OPEC is currently located in Vienna. However, this is not always the case. Headquarters in Geneva. Then it moved. This change took place in 1965. The move marks a shift to a more neutral position in global oil politics.
OPEC exists to coordinate oil policy. Provide technical support. It tries to stabilize the market. However, this member list is not static. Countries leave. They return. They suspend their status. Understanding this development shows how fragile the consensus among oil producing countries is.
Who founded the club?
The story begins in Baghdad. 10.-14. September 1960. Five countries organized the conference. They are tired of foreign companies setting prices. They want control.
Saudi Arabia. Iran. Iraq. Kuwait. Venezuela.
These are the founding members. They officially founded the organization in January 1961. The whole world is watching. Then others joined in.
Qatar joined in 1961. Indonesia and Libya joined in 1962. Abu Dhabi joined in 1967. Algeria joined in 1969. Nigeria joined in 1971. Ecuador joined in 1973.
The list is getting longer all the time. But it also causes friction.
OPEC’s revolving door
Look at the exit. They tell you as much as the entries.
Gabon joined in 1975. Withdrawn in January 1995. Returned in 2016. Ecuador’s membership was suspended from 1992 to 2007. After returning, he stayed until 2020. After that, he resigned.
Indonesia suspended its membership in 2009, briefly rejoined in 2016, but then suspended its membership again.
Qatar ended its membership in January 2019. Why? A prolonged blockade by other OPEC countries. It wanted to focus on natural gas production instead.
Angola joined in 2007. It withdrew in January 2024.
Soon after, the United Arab Emirates announced its withdrawal for 2026.
“The impact of individual OPEC members… depends on their reserves and production levels.”
It’s not just red tape. This is economics. When the math no longer applies to state budgets, states withdraw. Or at least pauses.
How OPEC works in practice
This organization meets twice a year. Special meetings are held when necessary. They discuss the price of oil. Production quotas. Related matters.
The board is responsible for managing day-to-day operations. It convenes the conference. It draws up the annual budget. Each member nominates a representative. The chairman’s term of office is one year.
The secretariat takes care of the laborious work. Includes research department. Energy research. The term of office of the Secretary General is three years.
But here’s the problem. Members differ wildly. Geography. religion. political interests. Economic power.
Some countries have huge oil reserves per capita. Kuwait. Saudi Arabia. United Arab Emirates. They are financially strong. they have flexibility. Production can be adjusted without causing an economic collapse.
Saudi Arabia holds the reins. It has the second largest reserves. The population is relatively small, but growing rapidly. Traditionally, Riyadh determines the overall production level. It influenced prices.
Venezuela has the largest reserves. However, its production is only a fraction of Saudi Arabia’s production. The gap between potential and reality is huge.
Is this a cartel?
Experts discuss this. Semantics matter.
One side says OPEC is not a cartel. Or at least not an effective one. They refer to sovereignty. Each country is independent. Coordination is hard. Countries break agreements. They cheat at ministerial meetings.
The other side says it is a cartel. An effective one. They believe that the cost of production in the Persian Gulf is less than 10% of the selling price. Without OPEC adjustments, prices fell to the level of these costs.
OPEC claims that its member countries hold four-fifths of the world’s proven oil reserves. They account for two fifths of the world’s oil production.
This power exists. But it is not monolithic.
Saudi Arabia controls about a third of OPEC’s total reserves. It plays a leading role.
Iran. Iraq. Kuwait. United Arab Emirates. The combined reserves of the countries exceed the reserves of Saudi Arabia. But their behavior is different.
Kuwait has a small population. It cuts production relative to its reserves. Protects long-term value.
Iran and Iraq have large and growing populations. They produce at high levels relative to reserves. They need cash now.
Revolutions. Wars. These have a negative impact on production. They disrupt quotas. They force everyone else to pick up the slack.
UAE announces withdrawal in 2026, why?
Maybe the market has changed. Perhaps their internal economy has changed. Maybe they no longer believe in collective bargaining.
The oil market has never been quiet. And neither are its players.
Transition from price support to market share
OPEC did not begin to dominate the world economy. It started in 1960 as the defensive coalition. The goal is simple. The purpose is to prevent self-interest (large multinational producers and refiners) from unilaterally lowering the “announced” price of oil. Members want a seat at the table. They coordinate the production. But they kept their individual sovereignty intact.
It worked to some extent. Prices fell only in the 1960s. However, higher production led to a slow bleed. Nominal prices fell from $1.93 per barrel in 1955 to $1.30 per barrel in 1970. The real change occurs when the focus shifts. The goal is no longer just price. This is sovereignty.
Some members nationalized their reserves. They rewrote the contracts with the big oil companies. They took their possessions.
1973 shock and petro dollar era
Then came the crisis. October 1973. OPEC raised prices by 70%. By December after the Yom Kippur War, another 130 percent hike hit the market. From 1968, the Arab countries organized under OAPEC turned on their customers. They embargoed shipments to the United States and the Netherlands. They were the main supporters of Israel during the conflict.
The result was chaos. Severe shortages in the West. Inflation continues to rise. The oil crisis is not temporary. It was a structural break.
As the decade progressed, prices rose tenfold between 1973 and 1980. The leverage was undeniable. Oil money was poured into OPEC’s coffers. Countries launched large-scale domestic development programs. They invested heavily overseas, especially in the United States and Europe. An international fund was established to help developing countries. The power relationship has reversed.
Backlash and the collapse of the 1980s
Importing countries do not accept the new normal. They reacted. Slowly at first. Then they become aggressive. Reduce energy consumption. They found new sources. Norway. The United Kingdom. Mexico. They developed alternatives. coal. natural gas. Nuclear power.
OPEC tried to fight back. Saudi Arabia and Kuwait cut their production in the early 1980s. They tried to stick to the published prices. Failed.
The 1980s were brutal for oil revenues. Saudi Arabia suffered the most. By 1986, its revenue had fallen by four-fifths. Overall, revenues fell by about two-thirds across all producing countries (OPEC and non-OPEC). The price of oil fell below 10 dollars per barrel.
The internal politics were just as damaging. The Iran-Iraq war (1980-88) tore the organization apart. Two members at war? This is not an alliance. It’s a fracture.
Saudi Arabia has made a strategic shift. No more defending the price. Defend market share instead. It was a pragmatic, if painful, decision. The other members followed. The quotas still exist, but the price support mechanism was dead.
Modern volatility and the green transition
This strategy held during the 1990s. The focus was on production quotas. Then came the new millennium. Prices started to rise again. Why? Better unity among members. Cooperation with non-members, such as Russia, Norway, Oman and Mexico. The situation in the Middle East is tense. Venezuela’s political crisis.
In 2008, prices rose to an all-time high. Then the global financial crisis happened. The Great Recession followed. Prices fell again.
Since the 1970s, the story has changed. It is no longer just a matter of supply and demand disruptions. This is about the future of the resource itself. The international community is intensifying its efforts to reduce the burning of fossil fuels. The contribution to global warming is undeniable. The greenhouse effect is accelerating.
Demand for oil will inevitably fall. Eventually.
OPEC is trying to adapt. They try to develop a coherent environmental policy. This was a difficult transition for an organization based on mining. OPEC’s power has waxed and waned since 1960, and It will likely continue to do so. But as long as oil remains a viable energy source, the organization will remain a central player. The question is not whether they matter. It’s how they survive the transition.
