Organization of the Petroleum Exporting Countries (OPEC) is an international organization and economic cartel whose mission is to coordinate the policies of the oil-producing countries. The goal is to secure a steady income to the member states and to collude in influencing world oil prices through economic means.
OPEC is an intergovernmental organization that was created at the Baghdad Conference on 10–14 September 1960, by Iraq, Kuwait, Iran, Saudi Arabia and Venezuela. Later it was joined by nine more governments: Libya, United Arab Emirates, Qatar, Indonesia, Algeria, Nigeria, Ecuador, Angola, and Gabon. OPEC was head-quartered in Geneva, Switzerland before moving to Vienna, Austria, on September 1, 1965.
Read Also: Facts to know about Oil
Venezuela and Iran were the first countries to move towards the establishment of OPEC by approaching Iraq, Kuwait, and Saudi Arabia in 1949, suggesting that they exchange views and explore avenues for regular and closer communication among petroleum-producing nations.
OPEC was formed at a time when the international oil market was largely dominated by multinational companies, the ‘seven sisters’. OPEC’s ‘Policy Statement’ states that there is a right of all countries to exercise sovereignty over their natural resources. Because OPEC is an organization of countries (not oil companies), individual members have sovereign immunity for their actions.
Don’t Miss: Top 10 Steel Manufacturing Companies in India
OPEC membership is open to any country that is a substantial exporter of oil and that shares the ideals of the organization. OPEC had 12 member countries, including founder members Iran, Iraq, Kuwait and Venezuela. Because its member countries hold the vast majority of crude oil reserves and nearly half of natural gas reserves in the world, the organization has considerable power in these markets.
In the 1970s, OPEC began to gain influence and steeply raised oil prices during the 1973 oil crisis in response to US aid to Israel during the Yom Kippur War. It lasted until March 1974. OPEC added to its goals the selling of oil for socio-economic growth of the poorer member nations, and membership grew to 13 by 1975.
Currently, worldwide oil sales are denominated in U.S. dollars, changes in the value of the dollar against other world currencies affect OPEC’s decisions on how much oil to produce.
An organization consisting of the world’s major oil-exporting nations. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.