Organization of the Petroleum Exporting Countries (OPEC)

In 1960, the Organization of the Petroleum Exporting Countries (OPEC) was founded as an intergovernmental organization to work out a uniform policy aimed at [Page 1065]changing the unequal concession agreements, increasing petroleum revenues, and developing national petroleum industries. OPEC was founded on the initiative of Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela. Qatar, Indonesia, Libya, Abu Dhabi (United Arab Emirates), Nigeria, and Algeria subsequently became members. OPEC members produce about 40% of world's crude oil and own two thirds of the world's oil reserves. Saudi Arabia has the largest reserve and is the largest producer among OPEC members.

OPEC did not have significant effect in the first decade of its existence. Concessions in the era of imperialism granted to foreign corporations, under specific terms, rights for the exploitation, processing, and marketing of natural resources of certain countries. The corporations that won such concessions developed extensively, enabling the imperialist powers to ensure raw materials for themselves and to preserve their economic influence in developing countries.

In late 1960s and early 1970s, royalty agreements were reached that defined the participation of oil-producing countries in petroleum production. The conditions of negotiated agreements became increasingly favorable to the oil-producing countries. In a number of countries, the property of foreign companies was nationalized completely, as in Iraq in 1972, or partially in other countries. Many countries increased their ownership of production to 25%, to 51%, and some, like Kuwait, to 60%. Libya succeeded in its negotiation with Occidental Oil Company.

Between 1971 and 1974, the world's capitalist economies were in upheaval; an energy crisis caused by systemic shortages of petroleum had emerged. A radical breakdown in the colonial monopolistic system contributed to the crisis. The oil prices went up nearly fivefold in that period. OPEC had become powerful enough to oppose the international oil cartel. Their power arose from growing national liberation movements, the nationalization of oil companies in Algeria, Libya, and Iraq, and the sharp rise in demand on the world capitalist market for energy sources.

By 1973, OPEC was making decisions that before had been made exclusively by foreign monopolies, particularly decisions about prices and distribution of profit between producing countries and monopolies from the extraction of crude oil.

During the military action in the Middle East in October 1973, the Arab countries, at Libya's urging, imposed a selective embargo on petroleum exports to the United States and certain capitalist countries. Shortly thereafter, the OPEC countries quadrupled their prices for oil. The capitalist countries united their effort to fight OPEC and force a split in its ranks. These measures, together with the slow recovery of capitalist economies, made it difficult for OPEC to combat inflation, and oil prices decreased.

OPEC's proven reserves currently stand close to 900 billion barrels. OPEC uses some tactics to raise its prices by setting production ceilings that specify how much oil may be produced by each member country. Oil prices were relatively low through most of the 1980s and 1990s with temporary hikes during the 1990–1991 Gulf Crisis. Price fluctuations depend on world crises, worldwide economic slowdowns, monopolies' profit margins, supply and demand, and other economic forces. Today's oil crude prices stand at their highest ever, well over $70 per barrel.

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