The Organization of the Petroleum Exporting Countries (OPEC OH-pek) is an intergovernmental cartel enabling the co-operation of leading oil-producing and oil-dependent countries in order to collectively influence the global oil market and maximize profit. It was founded on 14 September 1960 in Baghdad by the first five members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The organization, which currently comprises 11 member countries, accounted for 38 percent of global oil production in 2022. It is estimated that 79.5 percent of the world's proven oil reserves are located within OPEC nations, with the Middle East alone accounting for 67.2 percent of OPEC's total reserves. In a series of steps in the 1960s and 1970s, OPEC restructured the global system of oil production in favor of oil-producing states and away from an oligopoly of dominant Anglo-American oil firms, the "Seven Sisters". In the 1970s, restrictions in oil production led to a dramatic rise in oil prices with long-lasting and far-reaching consequences for the global economy. Since the 1980s, OPEC has had a limited impact on world oil-supply and oil-price stability, as there is frequent cheating by members on their commitments to one another, and as member commitments reflect what they would do even in the absence of OPEC. The formation of OPEC marked a turning point toward national sovereignty over natural resources. OPEC decisions have come to play a prominent role in the global oil market and in international relations. Economists have characterized OPEC as a textbook example of a cartel, a group whose members cooperate to reduce market competition and obtain monopoly profits. The current OPEC members are Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, and Venezuela. The former members are Angola, Ecuador, Indonesia, Qatar, and the United Arab Emirates. OPEC+ is a larger group consisting of OPEC members and other oil-producing countries. It was formed in late 2016 to better control the global crude oil market. Canada, Egypt, Norway, and Oman have attended some meetings as observers. The United Arab Emirates left both OPEC and OPEC+ in 2026.
Organization and structure In a series of steps in the 1960s and 1970s, OPEC restructured the global system of oil production in favor of oil-producing states and away from an oligopoly of dominant Anglo-American oil firms, the Seven Sisters. Coordination among oil-producing states within OPEC made it easier for them to nationalize oil production and structure oil prices in their favor without incurring punishment by Western governments and firms. Prior to the creation of OPEC, individual oil-producing states were punished for taking steps to alter the governing arrangements of oil production within their borders. States were coerced militarily (e.g. in 1953, the US and UK sponsored a coup against Mohammad Mosaddegh after his government nationalized Iran's oil production) or economically (e.g. the Seven Sisters slowed down oil production in one non-compliant state and ramped up oil production elsewhere) when they acted contrary to the interests of the Seven Sisters and their governments. The organisational logic that underpins OPEC is that it is in the collective interest of its members to limit the world oil supply in order to reap higher prices. However, the main problem within OPEC is that it is individually rational for members to cheat on commitments and produce as much oil as possible. Political scientist Jeff Colgan has argued that OPEC has since the 1980s largely failed to achieve its goals (limits on world oil supply, stabilized prices, and raising of long-term average revenues). He finds that members have cheated on 96% of their commitments. The analysis spans over the period 1982–2009. To the extent that member states comply with their commitments, it is because the commitments reflect what they would do even if OPEC did not exist. One large reason for the frequent cheating is that OPEC does not punish members for non-compliance with commitments.
Leadership and decision-making
The OPEC Conference is the supreme authority of the organisation, and consists of delegations normally headed by the oil ministers of member countries. The chief executive of the organisation is the OPEC secretary general. The conference ordinarily meets at the Vienna headquarters, at least twice a year and in additional extraordinary sessions when necessary. It generally operates on the principles of unanimity and "one member, one vote", with each country paying an equal membership fee into the annual budget. However, since Saudi Arabia is by far the largest and most-profitable oil exporter in the world, with enough capacity to function as the traditional swing producer to balance the global market, it serves as "OPEC's de facto leader".
International cartel At various times, OPEC members have displayed apparent anti-competitive cartel behavior through the organisation's agreements about oil production and price levels. Economists often cite OPEC as a textbook example of a cartel that cooperates to reduce market competition, as in this definition from OECD's Glossary of Industrial Organisation Economics and Competition Law:
International commodity agreements covering products such as coffee, sugar, tin and more recently oil (OPEC: Organisation of Petroleum Exporting Countries) are examples of international cartels which have publicly entailed agreements between different national governments. While OPEC is at times cited as a textbook example of a cartel, various authoritative and academic sources provide a broader perspective on the organization's role. For instance, the US Energy Information Administration's glossary explains OPEC as:
An intergovernmental organization whose stated objective is to 'coordinate and unify the petroleum policies of member countries'. The Oxford Dictionary of Energy Science (2017) defines OPEC as:
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