In 2010, OPEC will have existed for half a century. The Organization of the Petroleum Exporting Countries is often associated with wealthy sheikhs and gasoline price increases, but the organization has done much more. What is OPEC? And how did OPEC come into existence? And who are actually members of OPEC?
History of OPEC
On September 14, 1960, the Organization of the Petroleum Exporting Countries was founded. This was a response to the unilateral decision by an American oil company to lower the oil price without prior consultation with the oil countries that supplied the substance. The countries decided to work together to determine the price together with the industry. However, this turned out not to work, because the oil companies had all the power. Libyan leader Gaddafi put an end to that situation in the autumn of 1969. That year (after he had staged a coup in his own country) he demanded higher incomes from the oil companies for his country, but also a majority stake in oil production . If the oil companies from other countries did not want that, he ordered them to leave the country. When his demands were met, the other members of OPEC also took the same action as Gaddafi. His actions also made him something of a hero in the Arab world.
OPEC was founded on September 14, 1960 in Baghdad, Iraq. The initiative came from Venezuela, by the way. In addition to Venezuela and Iraq, Saudi Arabia, Iran and Kuwait also joined the organization. Later they were joined by Qatar (1961), Indonesia (1962-2008), Libya (1962), United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador ((1973-1992) rejoined in November 2007 ), Gabon (1975-1994) and Angola (2007).
Members OPEC in 2010
In 2010, 12 countries are still members of OPEC. These are:
- Saudi Arabia
- United Arab Emirates
Bretton Wood system is falling apart
In 1973, OPEC’s position had its first impact on a financial system. That’s when the Bretton Wood system fell apart. The system linked the dollar to other currencies, but the US dollar became less and less valuable due to the war in Vietnam, which cost the US a lot of money. Therefore, the link between the dollar and other currencies was abandoned. As a result, the dollar fell in value very quickly. As a result, the oil countries received less and less income. Their response was to reduce monthly oil production by 5 percent.
There were even countries that were completely boycotted and therefore no longer received oil at all because the OPEC countries suspected them of supplying weapons to Israel. Israel was at war with its Arab neighbors during the Yom Kippur War. The Netherlands also no longer received oil, just like the United States, Portugal and Denmark.
Because oil was no longer supplied, the Netherlands faced a petrol shortage. The result was a number of car-free Sundays imposed by the government. This was intended to save fuel.
Oil prices rise again from 1973
Due to the position taken by the OPEC countries in 1973, the price of a barrel of oil rose considerably again. In 1974 the oil price was $10 per barrel. This was four times higher than in the spring of 1973. The reduction in oil deliveries was repeated several times by OPEC to drive up prices.
OPEC: abuse of power or just a good negotiating position?
Many people believe that the OPEC countries are abusing their position and are also citing other issues such as their hatred of Israel. Others think it is quite normal that countries that have highly sought-after raw materials determine their own prices and do not leave this up to the buyer.
OPEC: an inspiration for other producing organizations
Developing countries have often benefited greatly from OPEC’s working methods by imitating their working methods and joining forces. Collaborative organizations were also established in the field of coffee, tea and coal, which allowed them to take a stand against the buyers of their products and determine their own prices. However, these organizations were less successful because they often supplied products that were sold all over the world and often in the countries that purchased them. With oil it is very different. There are relatively few producers of these. Moreover, it has proven to be an indispensable raw material in a modern society.
OPEC members at odds with each other
Although the OPEC members have achieved a lot, the various members also often competed with each other. For example, Saudi Arabia and Iran want to supply as much as possible, while the small oil countries such as Algeria, Ecuador and Qatar mainly want a good price for their product. In addition, a number of countries have also been involved in wars with each other. Iraq and Iran were engaged in a long and bloody war from 1980 to 1988, and in 1990 Iraq invaded Kuwait.
OPEC no longer has all the power
Although the OPEC countries still provide around 40 percent of the world’s oil production in 2010, this is much less than in 1960. At that time, the countries supplied 80 percent of all oil to other countries in the world. The high prices have caused products worldwide to look for other suppliers. Mexico, Norway and the United Kingdom have now also become major oil countries.
OPEC countries that supply the most oil per day
Saudi Arabia and Iran are the OPEC countries that supply the most oil per day. In 2009, Saudi Arabia supplied 8,184,000 barrels per day, Iran 3,557,000 per day. OPEC indicated in 2009 that it was producing 28.9 million barrels of oil per day. 69 million barrels per day were produced around the world.
How long can the world survive on oil supplies?
If oil production remains as it is now and consumption remains as high, the world will only be able to use oil for about 45 years.