Kiran Stacey Fifty years on, OPEC can no longer be ignored

Fifty years after its creation, Opec’s carefully-worded announcements are now pored over like statements from the Kremlin at the height of the Soviet era. Nuanced phrasing and tone are studied for a sense of what member countries might do in terms of production.

So when Abdalla El-Badri, the secretary general said today, “Prices are moving $70-$80 a barrel. [This] is comfortable at this time,” the world took notice.

And among certain circles, it is not just opacity that makes Opec like the Kremlin, it is the menace it holds too. Here’s an excerpt from Foreign Policy magazine, for example, in an article entitled How to Ruin Opec’s 50th Birthday:

As their collective power grew, Opec members learned to use oil as an instrument of geopolitical power. Their boldest experiment occurred in 1973, when the cartel’s Arab members imposed a painful five-month oil embargo to deter Western nations from supporting Israel in the Yom Kippur War.

Since then, Opec has earned a reputation as a club of greedy, non democratic governments whose oil ministers, who gather in Vienna every few months to set the price of crude, hold everyone else’s economic fate in their hands.

Presumably then the organisation’s foundation must have sent tremors around the world, or at least the energy world. That’s what El-Badri would have us believe, telling us today:

In the context of that time, it was therefore a heroic act by the founder members to come together in the Iraqi capital 50 years ago and decide that enough was enough. They could no longer allow the lifeblood of their economies to be drained.

In fact Opec’s creation was met with much less fuss than it has created in recent years. This is from Daniel Yergin’s epic history of oil, The Prize:

The companies certainly did not take the organisation all that seriously. “We attached little importance to it,” said Howard Page of Standard Oil, “because we believed it would not work.” Fuad Rouhani, the Iranian delegate to the founding conference in Baghdad and Opec’s first secretary general, observed that the companies initially pretended “Opec did not exist.”

In fact it wasn’t until the oil crisis of 1973 that people began to take the organisation seriously, as only then did member countries start to take control of the production of their own oil.

Perhaps then we should have another 50th birthday celebration in 13 years time, marking the year Opec became the organisation we know today.