An Introduction to the Oil Industry & OPEC
The Organization of the Petroleum Exporting Countries (OPEC)
Is an intergovernmental organization currently made up of twelve oil exporting countries that work together to coordinate their petroleum policies.
The Organization was formed in response to the activities and practices of seven large international oil companies (IOCs) known as the “Seven Sisters”. The activities of these IOCs were often detrimental to the growth and development of the oil producing
host countries, whose natural resources they exploited.
The first move towards the establishment of OPEC can be traced back to 1949, when Venezuela approached four other oil producing developing countries—Iran, Iraq, Kuwait and Saudi Arabia—to suggest that they explore avenues for regular and closer cooperation on oil matters.
But the main impetus for OPEC’s birth came a decade later, after the IOCs had decided to reduce the price of oil without first asking the governments. In response, several oil-producing countries decided to hold a meeting in Cairo, Egypt, in 1959. This was the First Arab Petroleum Congress. Iran and Venezuela were invited as observers.
The meeting adopted a resolution asking IOCs to consult the governments of oil-producing countries before changing the posted price of oil. But the IOCs ignored the oil-producing countries. And in August 1960, they once again lowered the price of oil.
