OPEC : Brief History Brief History Home About Us Brief History Brief History The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962) – suspended its membership in January 2009, reactivated it in January 2016, but decided to suspend it again in November 2016; Libya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its membership in December 1992, but reactivated it in October 2007; Angola (2007); and Gabon (1975) - terminated its membership in January 1995 but rejoined in July 2016. OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence.

This was moved to Vienna, Austria, on September 1, 1965. OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry. The 1960s OPEC’s formation by five oil-producing developing countries in Baghdad in September 1960 occurred at a time of transition in the international economic and political landscape, with extensive decolonisation and the birth of many new independent states in the developing world. The international oil market was dominated by the “Seven Sisters” multinational companies and was largely separate from that of the former Soviet Union (FSU) and other centrally planned economies (CPEs). OPEC developed its collective vision, set up its objectives and established its Secretariat, first in Geneva and then, in 1965, in Vienna. It adopted a ‘Declaratory Statement of Petroleum Policy in Member Countries’ in 1968, which emphasised the inalienable right of all countries to exercise permanent sovereignty over their natural resources in the interest of their national development.

Membership grew to ten by 1969. The 1970s OPEC rose to international prominence during this decade, as its Member Countries took control of their domestic petroleum industries and acquired a major say in the pricing of crude oil on world markets. On two occasions, oil prices rose steeply in a volatile market, triggered by the Arab oil embargo in 1973 and the outbreak of the Iranian Revolution in 1979. OPEC broadened its mandate with the first Summit of Heads of State and Government in Algiers in 1975, which addressed the plight of the poorer nations and called for a new era of cooperation in international relations, in the interests of world economic development and stability. This led to the establishment of the OPEC Fund for International Development in 1976. Member Countries embarked on ambitious socio-economic development schemes. Membership grew to 13 by 1975. The 1980s After reaching record levels early in the decade, prices began to weaken, before crashing in 1986, responding to a big oil glut and consumer shift away from this hydrocarbon.

OPEC’s share of the smaller oil market fell heavily and its total petroleum revenue dropped below a third of earlier peaks, causing severe economic hardship for many Member Countries. Prices rallied in the final part of the decade, but to around half the levels of the early part, and OPEC’s share of newly growing world output began to recover. This was supported by OPEC introducing a group production ceiling divided among Member Countries and a Reference Basket for pricing, as well as significant progress with OPEC/non-OPEC dialogue and cooperation, seen as essential for market stability and reasonable prices. Environmental issues emerged on the international energy agenda. The 1990s Prices moved less dramatically than in the 1970s and 1980s, and timely OPEC action reduced the market impact of Middle East hostilities in 1990–91. But excessive volatility and general price weakness dominated the decade, and the South-East Asian economic downturn and mild Northern Hemisphere winter of 1998–99 saw prices back at 1986 levels.

However, a solid recovery followed in a more integrated oil market, which was adjusting to the post-Soviet world, greater regionalism, globalisation, the communications revolution and other high-tech trends. Breakthroughs in producer-consumer dialogue matched continued advances in OPEC/non-OPEC relations. As the United Nations-sponsored climate change negotiations gathered momentum, after the Earth Summit of 1992, OPEC sought fairness, balance and realism in the treatment of oil supply. One country left OPEC, while another suspended its Membership. The 2000s An innovative OPEC oil price band mechanism helped strengthen and stabilise crude prices in the early years of the decade. But a combination of market forces, speculation and other factors transformed the situation in 2004, pushing up prices and increasing volatility in a well-supplied crude market. Oil was used increasingly as an asset class. Prices soared to record levels in mid-2008, before collapsing in the emerging global financial turmoil and economic recession. OPEC became prominent in supporting the oil sector, as part of global efforts to address the economic crisis.

OPEC’s second and third summits in Caracas and Riyadh in 2000 and 2007 established stable energy markets, sustainable development and the environment as three guiding themes, and it adopted a comprehensive long-term strategy in 2005. One country joined OPEC, another reactivated its Membership and a third suspended it. 2010 until now The global economy represented the main risk to the oil market early in the decade, as global macroeconomic uncertainties and heightened risks surrounding the international financial system weighed on economies. Escalating social unrest in many parts of the world affected both supply and demand throughout the first half of the decade, although the market remained relatively balanced. Prices were stable between 2011 and mid-2014, before a combination of speculation and oversupply caused them to fall in 2014. Trade patterns continued to shift, with demand growing further in Asian countries and generally shrinking in the OECD. The world’s focus on multilateral environmental matters began to sharpen, with expectations for a new UN-led climate change agreement. OPEC continued to seek stability in the market, and looked to further enhance its dialogue and cooperation with consumers, and non-OPEC producers.

1st OPEC Conference, 10-14 September 1960, Baghdad, Iraq OPEC Board of Governors, 3 September 1962, Geneva, Switzerland 7th OPEC Conference, 23-28 November 1964, Jakarta, Indonesia 32nd (Extraordinary) OPEC Conference, 16–17 March 1973, Vienna, Austria 73rd (Extraordinary) OPEC Conference, 28–30 January 1985, Geneva, Switzerland Third OPEC Summit, 17-18 November 2007, Riyadh, Saudi Arabia Delegates and guests at OPEC's new Headquarters, 17 March 2010, Vienna, Austria 6th OPEC International Seminar, 3-4 June 2015, Hofburg Palace, Vienna, Austria 167th OPEC Conference, 5 June 2015, Vienna, Austria OPEC set to maintain oil output ceiling - Yahoo7 Finance Australia Sun, Jan 8, 2017, 5:49 AM AEDT - Australia Markets closed OPEC set to maintain oil

 output ceiling By Jessica Berthereau | AFP – Wed, Dec 4, 2013 12:09 PM AEDT Recommend View Photo A Libyan security worker walks past an oil well on March 23, 2013 OPEC was expected to stick by its oil output limit at a meeting here on Wednesday, even as Iraq and Iran eye higher crude exports amid slashed Libyan production.

The Organization of Petroleum Exporting Countries does not see a need to alter the cartel's crude production ceiling of 30 million barrels per day, member nations led by the world's biggest oil producer Saudi Arabia said in Vienna ahead of the meeting. Pumping about one third of the world's crude, OPEC will decide also on whether to replace Abdullah El-Badri as secretary general. "We know demand is good, economic growth is good, supply is good," Saudi Oil Minister Ali al-Naimi told reporters at OPEC headquarters in the Austrian capital. OPEC members Nigeria and Venezuela each said they believed the cartel would agree to maintain its crude oil production ceiling. Oil market analysts were meanwhile not expecting any surprises from OPEC, whose dozen member nations from the Middle East, Africa and Latin America are together producing slightly below its output target. "It is unlikely that OPEC will adjust its official notional production ceiling as it is unlikely that either Iran and Iraq can contribute incrementally in any significant manner to the cartel's supply next year," Harry Tchilinguirian, BNP Paribas' global head of commodity markets strategy, told AFP. OPEC is facing also demand strains as consumers turn to cheaper oil and gas extracted from shale rock, particularly in North America.

At the same time, cartel members Iraq and Iran are seeking to increase their production after sizeable falls to output in recent years. OPEC members welcome $100 crude oil Saudi Arabia and other OPEC members argue that benchmark crude oil prices, currently averaging $100 per barrel, provide acceptable income for producers without weighing too heavily on consumers. "The price of oil is acceptable and there will be some additional oil coming to the market from OPEC and outside OPEC," Qatar's Energy Minister Mohammed al-Sada said on Wednesday. "What is more important is that this additional oil will be needed for the signs of economic recovery." Sada added: "The current (output) situation seems to be comfortable? 30 million barrels seems to do justice to the current economic situation." Iran's Oil Minister Bijan Zanganeh this week said that the country would be able to "immediately" export 4.0 million barrels per day (bpd) once sanctions are lifted in the wake of the international deal to roll back its nuclear programme. Iranian crude oil exports have been slashed to about 1.2 million bpd from 2.5 million bpd in 2011, according to Zanganeh.

At the same time, Iraq's Oil Minister Abdelkarim al-Luaybi said his country hoped to export 3.4 million bpd of crude oil next year, including 400,000 bpd from Iraqi Kurdistan, as it looks to recover from years of bloodshed. This compares with exports of 2.38 million bpd in November. The market though doubts how quickly new production can come on board. "OPEC will find it very hard to come to an agreement to cut production given a significant number of its members -- Iran, Iraq, Libya, Nigeria -- are suffering from constrained production," said Thomas Pugh, commodities analyst at Capital Economics consultants. Libya's output has plunged to about 250,000 bpd amid deadly fighting between radical Islamist fighters and the army, but oil minister Abdelbari al-Arusi said he hoped production would be back to its normal level of 1.5 million bpd within two weeks. Nigeria is meanwhile facing regular acts of sabotage to its oil pipelines.

Saudi Arabia is battling against Iraq and Iran for the position of succeeding El-Badri, who has steered the cartel through the financial crisis in the role of administrative head since 2007. OPEC voted in December last year to re-appoint the Libyan for another year after members failed to agree on a new secretary general. @y7finance on Twitter, become a fan on Facebook OPEC set to maintain oil output ceiling OPEC set to maintain oil output ceiling Jessica Berthereau More OPEC was expected to stick by its oil output limit at a meeting here on Wednesday, even as Iraq and Iran eye higher crude exports amid slashed Libyan production. The Organization of Petroleum Exporting Countries does not see a need to alter the cartel's crude production ceiling of 30 million barrels per day, member nations led by the world's biggest oil producer Saudi Arabia said in Vienna ahead of the meeting. Pumping about one third of the world's crude, OPEC will decide also on whether to replace Abdullah El-Badri as secretary general. "We know demand is good, economic growth is good, supply is good," Saudi Oil Minister Ali al-Naimi told reporters at OPEC headquarters in the Austrian capital.

OPEC members Nigeria and Venezuela each said they believed the cartel would agree to maintain its crude oil production ceiling. Oil market analysts were meanwhile not expecting any surprises from OPEC, whose dozen member nations from the Middle East, Africa and Latin America are together producing slightly below its output target. "It is unlikely that OPEC will adjust its official notional production ceiling as it is unlikely that either Iran and Iraq can contribute incrementally in any significant manner to the cartel's supply next year," Harry Tchilinguirian, BNP Paribas (Milan: BNP.MI - news ) ' global head of commodity markets strategy, told AFP. OPEC is facing also demand strains as consumers turn to cheaper oil and gas extracted from shale rock, particularly in North America. At the same time, cartel members Iraq and Iran are seeking to increase their production after sizeable falls to output in recent years. OPEC members welcome $100 crude oil Saudi Arabia and other OPEC members argue that benchmark crude oil prices, currently averaging $100 per barrel, provide acceptable income for producers without weighing too heavily on consumers.

"The price of oil is acceptable and there will be some additional oil coming to the market from OPEC and outside OPEC," Qatar's Energy Minister Mohammed al-Sada said on Wednesday. "What is more important is that this additional oil will be needed for the signs of economic recovery." Sada added: "The current (output) situation seems to be comfortable? 30 million barrels seems to do justice to the current economic situation." Iran's Oil Minister Bijan Zanganeh this week said that the country would be able to "immediately" export 4.0 million barrels per day (bpd) once sanctions are lifted in the wake of the international deal to roll back its nuclear programme. Iranian crude oil exports have been slashed to about 1.2 million bpd from 2.5 million bpd in 2011, according to Zanganeh. At the same time, Iraq's Oil Minister Abdelkarim al-Luaybi said his country hoped to export 3.4 million bpd of crude oil next year, including 400,000 bpd from Iraqi Kurdistan, as it looks to recover from years of bloodshed.

This compares with exports of 2.38 million bpd in November. The market though doubts how quickly new production can come on board. "OPEC will find it very hard to come to an agreement to cut production given a significant number of its members -- Iran, Iraq, Libya, Nigeria -- are suffering from constrained production," said Thomas Pugh, commodities analyst at Capital Economics consultants. Libya's output has plunged to about 250,000 bpd amid deadly fighting between radical Islamist fighters and the army, but oil minister Abdelbari al-Arusi said he hoped production would be back to its normal level of 1.5 million bpd within two weeks. Nigeria is meanwhile facing regular acts of sabotage to its oil pipelines. Saudi Arabia is battling against Iraq and Iran for the position of succeeding El-Badri, who has steered the cartel through the financial crisis in the role of administrative head since 2007. OPEC voted in December last year to re-appoint the Libyan for another year after members failed to agree on a new secretary general.

Reblog Russia's energy minister: No discussions about coordination with OPEC on oil output | Reuters Wed Jul 20, 2016 | 10:36 AM EDT Russia's energy minister: No discussions about coordination with OPEC on oil output 1/2 Russian Energy Minister Alexander Novak attends a session of the St. Petersburg International Economic Forum 2016 (SPIEF 2016) in St. Petersburg, Russia June 16, 2016. Reuters/Kirill Kukhmar/TASS/Host Photo Agency/Pool + 2/2 The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria, May 30, 2016. Reuters/Heinz-Peter Bader + By Katya Golubkova, Vladimir Soldatkin and Oksana Kobzeva | MOSCOW MOSCOW Russian Energy Minister Alexander Novak said in an interview there were no discussions about possible coordination with OPEC on oil output after a failed attempt to jointly maintain production levels earlier this year. "We do not discuss the issues of coordination of actions between Russia and OPEC...

We can't agree on production cuts as we don't have such tools and mechanisms," Novak told Reuters in interview cleared for publication on Wednesday. The Organisation of the Petroleum Exporting Countries and other big oil producers, including Russia, were not able to reach a deal in Doha in April on freezing oil production in order to support falling oil prices. Global crude oil prices reached a 13-year low of $27 per barrel in January due to oversupply, but have recovered since then to around $50. The weak price for oil, Moscow's chief export commodity, hit the Russian economy, which shrank by 3.7 percent last year. In the interview with Reuters, Novak said Russia sees its cooperation with OPEC focussing on the exchange of information and analysis on the global oil market, rather than on coordinating production. Russian companies have been increasing oil production this year. Novak said he expects domestic oil output at 542-544 million tonnes this year after it hit 534 million tonnes (10.73 million barrels per day), a 30-year high, in 2015.

SAUDI-RUSSIA MEETING Novak said he will likely meet new Saudi energy minister Khalid al-Falih at a conference in Algeria at the end of September. It will be their first meeting since Falih was appointed in May, taking over from veteran minister Ali al-Naimi. "Obviously, we will discuss the situation on the (global) oil market," he said, adding that they will also look into the possibility of joint energy projects in Russia, Saudi Arabia and third countries. Last week, Falih said that the oil industry needs a price above $50 per barrel to sustain investments, adding that downward pressure on prices would prevail because of a huge stocks overhang. Novak said Russia is sticking to its forecast that the oil price will average between $40 and $50 this year. He said though there are risks that it could be lower due to seasonal decline in demand. Trading houses across the globe are betting on oil markets remaining oversupplied for at least two more years even as crude prices stage a recovery driven by early signs of falling production. The Russian minister said he expected global oil markets would balance out by mid- or end-2017, with a lot depending on Saudi Arabia's policy.

He said he saw demand rising by at least 0.8-1 percent per year, or by 0.7-1.0 million barrels per day. Novak added that global oil stockpiles have reached 3 billion barrels, of which 500 million barrels he called "excessive" and warned that it will take a long time before they leave the market. "In general, this is almost 1.5 million bpd, meaning that if nothing in addition will be produced (globally) and output is maintained at current levels, this overhang will still cover for the annual increase in demand," Novak said.

(This version clarifies in headline and paragraph 1 that there are no discussions about output coordination now, the minister did not say it will never happen in the future) (Reporting by Vladimir Soldatkin, Katya Golubkova, Oksana Kobzeva, Denis Pinchuk, Alexander Ershov, Natalia Chumakova, Darya Korsunskaya and Anastasiya Lyrchikova, editing by David Evans) ADVERTISEMENT OPEC Quota A Mere 'Recommendation' To Members, Says Secretary General OPEC Quota A Mere 'Recommendation' To Members, Says Secretary General {{article.article.images.featured.caption}} Opinions expressed by Forbes Contributors are their own. Full Bio The author is a Forbes contributor. The opinions expressed are those of the writer. Loading ... Loading ... This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}.

Subscribe As OPEC decided to maintain its official oil production quota at 30 million barrels per day on Friday, the organization’s Secretary General Abdalla Salem El-Badri said what the outside world chooses to describe as a production quota, was rather more of a “recommendation.” No very many analysts were surprised when OPEC left its ‘official’ production quota where it was. It is an open secret that the cartel’s 12 members were in fact producing considerably more than that. In April, OPEC’s own figures put daily production at 30.93 million bpd. Industry surveys since then have put OPEC oil production in the 31.5 to 32 million bpd range, with Saudi Arabia leading the charge. While OPEC's decision to maintain production had been widely factored in by the markets, El-Badri's description that the quota was anything but drew bemused looks from the assembled media and analysts alike. Abdalla Salem el-Badri, Secretary General of OPEC, at the 167th meeting of OPEC at its headquarters in Vienna, Austria on 5 June, 2015.

Photo: Joe Klamar, AFP/Getty Images "It is not a quota as such, but rather a recommendation given to members which we expect them to take," said OPEC’s longstanding Secretary General and peacemaker-in-chief. The only problem is, when oil producers of all makes and stripes are involved in a war of attrition , recommendations often go out of the window. As an analyst I have tremendous respect for El-Badri. Having witnessed and gone through the pain of civil strife in Libya, his homeland, the Secretary General has kept his country's divided delegation to OPEC in check, which at one point rather bizarrely witnessed the prospect of sending two oil ministers from warring factions. Above all he has been the ultimate compromise candidate as the Saudis and Iranians jostled for position within OPEC.

So good is he as a consensus man, that internal dissensions mean finding another one would be an almighty task, says Jason Schenker, President of Prestige Economics, adding, "He is to OPEC, what Switzerland is to international diplomacy." Angola: Opec to Maintain Production Levels - allAfrica.com Angola: Opec to Maintain Production Levels more Riyadh — The Organisation of Petroleum Exporting Countries (OPEC) will maintain its crude oil production levels said Angolan Finance minister, José Pedro de Morais. Speaking to journalists in Riyadh, Saudi Arabia, alongside OPEC's 3rd Summit that opened Saturday, in Riyadh, the minister said the matter of rising production, currently estimated at more than 30 million barrels a day, will not be discussed at the ongoing meeting. During a ministerial conference held in September this year in Viena, Austria, OPEC decided to increase its production share by another 500,000 barrels of crude oil per day as from November this year, so there is no reason to talk about rising the actual levels, added the minister.

"The question of the quantity being produced is not a topic for this conference", said the official who attended the joint ministerial meeting of preparation of the 3rd Summit of OPEC's heads of State taking place in Saudi Arabia capital. The international oil market has recorded no shortage or deficit and the steep price hiking recorded over the last six months has to do with other factors, considered the cartel member countries that also spoke out for dialogue among producers and consumers towards the stabilisation of the market. At the Summit, José Pedro de Morais stated, there is a series of issues of political nature the heads of State are to decide about, but not regarding the current output. As to the crude oil price hiking currently estimated at Usd 100 per barrel, the Angolan minister said it is compensating, but the cost of equipment and facilities for the oil sector are also rising as a result. The OPEC's first summit took place in 1975 in Algiers, capital of Algeria, followed by the second in 2000 in Caracas, Venezuela, one of the organisation's founding members. With its headquarters in Viena, Austria, OPEC generally holds ministerial conferences that, according to its statutes, constitute its supreme authority.

The conferences gather delegations from member countries, normally headed by their respective oil ministers. At the ongoing meeting, the organisation's heads of State are expected to adopt initiatives meant for the creation of an environment of trust and stability in the oil market. The Organisation of Petroleum Exporting Countries groups Angola, Saudi Arabia, Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, United Arab Emirates and Venezuela. OPEC might count on 13 members at the end of the ongoing meeting as, according to sources from the organisation, Ecuador will be readmitted as full right member. The Organisation of Petroleum Exporting Countries was established in 1960 in Baghdad, Iraq, at the end of a meeting held on September 10-14. Saudi Arabia, Iran, Iraq, Kuwait and Venezuela are the founding members. Copyright © 2007 Angola Press Agency. All rights reserved. Distributed by AllAfrica Global Media ( allAfrica.com ). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals , representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica . To address comments or complaints, please Contact us . OPEC facts, information, pictures | Encyclopedia.com articles about OPEC Organization of Petroleum Exporting Countries (OPEC) Encyclopedia of the Modern Middle East and North Africa COPYRIGHT 2004 The Gale Group, Inc. ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) group formed in 1960 to protect economic interests of oil-exporting countries. In the early 1950s, international oil companies (IOCs) developed the posted price system to help host governments estimate oil revenues in advance. Posted prices were accounting devices that host governments used to calculate the amount of taxes the companies would pay under industrywide fifty-fifty profit-sharing agreements.

Despite normal fluctuations in the real prices at which crude oil was traded, posted prices were not adjusted, and fixed posted prices became an industry norm. When competitive pressures forced the IOCs to reduce posted prices unilaterally in February 1959, an immediate outcry arose from the affected host governments. OPEC's Founding The first Arab Oil Congress met later that year. Delegates from oil-exporting countries came to plan concerted action against the oil companies. Structural differences among national oil industries made coordination among these countries difficult technically. Conflicts of interest over investment and production shares made coordination difficult politically. Competition between Venezuela and Middle Eastern exporters was heightened by the 1959 posted price cuts. British Petroleum set lower prices in parts of the Middle East than in Venezuela in hope of breaking the As-Is Agreement, a mediated connection between world oil prices and the U.S. market. Venezuelan oil thereby became even less competitive, requiring further downward price adjustments and convincing oil exporters that their responses to the companies had to be closely coordinated. Political conflicts ended the Oil Consultation Commission, the first producer attempt to institutionalize coordination.

But when the IOCs imposed yet another round of price cuts in August 1960, five oil-exporting countries set aside their political differences to salvage their economic interests. Venezuela, Saudi Arabia , Iran , Iraq , and Kuwait formed the Organization of Petroleum Exporting Countries (OPEC) in September 1960. OPEC's first resolutions included calls to restore posted prices to their pre-February 1959 levels and to stabilize oil prices by regulating production. The U.S. government refused to recognize OPEC, forbade U.S. oil companies to negotiate with it, and imposed trade sanctions on OPEC members to discourage other countries from joining. This suited the IOCs, which saw an advantage in continuing their accustomed practice of dealing with host governments one at a time. OPEC responded creatively, developing joint negotiating positions with the understanding that any member able to gain an additional advantage on its own should do so. Any gains would constitute a new floor for bargaining in the next round. During its first ten years, this "leapfrogging" earned OPEC members incremental gains in oil revenues, which both increased OPEC's international stature and attracted new members to the organization.

Perhaps OPEC's most significant contribution to the oil revolution was its support and implementation of "participation," the gradual nationalization of foreign-owned oil properties. Most members did not follow the participation strategy to the letter, but years of discussion provided an opportunity to prepare for the responsibilities that would come when they became full owners of their oil industries. This accomplishment was overshadowed, however, by OPEC's successful utilization of leapfrogging to achieve rapid oil price increases, by Libya in 1970 and afterward by alternating pressure exerted first by oil-exporting countries in the Mediterranean and then in the Persian Gulf . This set the stage for OPEC's takeover of crude oil pricing when the 1973 Arab–Israel War, with its well-designed Arab oil embargo, provided the opportunity. Pricing Strategies OPEC's success in taking over oil pricing created new problems for the group. Oil-importing countries, led by the United States , demonized OPEC as the primary cause of worldwide economic decline. Inside OPEC, structural differences among member industries led to disagreements over pricing strategies. Low-price-preference members such as Saudi Arabia, with small populations and huge oil reserves, favored moderate oil prices to discourage consumers from seeking alternative fuels.

High-price-preference members like Algeria , with large populations, wanted high prices so they could pay for ambitious development programs, while their small reserves offered no incentive to support pricing policies that would sustain the long-term attractiveness of oil as a fuel. Some members with large reserves, like Iran and Libya, also favored high prices. Iran had a large population and an ambitious development program, but Libya's preference was politically motivated by Libya's desire to assert its autonomy among its OPEC peers as well as its independence from western domination. Price positions could be flexible, however. In 1978, the threat of revolution pushed Mohammad Reza Shah Pahlavi of Iran to seek allies among his neighbors. Iran joined most of the Arab gulf countries in pushing for the adoption of a long-range moderate pricing strategy to replace what had, until then, been an ad hoc method of setting oil prices. The new system became obsolete almost before it was agreed upon, however; it was superseded by pressures that doubled oil prices in one year thanks to panic buying during the Iranian Revolution.

Predictably, oil demand fell, but the availability of new, non-OPEC supplies from the North Sea and elsewhere allowed major importers to shift their purchases, making OPEC the marginal supplier of crude oil to the world market. Market weakness in the early 1980s caused OPEC to focus on oil production sharing as a strategy for controlling oil prices by regulating crude supply. A voluntary production-sharing plan was launched in 1982 but, as had happened to the voluntary oil import quota in the United States during the 1950s, producers ignored it. A mandatory quota system was introduced in March 1983, and crude prices were reduced for the first time since OPEC had assumed its price-setting role in the hope of stimulating consumer demand. An Austrian accounting firm was hired to monitor member production in order to discourage cheating on the quotas. The quota system had many flaws. Even small producers were required to accept a quota, prompting Ecuador to leave OPEC in 1993 to escape its quota obligations. Saudi Arabia, OPEC's largest producer, refused to accept a formal quota that it said was an unacceptable infringement on its sovereignty.

This marginalized Saudi production within OPEC as crude from many sources flooded the market and total demand for OPEC oil declined. Without a quota and its implied entitlement to produce a defined share of OPEC crude, the Saudis had to accept the informal role of swing producer, one which would vary its production to satisfy market demand remaining after other producers had supplied their quota amounts. As OPEC's swing producer, however, Saudi Arabia would have to absorb more than a proportional share of demand reduction. This already unpleasant situation would be complicated in the Saudi case by its heavy dependence on associated natural gas, which led to shortages of fuel for power generation when oil production there fell to below 3 million barrels per day in mid-1985. Shortly afterward, Saudi Arabia decided to produce oil with only its own needs in mind. Global supplies burgeoned and oil prices plummeted, dipping below $10 U.S. per barrel in June 1986. Although oil prices recovered, they have yet to return to pre-1985 highs. Political Divisions Political conflicts continued to divide OPEC members during this time.

The first Gulf War, between Iran and Iraq (1980–1988), so split the organization that OPEC could not agree on a new secretary-general when it was Iran's turn to nominate one of its nationals. An assistant secretary-general, Fadhil al-Chalabi of Iraq, served as acting secretary-general from 1983 to 1988. Hostility among members during this period made meetings acrimonious and reduced the usefulness of OPEC as a forum for coordinating policy. The end of the Iran–Iraq War provided an opportunity to mend intra-OPEC relations, but the second Gulf War, which began when Iraq invaded Kuwait in 1990, brought new turmoil to oil markets and to OPEC itself. Before Iraq invaded Kuwait, world oil prices were depressed and virtually every OPEC member with excess production capacity was producing over its quota. Unfortunately for Kuwait, it was the only country small enough and close enough to suffer Iraq's wrath directly. After Kuwait was liberated in February 1991, U.N. sanctions against Iraq, imposed in retaliation for the invasion, ended legal oil exports from Iraq.

Starting in December 1996, Iraqi income from smuggled oil was augmented by earnings from the U.N. Oil-for-Food Program, which supervised the marketing of some 3.4 billion barrels of Iraqi crude between the start of the program and March 2003, when the United States and Britain invaded Iraq. The United Nations also ensured that the Iraqi share of oil-for-food income was spent only to meet humanitarian needs. The rest went for war reparations (25 percent after December 2000, 30 percent before), the cost of U.N. weapons inspections (0.8 percent), and administrative and operational costs for the program (2.2 percent). Overproduction by OPEC members remains a problem during periods of ample crude supplies, but political turmoil and consequent supply disruptions in member countries, from Venezuela and Nigeria to Iraq and Indonesia , have masked the problem of excess capacity by creating or even merely threatening war-related shortages. Yet members able to do so are expanding production capacity, which will add to conflict over production ceilings and quota allocations as growing supplies from Iraq come to the market. Overall, OPEC's difficulties in managing and stabilizing the international oil market continue to be beyond member control.

Following the collapse of the Soviet Union , the new Central Asian countries offered attractive terms to potential investors in oil and gas exploration and development. Now rising production from this region adds to pressures on the price structure. The need for capital investment is another axis of competition pitting OPEC against Central Asian and non-OPEC African producers, leading many OPEC members to reconsider their positions on nationalization. IOC operations are expanding in virtually every OPEC nation, while the occupation of Iraq could leave a privatized Iraqi oil industry as one of its legacies. OPEC's gravest failure has been its concentration on oil market conditions rather than on the economy as such. Consequently, it has failed to develop strategies to prepare members for a post-oil world. As long as prices are low and supplies seem secure, oil will remain a competitive fuel in global markets and the deep restructuring necessary to wean member economies from their addiction to oil revenues can be avoided. Yet whether post-Saddam Iraq will be reintegrated into OPEC or not, relying on hydrocarbon revenues as the mainstay of their economies leaves members vulnerable not only to the day-to-day vagaries of the market but also to the impact of long-term structural change.

The almost exclusive concentration of governments, press, and public on oil pricing actually prevents OPEC from devoting significant intellectual and financial resources to other aspects of industry development, including research on alternative sources of energy for export and domestic use. Kuwait's early research into solar power, for example, was quickly abandoned as its oil reserves expanded and reliance on oil revenues seemed less risky than devoting substantial resources to bringing a competing energy source to markets where it already had an advantage. Yet with concerns about pollution and global climate change encouraging consumers to shift out of hydrocarbons, OPEC members' acute dependence on oil and gas revenues leaves their economic security as vulnerable to changes in market structure as they are to political conflict. see also as-is agreement; oil embargo (1973–1974); petroleum, oil, and natural gas. Bibliography Mikdashi, Zuhayr. The Community of Oil Exporting Countries: A Study in Government Cooperation. Ithaca, NY: Cornell University Press, 1972. Mitchell, John, et al. The New Economy of Oil: Impacts on Business, Geopolitics, and Society. London: Earthscan, 2001. Skeet, Ian.

OPEC: Twenty-Five Years of Prices and Politics. Cambridge, U.K.: Cambridge University Press, 1989. Tétreault, Mary Ann. Revolution in the World Petroleum Market. Westport, CT: Quorum Books, 1985. Weisberg, Richard C. The Politics of Crude Oil Pricing in the Middle East, 1970–1975. Berkeley: University of California, 1977. mary ann tÉtreault Pick a style below, and copy the text for your bibliography. MLA OPEC (Organization of Petroleum Exporting Countries) Encyclopedia of Espionage, Intelligence, and Security COPYRIGHT 2004 The Gale Group Inc. OPEC (Organization of Petroleum Exporting Countries) █ JOSEPH PATTERSON HYDER The Organization of Petroleum Exporting Countries (OPEC) is a coalition of eleven nations that controls over fifty percent of the world's oil and natural gas exports. OPEC members are Algeria , Indonesia , Iran , Iraq , Kuwait , Libya , Nigeria , Qatar, Saudi Arabia , United Arab Emirates , and Venezuela .

OPEC strives to protect the economic interests of participating countries while maintaining a stable petroleum market by establishing production quotas for its member states. Large Western oil companies controlled and profited from oil production in the Middle East and Africa in the first half of the twentieth century. The oil companies angered the leaders of these oil-rich countries by retaining 65 percent of the profits. OPEC was established in 1960 in order for the oil producing countries to maintain a larger percentage of oil-derived profits. Although OPEC represented its members in negotiations with the large oil companies, the organization exercised little control over the world oil market until 1973. With inflation spiraling around the world and with increasing oil demands in the United States and Europe , OPEC realized that the stage was set for a major power grab. Inflation led the Richard M. Nixon administration to place price controls on oil products in March 1973, resulting in increased demand. Faced with oil shortages because of increased demand, Nixon tapped U.S. oil reserves. By autumn 1973, the U.S. had nearly drained its reserves. The United States had become more dependent on oil imports than ever before.

The Yom Kippur War began in October 1973, with the United States and Western Europe supporting Israel over Egyptian and Syrian forces. OPEC, comprised primarily of Middle Eastern countries sympathetic to Egypt and Syria , made a move to seize increased control of the world oil market. OPEC imposed an oil embargo against the United States and increased oil prices in Europe. The price of crude oil doubled in a matter of days, from three U.S. dollars per barrel to over five dollars per barrel. In January 1974, prices reached 11.75 dollars per barrel. The oil embargo of 1973–1974 inconvenienced frustrated Americans, who had to modify their lifestyles to accommodate the steep increase in oil prices. The White House encouraged Americans to conserve energy by driving less, carpooling, and turning down thermostats. The Nixon administration responded by extending Daylight Savings Time in the United States, encouraging companies to trim work hours, and pushing Congress to approve construction of the Alaskan Pipeline. The energy crisis that resulted from the OPEC embargo fueled a worldwide recession. The Dow-Jones lost 45 percent over the next two years.

Oil shortages led to long lines at gasoline pumps. When OPEC finally lifted the oil embargo against the U.S. in March 1974, it had established itself as one of the most powerful economic forces in the world. OPEC's strategy backfired, however, when public and political opinion in the United States and Europe was inflamed. The United States increased its oil production with the completion of the Alaskan Pipeline in 1977. Large American and European oil companies also sought to regain some of their lost influence by increasing oil exploration in non-OPEC countries and offshore. As a result, much of the power that OPEC had wielded over world energy markets was eroding. For the first several years of the 2000s, OPEC sought a stable oil market by maintaining an average price of $22 to $28 per barrel of crude oil; exerting price controls had become more difficult and less profitable for members. An example of OPEC's increasing ineffectiveness occurred in 2001, when crude oil prices fell by one-third. During the same year, OPEC cut its oil production by over twenty percent.

OPEC has experienced periods of waning effectiveness in the past, but these periods were usually the result of internal disagreements. OPEC's more recent problems stem from the rise of large, non-OPEC oil producing states, such as Russia , Norway , Mexico, Oman , and Angola . In order for OPEC to remain a viable power, it needs the cooperation of these states. Russia, Norway, and Mexico have tended to follow OPEC's lead, but continued support from these states is questionable. Russia has already indicated that it will proceed independently for the fore-seeable future. Many OPEC members have expressed an unwillingness to limit their oil production and profits if non-OPEC countries continue pumping at full capacity and flooding the market with cheap oil. If OPEC cannot hold sway over these emerging oil-producing states, then the primary reason for the existence of OPEC may eventually be in question. █ FURTHER READING: Organization of Petroleum Exporting Countries The Columbia Encyclopedia, 6th ed. Copyright The Columbia University Press Organization of Petroleum Exporting Countries (OPEC), multinational organization (est. 1960, formally constituted 1961) that coordinates petroleum policies and economic aid among oil-producing nations.

Its Board of Governors and board chairperson are elected by member nations; OPEC's headquarters are in Vienna, Austria. Members consist of Algeria, Angola, Ecuador (membership suspended 1992–2007), Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Indonesia was a member but suspended its membership in 2008. Saudi Arabia has traditionally dominated the organization, owing to its enormous oil reserves; the organization's members produce about 40% of the world's crude oil. In 1973, as a result of the Arab oil embargo against Western nations who supported Israel during the Yom Kippur War (see Arab-Israeli Wars ), OPEC was able to raise oil prices tremendously; the price hike caused inflation in oil-importing nations. Increases ensued from 1975 to 1980. However, as importing countries pursued alternate energy resources, OPEC was forced to lower prices by 1982.

Oil prices remained low through most of the 1980s and 90s, with only a temporary hike during the Persian Gulf crisis of 1990–91 (see Persian Gulf War ). With the cooperation of non-OPEC oil-exporting nations, OPEC was able to raise prices in 1999 by cutting production. As prices rose above $30 a barrel in early 2000, OPEC members agreed to increase production somewhat, cutting back production again a year later in an attempt to maintain prices. A worldwide economic slowdown caused oil prices to fall to near $20 by late 2001, but cutbacks by OPEC and non-OPEC nations, an economic rebound (including very strong economic growth in China), and the U.S. invasion and occupation of Iraq subsequently caused benchmark prices to rise and stay above $40 in mid-2004. Efforts by OPEC to control prices, however, have generally been less influential than market forces, which in 2008 drove the price of oil to nearly $150 in midyear and down to below $40 the year's end. Cite this article Gale Encyclopedia of U.S.

Economic History COPYRIGHT 2000 The Gale Group Inc. OPEC OIL EMBARGO On October 17, 1973, Arab oil producers declared an embargo that drastically limited the shipment of oil to the United States . These producers, members of a cartel known as the Organization of Petroleum Exporting Countries (OPEC), enforced the embargo in response to the Yom Kippur War between Egypt and Israel. In a gesture of support for Egypt OPEC curtailed oil exportation to countries that supported the Israelis. The cartel later extended the embargo to other countries and oil prices soared worldwide. Accustomed to the influx of ample, inexpensive petroleum from OPEC member countries such as Saudi Arabia , Iraq , Iran , and Kuwait , many nations remained at the mercy of these producers of the valuable natural resource. In the United States the embargo brought on a crisis of unequaled proportions. Daily shipments of oil from the Middle East dropped from 1.2 million barrels to a scant 19,000 barrels. Motor vehicle owners faced long lines at the service stations, and were forced to pay dearly for gasoline when they finally took their turn at the pump.

Between May 1973 and June 1974 the average price of gasoline increased by 43 percent. Perhaps the most dangerous effect of the embargo however was the fear and panic it aroused. U.S. citizens were suddenly faced with the shortage of a resource indispensable to every industrialized nation. The shortage was mainly a matter of perception, since OPEC simply withheld oil and had not run out of it. In fact at the time the United States imported only about a third of the oil it used, relying on domestic production for the majority of its supply. But the embargo proved that every drop counted and that a powerful cartel could bring the world to its knees. Daily hardships such as rising oil prices and rates of inflation made the perceived scarcity of the resource seem very real. Indeed the United States was consuming resources faster and more voraciously than most other countries. Although it represented only six percent of the world's population in 1973, the United States regularly consumed 33 percent of the world's energy supply. Station wagons and other gas-guzzlers were enjoying their heyday. A positive effect of the embargo was that it prompted conservation efforts throughout the country.

President Jimmy Carter (1977–1981) declared a national speed limit of 55 miles per hour in order to cut back on gasoline consumption (meanwhile, the number of traffic-related deaths dropped considerably during that period). Between September 1973 and February 1974 the average daily use of petroleum dropped by more than six percent. The U.S. government adopted an energy conservation policy that remained in effect until President Ronald Reagan's (1981–1989) administration discarded it two decades later. The embargo served as a reminder that the world's oil supply was finite and encouraged consumers to use it responsibly, at least for the time being. OPEC exercised an enormous amount of power during the embargo, which lasted well into 1974. But eventually the crisis hurt the cartel as much as the countries outside of it. The skyrocketing prices and the perceived shortage led to a drop in the overall demand for oil. Countries looked to alternative energy sources such as natural gas, nuclear energy, and coal. Oilproducing countries outside of the Middle East stepped up their pace of production and relied more heavily on their domestic supply.

Unfortunately many of the positive effects of the 1973 crisis, the attempts at energy conservation and the move toward relying more heavily on domestic resources, did not last long enough after the embargo was lifted. Conservation efforts dropped off as memories of long waits at the gas station and inflated prices faded. A new breed of larger, less gas-efficient cars took to the roads in the 1990s when sport-utility vehicles and small trucks gained popularity. In the 20 years following the crisis U.S. dependence on imported oil increased rather than decreased, reaching the 50 percent mark in 1993. In 1998 on the twenty-fifth anniversary of the embargo many analysts pointed to such statistics as indications that a crisis like that of 1973 could happen again. They claimed that the low, stable price of oil was misleading people in the United States into believing that the world's supply of the natural resource was unlimited. Meanwhile the nation continues to consume energy at an extraordinary rate. Whether or not it will take another economic crisis to change such ingrained behavior remains to be seen. Topic overview OPEC exercised an enormous amount of power during the embargo, which lasted well into 1974.

But eventually the crisis hurt the cartel as much as the countries outside of it. The skyrocketing prices and the perceived shortage led to a drop in the overall demand for oil. Countries looked to alternative energy sources such as natural gas, nuclear energy, and coal. See also: Embargo, Petroleum Industry FURTHER READING Bode, Denise. "Twenty Years After OPEC Oil Embargo, United States at More Risk Than Ever." The Oil Daily, October 18, 1993. Chalabi, Fadhil J. "OPEC: An Obituary." Foreign Policy, Winter 1997–1998. Crow, Patrick. "Remembering the 1973 Oil Embargo." The Oil and Gas Journal, October 18, 1993. "The Energy Embargo of 1973," [cited May 25, 1999] available from the World Wide Web @ Feldman, David Lewis. "Revisiting the Energy Crisis: How Far Have We Come." Environment, May 1995. Foner, Eric, and John A. Garraty, eds. The Reader's Companion to American History.

Boston: Houghton Mifflin Co., 1991. Cite this article

Question: In which country does OPEC maintain its headquarters?
Answer: Austria