OPEC promotes the use of petroleum and attempts to make oil production profitable for its member countries. Petroleum is one of the three fossil fuels contributing to an increase in atmospheric CO2, which is a key factor in global warming.

Meeting in Baghdad, Iraq, September 10-14, 1960, Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela formed the Organization of Petroleum Exporting Countries (OPEC). The organization is often referred to as a cartel, with the aim of coordinating petroleum production and policies. Through these actions, the members hope to achieve maximum economic return, without causing a decrease in demand for petroleum. There are seven other active members (Algeria, Angola, Ecuador, Libya, Nigeria, Qatar, and the United Arab Emirates).

OPEC is an intergovernmental organization with its headquarters in Vienna, Austria. Any oil-exporting country may apply for membership, which is granted if the application is accepted by three fourths of the current members, including all five of the founding members. At the OPEC Conference all members have one vote, and the conference alone has the power to make decisions on all policy issues of substance, by unanimous vote. At its semiannual sessions, the conference also appoints a secretary general who oversees the daily operation of the organization. All sections of the organization are charged with developing an acceptable policy that will match supply and demand for petroleum, allowing for stable prices and supplies. OPEC must take into consideration the effect these policies will have on other oil exporting countries and upon the nations that consume petroleum.

For the first decade of its existence, OPEC had limited opportunities (Leggett, 2001). Large American and European petroleum companies dominated all aspects of oil production and marketing. Around the end of the decade, most members nationalized oil production, giving themselves greater power. This also gave the countries a greater stake in having a stable marketplace for trading petroleum. OPEC set production quotas for each country that insured relative stability, since slightly more than half the traded oil originates in OPEC. OPEC prices all of its oil in U.S. dollars.

In 1973, American economic problems had caused a decrease in the value of the dollar. Thus, OPEC leaders desired to increase the price of oil. On October 6, the Yom Kippur War was launched by Egypt and Syria against Israel, giving OPEC an excuse to raise prices and make a political statement.

Led by the Persian Gulf oil producers, other Middle Eastern states sought to weaken the ties between the United States and Israel. On October 17, OPEC decided to end oil exports to those countries supporting Israel. OPEC cannot force its members to follow its decisions. However, within two days all the Arab states that were OPEC members joined in this action, as did Iran. In just over two weeks, OPEC cut production by one fourth. The actual military conflict was only twenty days in length, but the oil embargo lasted five months. The rising oil prices were a strong incentive for other oil producing countries to increase their production. This caused the resolve of some participating in the embargo to weaken, so with the military conflict ended and the price of oil greatly increased, OPEC could declare victory and stop boycotting the American market.

Even though the Arab oil embargo only affected 7 percent of the oil available to the United States, it sent tremors throughout the United States. The psychological impact of people worrying about the gasoline supply resulted in long lines forming at gas stations across the country. Many areas of the country suffered gasoline shortages (Mills, 2008). By the end of the embargo, the price of gasoline had increased by about 45 percent nationwide. The threat of another oil embargo led to support for more domestic oil production and exploration and for non-OPEC suppliers. In the United States, the long term effect of the embargo was energy conservation, including mandated automobile efficiency standards. By decreasing dependence upon OPEC oil, the United States was able to decrease OPEC's economic and political power.

The focus of OPEC's work since the mid-1970's has been to stabilize oil prices in a range that is advantageous for its members. About twice a decade an unexpected political or economic situation has affected the oil markets, causing rapid price increases or decreases. OPEC desires stability or orderly petroleum price increases. Since the 1990's a new challenge has arisen: the strong international movement to reduce dependence upon fossil fuels to combat global warming. OPEC fears this could significantly reduce the world's demand for oil. During the 2000's, OPEC produces about 45 percent of the world's petroleum and anticipates this increasing to over 50 percent in the next decade. While it has passed resolutions in favor of environmental responsibility and efficient automobiles, it also lobbies hard against any special taxation of oil, or petroleum products. OPEC believes that in the foreseeable future there is a continuing major role for oil. To offset any contribution oil makes to global warming, it advocates carbon capture and storage technologies, which captures carbon dioxide pollution and stores it underground. It is an advocate for investment in exploration for new oil fields and development of current fields.

The balancing act that OPEC must undertake between optimal profitability and continued demand for oil products means that the secretariat is very active. The secretariat is constantly trying to forecast the global economic future, while at the same time watching for political activity that might be seen as a threat to the stability of the oil supply. OPEC was formed because there was a strong desire for the governments and citizens of the countries with the oil resources to get a larger share of the profits, rather than having them go to foreign firms. As such, it is only to be expected that OPEC will push hard to retain its markets for oil. With its central focus on economic interests, it should be expected that OPEC will fight hard to stop any movement to greatly reduce the use of oil, even if these changes are part of a process toward ending global warming. To get OPEC support on climate change issues, any proposals must allow continued use of petroleum products.

References

1. Leggett, Jeremy. Carbon War: Global Warming and the End of the Oil Era. London: Routledge, 2001.

2. Mills, Robin. The Myth of the Oil Crisis: Overcoming the Challenges of Depletion, Geopolitics, and Global Warming. Santa Barbara, Calif.: Praeger, 2008.

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