crude oil production
reached 30,667 million barrels a day in December 2011, its highest level in three years.
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Gale Document Number:CP3208520412