The Organization of Petroleum Exporting Countries is an intergovernmental organization of 12 of developing nations. OPEC was created in 1960 in response to the imposition of import quotas for crude oil and refined products by the United States. OPEC controls roughly 3/4 of the world’s oil reserves if extra-heavy crude is not considered. If extra-heavy crude is considered, the percentage may be higher. It is estimated that OPEC will exceed earnings of $1 trillion in 2011. OPEC is currently headquartered in Vienna, Austria.
HistoryIn 1959 based U.S. government established the Mandatory Oil Import Quota program, which restricted the amount of imported crude oil and refined products to the United States and gave preferential treatment to oil imported from Canada and Mexico. As a result of this program, oil prices in the Middle East or depressed. In 1960 Iran, Iraq, Kuwait, and Saudi Arabia, along with Venezuela, formed OPEC in order to obtain higher prices for crude oil. They were joined in 1973 by eight other nations though two withdrew in the 1990s.
In 1973 and 1974 OPEC reduced its production of crude oil, raising world market prices sharply. Despite popular opinion, OPEC was not responsible for the 1974 energy crisis in the United States. Rather, U.S. government policy of limitations on the crude oil imports and usages as a result of the 1971 law passed by President Richard Nixon was the direct cause of the energy crisis.
The economic needs of OPEC member states often affect the internal politics behind OPEC production quotas. At various points in the past, members have pushed for reductions in quotas to increase the price of their own oil and thus their own revenue. Often times, these demands conflict with Saudi Arabia’s long-term strategy of working with the world’s economic powers to create economic stability. Unity is necessary within OPEC if their praise quotas are to work. On several occasions in the past, member countries have set their own quotas, resulting in oil gluts and driving down the price of crude.
OPEC currently consists of the following countries:
- Saudi Arabia
- United Arab Emirates