OPEC was created at the Baghdad Conference in Iraq in September 1960. The founding members of the organization were Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Eight other countries later joined these five countries: Qatar, Indonesia, Libya, United Arab Emirates, Algeria, Nigeria and Ecuador and Gabon who both withdrew from the organization between 1992 and 1994. All member countries use oil as a main source of income and need careful regulation of their scare resource. The objective is to co-ordinate and unify petroleum policies among Member Countries, in order to s

OPEC’s fortunes began to shift in the 1970’s as rising demand for oil began to overtake production. While the demand was rising from consumers so was the oil producers’ demand. Muammar al-Qaddafi, after seizing power in military coup in Libya, demanded and received a 20 percent increase in royalties. This move triggered a series of new demands that ratcheted up oil prices and oil OPEC members’ profits (world news Archive). As the world oil market tightened, the Arab world became more vocal in calling for use of using oil as a persuasion to achieve their economic and political objectives. This was most greatly realized in the oil embargo during the 1973 October War between Egypt and Israel. Saudi Arabia refused to increase production in order to halt rising prices unless the United States backed the Arab position. Arab oil ministers than agreed to an embargo to further their political objectives. Production would be cut by 5 percent per month until west gave in. Countries adopting a friendly position with the Arabs would be unaffected. When Nixon publicly proposed a $2.2 billion military aid package for Israel, Arab countries began an oil embargo against the United States (World news Archive). OPEC struggled to come up with a solution, but before the problem worked itself out the United States was sent into a deep recession. Oil prices jumped from $3.00 a barrel before the conflict and then leaped to $11.65 a barrel, causing the United States GDP to decline by 6 percent for the next two proceeding years (World news Archive)!

On OPEC’s web site they comment on the oil shock of the 1970’s:

By looking at large industries United States we can actually see how the oil inflation effected the economy in the consumers view. Total employment at three major car makers—General Motors Corp., Ford Motor Co., and Chrysler Corp.—had declined 178,6000 from their peak in 1973 when the production was at a record high level. 11.5 million cars were sold, compared with 8.8 million in 1974 and an 8.5 million in 1975 (World News Archive). The industries attributed their loss to depressed car sales, a smaller market share and rising interest expenses due to the increased borrowi

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