Organization of the Petroleum Exporting Countries (OPEC)
The Organization of the Petroleum Exporting Countries, OPEC, is headquartered in Vienna, Austria, and is intended to make policy decisions regarding oil that will benefit its 12 member states. It is commonly thought that OPEC got its start in the 1970s during the first oil shocks but was actually founded in 1960. Venezuela and Iran are actually said to have broached the concept with countries such as Iraq and Saudi Arabia as far back as the late 1940s, believing that a cartelized approach to oil production would be of benefit to producers. The OPEC role has shifted considerably. Founders included Algeria, Ecuador, Gabon, Indonesia, Libya, Qatar, Nigeria, and the United Arab Emirates. Today's members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.
A 1960s law that came out of the administration of President Dwight Eisenhower was the proximate cause that apparently led to OPEC. It reduced US usage of Venezuelan and Persian Gulf oil and expanded the Canadian and Mexican oil industries. Falling prices in Venezuela generated increased pressure for an alliance with Middle Eastern producers. Almost from the start, OPEC sought to regulate how much oil members could produce in order to minimize production and maximize profitability. Members initially had to pay US$2 million to join. Production quotas remain at the base of OPEC operations and member requirements. In 2008 Indonesia was forced to withdraw when it could no longer fulfill its quota.
This points to a larger important issue. The OPEC producers are very mindful that if they wish to influence (indeed, control) the oil market, they must not merely reduce production but actually increase it too and at times aggressively so. Higher prices inevitability create new incentives and such incentives can create competition. Competition comes in two forms: alternative energy and additional oil resources. Neither development is a positive one from OPEC's point of view. Thus, stable prices are sought for the members who forego profits in order to discourage competition and an expanding market.
This does not mean OPEC's clout is minimal. In the short term, threats to raise the price of oil or restrict supply or both can be an effective weapon. OPEC wielded its "oil weapon" against Israel in 1973 by withholding supplies; however such interludes have been fairly rare. It is not in OPEC's interest to turn oil into a military tool as once again that could have a negative impact on the way world leaders regard OPEC supplies and impel some of them to look for alternatives. Alternatives outside the OPEC community are anathema to OPEC.
OPEC members still wield clout with some 80% of world crude oil reserves. However, other large supplies of oil are becoming available despite OPEC's best efforts. Russia is becoming a huge supplier of oil and oil-share in the US and Canada is beginning to have a considerable additional global impact as well.
Due to OPEC's activities and information currently available on the Internet, it is increasingly hard to avoid the perception that the oil market, despite its size, is one of the most manipulated markets in the world. It also seems clear that Western powers-that-be tolerate and possibly encourage OPEC behind the scenes because it is in the best interest of Western elites to encourage a perception of oil scarcity. This drives up prices and serves as a pretext for social control domestically and military action abroad.
The world, some say, is awash in oil. It is Western elites, more than OPEC, who are responsible for the perception that it is not and for spikes in the price of oil that are extremely profitable for large oil companies and for the elite-managed supply chain that delivers energy supplies throughout the West and abroad.