PETROLEUM EXPORTING COUNTRIES, ORGANIZATION OF

(OPEC) multinational organization that was established to coordinate the petroleum policies of its members and to provide the member states with technical and economic aid. The organization was established in September 1960 and formally constituted in January 1961 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Members admitted since OPEC was founded include Qatar (1961), Indonesia and Libya (1962), Abu Dhabi (1967; membership transferred to the United Arab Emirates in 1974), Algeria (1969), Nigeria (1971), Ecuador (1973), and Gabon (1975). The headquarters of OPEC, initially in Geneva, were moved to Vienna in 1965. Policy is formulated at conferences of delegates from member countries, which meet at least twice a year. Conference decisions are made on the principle of unanimity. OPEC decisions began to be of major importance in the world oil market at its 35th conference in Vienna in September-October 1973, when it raised oil prices by 70 percent. The dominant Middle Eastern members of OPEC used succeeding price increases as a political weapon aimed at Western nations in retaliation for their support of Israel against its Arab neighbours in the so-called Yom Kippur War of October 1973. Prices were accordingly raised another 130 percent at the Tehran conference of December 1973, and a temporary embargo was placed on oil shipments to the United States and The Netherlands at the same time. Other price increases followed in 1975, 1977, 1979, and 1980, which ultimately raised the price of a barrel of crude oil from US $3.00 in 1973 to $30.00 in 1980. The oil price increases brought a great upsurge in the government revenues of the OPEC countries. They spent part of these revenues on the development of their economies and also invested large sums in the industrialized countries, particularly the United States. A significant amount was also placed with U.S. banks to finance loans to developed and developing countries. Other sums went to the European currency market. OPEC also established the OPEC Fund for International Development in 1976 to aid developing countries. By the early 1980s, however, the influence of OPEC on world oil prices was declining; Western industrialized countries were responding to increased oil prices by exploiting alternative sources of energy (most notably coal and nuclear energy), by locating and drilling more of their own oil resources, by turning to other emerging oil-exporting countries to meet their fossil-fuel needs (particularly Mexico and the Soviet Union), and by encouraging conservation programs to decrease their overall demands for energy. These efforts by the West significantly reduced dependence on OPEC oil and by 1982 had forced the OPEC countries to lower prices and cut back production. Decreasing Western demand for OPEC oil was a severe blow to the organization's unity, which had already been damaged by internal conflicts and by the Iran-Iraq War that had broken out in 1980. The member countries of OPEC differ in their oil endowment, as well as in their economic and political interests. Four of the members-Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates-have very large oil reserves in relation to their populations. They are also financially strong and can thus afford more flexibility in adjusting their output to serve long-term interests. Saudi Arabia, having the largest reserves, has traditionally played a decisive role in determining prices, although its influence has diminished. OPEC has a Board of Governors, appointed by the member countries, with a chairman elected by the conference. There is a secretariat for administration and research, located in Vienna.