OPEC

A cartel of governments that changed the world economy in a single autumn and has been trying to repeat it ever since. OPEC was founded in Baghdad in 1960 by five oil-exporting states whose complaint was specific: the international oil companies set the posted price of crude unilaterally and had just cut it, reducing government revenue without consultation. For its first decade it achieved little. Its moment came in October 1973, when Arab members cut production and embargoed states supporting Israel in the Yom Kippur War; the price of oil roughly quadrupled within months, producing petrol queues, inflation and recession across the industrial world, and ending the long post-war boom. A second shock followed the Iranian revolution in 1979. The durable consequences were the transfer of enormous wealth to producer states, the nationalisation of oil industries that had been foreign owned, and a permanent western interest in energy efficiency and alternative supply. The cartel's difficulty is structural: quotas only raise prices if members observe them, and each member gains individually by exceeding its own, so compliance has always been imperfect. Saudi Arabia acts as the swing producer with the spare capacity to enforce discipline. American shale production after 2010 weakened OPEC's control considerably. A wider grouping with Russia, known as OPEC+, was formed in 2016. Its headquarters moved to Vienna in 1965. Members hold most of the world's proven reserves. The organisation was founded in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Its secretariat is in Vienna. Membership has fluctuated as states have joined, left and rejoined. OPEC+ adds around ten non-member producers.

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