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OPEC - The World's Oil Cartel

OPEC is the Organization of Petroleum Exporting Countries. It was founded in Bagdad in 1960 and has currently 11 members.  OPEC’s aim is to regulate the amount of oil that member nations produce and to keep prices at a steady rate. The countries get together twice a year and agree on how much oil each country is allowed to produce. OPEC’s headquarters are in Vienna, the capital of Austria.

Before OPEC was created, there were large oil companies that controlled the world’s oil production. They wanted to sell as much oil as possible and did not let governments influence their decisions.  Oil-rich countries, especially in the Middle East, wanted more control over the oil that they produce. As a result, Iran, Iraq, Saudi Arabia, Kuwait and Venezuela founded OPEC. In the following years Qatar, Indonesia, Libya, Algeria, Nigeria, Ecuador, Angola and the United Arab Emirates also become members.

In the 1960s, OPEC did not have much power. This changed in 1973 when the third Arab-Israeli war started. The United States and a few European countries supported Israel.  As a form of punishment, OPEC nations, influenced by the Arab countries, stopped selling oil to the West. Within the next six years oil prices rose to ten times the price of the early 1970s. OPEC countries became rich with so-called petrodollars; the West sank into deep recession because they needed OPEC’s oil.

 

 

In the aftermath of the energy crisis of the 1970s, western countries started looking for alternative forms of energy in order to become more independent from OPEC and the oil-producing nations. In 1986, oil prices dropped to the lowest rate in history. Oil-producing nations lost much of their income.  In the 80s and 90s OPEC’s power diminished, often because of conflicts and internal arguments and because member states could not agree on production quotas. Some OPEC countries did not keep agreements and produced more oil, thus lowering prices.

After 2000, oil prices began to rise again and reached an all-time high in 2007. The financial crisis of 2007 and 2008 hit world economy hard and oil prices fell once again. Since the Arab Spring of 2011, prices have gone up and down several times.

Today OPEC still controls about 60% of the world’s oil reserves and produces 40% of the world’s oil. Saudi Arabia is the most powerful member of the group, because it has the largest reserves. Even though there have been quarrels in the cartel in the last 5 decades it remains a powerful organization.

 

 

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Words

  • aftermath = what comes after a special event
  • agree on =  decide, come to a decision
  • agreement = promise, deal
  • aim = goal; what somebody wants to do
  • all-time high = the highest price  in history
  • alternative = other, new
  • amount = how much of a product
  • argument = quarrel, fight
  • as a result = that is why
  • capital = most important city of a country; in which the government is
  • cartel = countries that agree to sell something at the same price
  • currently = right now, at the moment
  • decision = deciding something
  • diminish = become less, weaker
  • drop= go down
  • economy = the system by which a country’s money and goods are produced and used
  • especially = above all
  • even though = while
  • found-founded = start, create something new
  • government = people who rule a country
  • headquarters = the main building of an organization
  • income = the money you get for selling products
  • independent = free
  • influence = power, control
  • internal = between member countries
  • petrodollars = money that you get by selling oil
  • petroleum = oil
  • production quota = official limit on how much a country can produce
  • punishment = penalty; to make someone suffer because they have done something wrong
  • quarrel = argument, fight
  • rate = here: price
  • recession = difficult time in business, when there is less production and people do not earn enough money and buy things
  • regulate = control
  • remain = stay
  • reserves = here: the oil that probably is in the ground and can be produced in the future
  • rise – rose- risen = go up
  • several = a few
  • steady rate = stable price
  • support = help; assist
  • thus = therefore
  • twice = two times