Fifty years ago, five of the world’s top oil producing countries convened in Baghdad to form the Organization of Petroleum Exporting Countries (OPEC), the most powerful cartel in modern history. Contrary to popular belief, OPEC was not the brainchild of an Arab but of Venezuela’s Energy and Mines minister Juan Pablo Pérez Alfonzo who got fed up with the domination of the petroleum industry by the Seven Sisters, the seven Anglo-American oil companies, and particularly with the Eisenhower Administration’s law that forced quotas on Venezuelan and Persian Gulf oil imports in favor of Canadian and Mexican oil firms. Pérez Alfonzo, who is otherwise known for titling oil “the Devil’s excrement,” convinced his Saudi and Iranian counterparts to join a consortium of major oil producers whose goal would be to “assert its member countries legitimate rights” and to gain “a major say in the pricing of crude oil on world markets.”
OPEC did just that. In the decades that followed, the cartel nationalized international oil companies’ oil fields and infrastructure assets, and gained the upper hand in price negotiations, turning the Seven Sisters into seven dwarfs whose ability to influence oil prices is virtually nil.
As their collective power grew, OPEC members discovered the use of oil as an instrument of national power. During the 1967 Six-Day War, Arab oil producers refused to sell oil to western countries that supported Israel, but the war ended so quickly that the world paid little attention. Six years later, when the same exporters imposed a six-month oil embargo and “No Gasoline” signs spread throughout America’s service stations, the economically ruinous oil weapon, exacerbated by counterproductive domestic policies, was felt by all.
Since then, OPEC has earned a reputation of a club of greedy, non-democratic governments whose oil ministers gather in Vienna every few months to fix the price of crude and, in more than one way, determine our security and economic well being.
This reputation is well deserved.