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What Is OPEC?

Gasoline is made from crude oil, the price of which is controlled, in part, by OPEC.
Iran is an original member of OPEC.
Saudi Arabia was an original member of OPEC.
Many members of OPEC are located in the Middle East.
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  • Last Modified Date: 10 September 2014
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The Organization of the Petroleum Exporting Countries(OPEC) was created in 1960 to unify and protect the interests of oil-producing countries. The organization allows oil-producing countries to guarantee their income by coordinating policies and prices among them. This unified front was created primarily in response to the efforts of Western oil companies to drive oil prices down. The original members included Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. OPEC has since expanded to include seven more countries — Algeria, Angola, Indonesia, Libya, Nigeria, Qatar, and United Arab Emirates — making a total membership of 12.

OPEC represents a considerable political and economical force. Two-thirds of the oil reserves in the world belong to its members; likewise, OPEC members are responsible for half of the world's oil exports. The fact that the organization controls the availability of a substance so universally sought after by modern society makes it a force to be reckoned with.

The first display of the power that OPEC could have on the world's politics was in the 1970s. When the Yom Kippur War exploded in the Middle East, the United States assisted Israel in defending itself against the Egyptian and Syrian armies. In what may have been a response to this interference in the war, OPEC instituted an oil embargo that targeted the United States and its European allies. The embargo lasted from 19 October 1973 to 17 March 1974.

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The effects of the OPEC oil embargo were widespread. Immediate effects included inflation and economic recession in the United States and other countries targeted by the embargo. Car owners in the United States were restricted to specific days on which they could purchase gasoline: even dates for cars with even-numbered license plates, and odd dates for cars with odd-numbered license plates.

A national law introducing more restrictive speed limits was instituted, as well as a year-round Daylight Savings Time. The oil embargo also drove auto manufacturers to produce smaller and more fuel-efficient vehicles. Even after the embargo ended, oil prices continued to rise, and the United States economy continued to suffer.

Although OPEC is often seen as a villain in the political arena, the organization serves an important purpose. It prevents its members from being taken advantage of by industrialized countries by ensuring that oil-exporting countries are paid a fair price for crude oil. Because oil-exporting countries are dependent on industrialized countries for oil products, OPEC standards prevent industrialized countries from buying crude oil at rock-bottom prices, then turning around and selling oil products back at vastly inflated prices.

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Discuss this Article

anon257957
Post 20

"Before you say the USA is lazy and greedy..." The United States and the majority of the western world understand consumption. I want, I need, get me, give me, put that book away because MTV is on.

America is nowhere near the most populated country on god's green earth, yet with only 5 percent of the world's population, you manage to consume 25 percent of the worlds fossil fuels. Oh yeah, and statistically, America is the most obese nation in the world.

anon257106
Post 19

There is no doubt that OPEC serves as an important safety net for their interests. But the oil embargo is a clear indicator that they will abuse their power beyond protecting their fair trade.

It's like saying the US government can do whatever it wants simply because it's essential to order and civilization. And the author here, who apparently thinks it is ok for OPEC to abuse their power, would probably disagree that our government can do whatever it wants simply because the government plays a needed role.

anon156554
Post 17

I am searching for a useful article about introducing opec. can you help me?

anon142815
Post 16

Yes, we do adapt and overcome and we always will.

In 1972 OPEC was organized. This was in response to the U.S.A. "getting involved" in other countries' issues. This was not the result of crude oil production, price control or anything like it. The U.S. had its "hands" around the neck of these Middle East countries for the benefit of one of its allies. The Arab nations responded by grabbing us by our economic short hairs. Simply economic retaliation by OPEC.

There are many repercussions to OPEC's actions. We had a shift in priorities. Did we need big, fast cars or fuel efficient cars? The car industry was required to produce more fuel mileage efficient gas or diesel cars. Now we have the new “clean energy” hybrid or electric cars. The car companies have had a bigger and more costly issue to overcome then any individual person ever did. If we are the biggest consumer of crude, then OPEC should be trying to keep us in our cars. We are moving away from crude oil, slowly.

Time for my personal soapbox of thought and rebuttals to prior crap written.

Today I find curious the notion of "fair trade" products i.e. coffee etc. Fair trade is just another way to regulate and control the final the price for a commodity. Profit has to be made! You want to help the “little guy” in some other country until he becomes successful. Then he becomes large and successful on the corner and you boycott him. A success only comes from successful planning and work.

I reject the idea the U.S.A is evil! Just the opposite is true! We have introduced so much to the world, given so much to the world and protected so many around the world. We have opened our arms to so many. We have a large number of people who live here. A lot of resources are needed. And we pay for them in a free market arena. It works!

Before you say the U.S.A is lazy or greedy with a broad brush, look at your own "neighborhood" or community. Crime is the only result of a lazy person or group of people. Greed, envy and how to take advantage of another person’s hard work is what many lazy people resort too. Most of the US citizens are thoughtful, hard-working people.

anon112752
Post 14

ncepman has it right. We are acting as though we are entitled to unlimited cheap oil prices. Huh? There is only so much, and Americans are not going to stop consuming at all time high until it is shown to be truly a problem.

We can think we are entitled to it, but does not make it an unlimited supply. Supply side economics tweak the price of oil based on supply. The supply has reached its peak, so prices can only go up. No war can change the fact that we have little oil in the U.S., it is needed to produce our goods, so why the hell should we act like we can just guzzle it down whenever we feel like it?

Not saying you cannot drive a huge consumption vehicle, but why stifle the production of low consumption fuel vehicles for those of us who want to buy them?

anon61925
Post 11

Has anyone ever heard of free market economics? because we are all connected OPEC will always be a part of the global system. more or less what I'm saying is that we are all connected and now to the global network, so if OPEC doesn't want to sell to the US, they have to sell it to someone so if they decide to sell it to country XYZ the US consumer will inevitably find a way to get their hands on it.

anon58027
Post 10

I think the U.S. should have been more cautious about helping Israel. By helping Israel, we made the OPEC mad at us so they launched an oil embargo at us and our allies in western Europe. Also, I think that if industrialized nations cut back on oil consumption, and the Middle Eastern oil companies rose their oil prices, they would get more profit from their oil and hopefully we won't need as much oil as we do now.

anon38123
Post 8

I think that OPEC is a justified union. The US and other industrialized countries have and will always try and take advantage of smaller less organized countries and their natural resources so we can preserve our way of spoiled life. It's their resource they have every right to get as much out of it as possible. Just because it effects our economy in a negative way doesn't mean they are bullies! It means we need to change our way of life! Adjust to reality, people!

anon28419
Post 7

They are protecting themselves against competitors, price wars. If there are many people selling the same good, they lose control over pricing. The price then would drop, and profit would not be close to what it could be.

ncepman
Post 5

The bottom line is that oil is a depleting resource. The OPEC nations know that. So why should they continue to increase production just to keep prices low so countries like the US, that has an all you can eat buffet mentality, can keep driving SUV’s and living two hours away from where they work? As written above, OPEC is to “guarantee their income by coordinating policies and prices”. So why should they accelerate their own demise by giving it away. We, the US, are consumers to the N’th degree. We want it all, we want it now and we want it cheap. We buy a 5,000 sq ft home to accommodate two people, we live far from work, shopping and friends because gas is cheep (Yes $3 is cheep). If the US wants to decrease dependency on oil we need to get back to reality. And I think the best thing to happen would be for gas to hit at least $6.50 per gallon. Yes, that would be a disaster, but it would wake Americans up and force change. There is no country in the world that deals with disaster and adversity better than the U.S.

anon15558
Post 4

Why is diesel fuel so high and propane, heating oil, etc. it is nothing but a byproduct of crude oil when you make gasoline... In other countries most of these products are inexpensive so one way or another we have always been riped off. But I think that's the reason our gasoline was always so low to set off the difference in cost...

anon15542
Post 3

I think where very spoiled in reality for the price we pay for it is still lower than most of the world. We didn't complain when cars went up an average of $18,000.00 and up. Or homes that triple in price or more. I am sick and tired that we are always trying to dictate what other countries can do...

anon14362
Post 2

I think these OPEC guys need to be looked at. They are all a little corrupt. these prices are killing us citizens. Someone needs to do something. Please Help Us..

anon5786
Post 1

Perhaps this is the time that we are in now, rather than the time that OPEC was created, but why would the oil producing countries need to unify to protect themselves? They have the commodity that everyone in the world wants, and perhaps needs. Why would they need protection?

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