Impact of Opec

The Organization of the Petroleum Exporting Countries (OPEC), inter-governmental organization, was established at the Baghdad Conference in Iraq in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. These five countries were later joined by eight other countries; Qatar (1961), Indonesia (1962), Libya (1962), United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), and Gabon (1975). Ecuador and Gabon withdrew from OPEC in 1992 and 1994. The current eleven OPEC members account for about 40 per cent of world oil production, and two-thirds of the world’s proven oil reserves. (Note: Iraq remains a member of OPEC, but Iraq’s production has not been a part of OPEC quota since 1998). The purpose of OPEC is to co-ordinate and unifies petroleum policies among the member in order to limit supplies in the hope of keeping prices high. From 1920s to 1960s, the major oil companies colluded to prevent prices from falling. In the 1960s, OPEC had started as a group of five oil producing, developing countries, seeking out the member countries’ legitimate rights in the international oil market. So the rise of OPEC was tied to a shifting balance of power from the multi-national oil companies to the oil producing countries. The creation of OPEC intensified the need among the Third World countries for closer cooperation in order to achieve their political and economic objectives. Membership grew to ten within the decade.
In 1970’s, member countries took control of their domestic petroleum industries and acquired the right to influence the pricing of crude oil on the world market. There were two oil pricing crises, triggered by the Arab oil embargo in 1973 and the Iranian Revolution in 1979. During the 1973 War between Egypt and Israel, Saudi Arabia refused to increase production in order to halt rising prices unless the United States backed the Arab position. When the U.S. government proposed a military aid package for Israel, Arab States began