OPEC: THE ORGANIZATION

The Organization of Petroleum Exporting Countries (OPEC) was founded in 1960 as an intergovernmental organization with five member states. Membership in the organization was and remains voluntary, in that a member state may leave the organization at any time. Joining the organization, however, requires the approval of other member states. In early 2000, OPEC has 11 member states.

The essential purpose of the organization has not changed since it was founded. That purpose is to (1) unify and coordinate the petroleum policies of the member states, and (2) safeguard the general interests of the member states.

Knowledge of the enduring purpose of the organization does not address the underlying issue of why the five original member states of OPEC negotiated and ratified the treaty to establish the organization. The analogy of the labor union may be used to explain the motivation of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela to create OPEC. Labor unions typically are formed to provide individual workers with increased power through unified action to negotiate in their own interests with a ground of employers which is smaller in number but much stronger in power than are the workers as individuals.

In 1960, the power in the global crude petroleum industry was in the collective hands of the so-called “Seven Sisters,” which were seven powerful multinational oil companies headquartered in Western nations. The five countries that were to become the founding members of OPEC were, in 1960, just five more Third World countries for which the export of their resources in raw form was the centerpiece of their economic policy. In the case of these five countries, that resource was crude oil. Not only were the five countries subordinate to the “Seven Sisters” in price management of their crude oil resources, the seven multinational oil companies, for the most part, owned concessionary rights to those crude oil resources whic…

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