OPEC Founded in Baghdad
Five states founded the Organization of the Petroleum Exporting Countries at a conference in Baghdad in September 1960. Iran, Iraq, Kuwait, Saudi Arabia and Venezuela were producing most of the oil that entered international trade and were receiving a price they had no part in setting. It was fixed by the seven companies known as the Seven Sisters, which controlled the concessions, the tankers and the refineries, and which had just cut the posted price twice in a year without consulting anyone. The intellectual author was Juan Pablo Pérez Alfonzo of Venezuela, who had studied the Texas Railroad Commission's prorationing of American production and proposed the same logic internationally, and who found a partner in the Saudi oil minister Abdullah Tariki. For its first decade it achieved very little beyond preventing further cuts. What changed the balance was the shift in the market. American production peaked around 1970, demand was rising, and spare capacity moved to the Gulf. Libya broke the pricing structure in 1970 by squeezing the smaller independent producers who had no alternative supply. The Yom Kippur War of 1973 brought the embargo — a production cut and a ban on sales to states supporting Israel — and the price quadrupled within months, producing queues at petrol stations, stagflation across the industrialised world, and enormous transfers of wealth. Membership has fluctuated. The organisation now coordinates with Russia and others as OPEC+, and its share of world production has fallen well below half. It remains the clearest case of producer states taking a resource back from the companies that had been extracting it.
- Year: 1960 CE
- Category: Economic
