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An organization of about a dozen nations that sell oil to other nations. The purpose of OPEC, a cartel, is to control the production of oil and to establish favorable oil prices for the member nations. Most OPEC countries, such as Libya and Saudi Arabia, are in the Middle East or northern Africa, but Indonesia and Venezuela are members as well.
Note: OPEC was formed in the early 1960s but had little impact before 1973. Then, to punish the United States and several Western nations for supporting Israel in a war against Egypt and Syria (see Arab-Israeli conflict), the Arab members of OPEC placed an embargo on the sale of oil to the United States and some of its allies. The result was a severe gasoline shortage and a recession in Western nations, especially in Europe, Canada, and the United States. Since then the price of oil has fluctuated, partly because OPEC members have had difficulty agreeing on and policing a common pricing policy.
Organization of Petroleum Exporting Countries - OPEC
An organization consisting of the world's major oil-exporting nations, OPEC was founded in 1960 to coordinate the petroleum policies of its members and to provide member states with technical and economic aid. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.
Investopedia Commentary
OPEC membership is open to any country that is a substantial exporter of oil and that shares the ideals of the organization. OPEC has 11 member countries, including founder members Iran, Iraq, Kuwait and Venezuela.
OPEC member nations currently supply about 40% of the world's crude oil and 16% of its natural gas. At the end of 2003, OPEC nations possessed about 78% of the world's total proven crude oil reserves.
Related Links
Getting A Grip On The Cost Of Gas
See also: Antitrust, Cartel, Petrodollars, Price Fixing, Sour Crude, Sweet Crude
Also spelled: OPEC