Organization of Petroleum Exporting Countries (OPEC)

The Organization of Petroleum Exporting Countries (OPEC) was formally established in 1960 by Venezuela, Iran, Kuwait, Iraq, and Saudi Arabia at a conference in Baghdad. OPEC, which currently does not include Iraq, also includes Algeria, Indonesia, Libya, Nigeria, Qatar, and the United Arab Emirates, and since 1965 has been headquartered in Vienna, where it conducts its semiannual OPEC conferences. The 11 members produce 40% of the world's oil supply today, and, more important, they jointly hold 78% of the world's proven crude oil reserves (2003 estimates).

OPEC is a cartel whose principal objectives are to coordinate petroleum policies in the best interests of member countries, to stabilize prices, to provide a regular supply to consumer nations, and to provide a fair return on capital to investors. With these aims in mind, the oil ministers of the member countries meet at least twice per year to discuss policy and to allocate per-country supply quotas that are based on demand forecasts.

The exploration for oil and its drilling, production, transportation, refining, marketing, and distribution have historically been the concentrated activity of a few powerful global companies, at the head of which have been the “Seven Sisters” consisting of the three American Standard Oil companies, Texaco, Gulf, Royal Dutch Shell, and British Petroleum. On the other hand, the production of oil is dominated by relatively young nations, many of which made the transition from Western colonies to sovereign entities after the end of World War I and historically have had little international clout or bargaining power to apply when dealing with Western powers and their multinationals. It is the need to address this imbalance of power that OPEC members use as justification for their collusion in manipulating the world's oil supply.