OPEC facts for kids

Quick facts for kids Organization of the Petroleum Exporting Countries (OPEC)
Flag Coat of arms
OPEC and OPEC+ members
Headquarters	Vienna, Austria
Official language	English
Type	Organization
Membership	12 OPEC members 10 OPEC+ members 6 observer states
Leaders
• Secretary General	Haitham al-Ghais
Establishment	Baghdad, Iraq
• Statute	September 1960 (64 years ago) (September 1960)
• In effect	January 1961 (64 years ago) (January 1961)

The Organization of the Petroleum Exporting Countries (OPEC, pronounced OH-pek) is a group of major oil-producing countries. They work together to influence the global oil market. Their main goal is to get the best prices for their oil.

OPEC was started on September 14, 1960, in Baghdad, Iraq. The first five members were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Today, OPEC has 12 member countries. These countries produce about 38% of the world's crude oil. They also hold nearly 80% of the world's known oil reserves. Most of these reserves are in the Middle East.

In the 1960s and 1970s, OPEC changed how oil was produced globally. Before OPEC, a few large oil companies, called the "Seven Sisters," controlled most of the oil. OPEC helped oil-producing countries gain more control over their own natural resources.

In the 1970s, OPEC limited oil production. This caused oil prices to rise sharply. This had big effects on the world economy. Since the 1980s, OPEC's impact on oil supply and prices has been less strong. This is partly because members sometimes produce more oil than they agreed to.

However, since 2020, OPEC countries and other oil producers (called OPEC+) have helped stabilize oil markets. This was important after the COVID-19 pandemic caused oil demand to drop. OPEC says it is not a monopoly or a cartel. Instead, it aims to keep oil markets stable. This helps producers, consumers, and the world economy.

As of 2018, current OPEC members include Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates, and Venezuela. Some countries like Angola, Ecuador, Indonesia, and Qatar used to be members. The larger group, OPEC+, includes OPEC members and other oil-producing countries. They formed in 2016 to have more influence on the global oil market. Canada, Egypt, Norway, and Oman are observer states.

In December 2016, OPEC and non-OPEC countries signed the Declaration of Cooperation (DoC). This agreement helps them work together to keep the global oil market stable. They adjust oil production, meet regularly, and share information. This helps stabilize oil prices and benefits everyone. The DoC has been very successful and extended many times.

How OPEC Works

OPEC was created to help oil-producing countries. Before OPEC, individual countries could be punished if they tried to change oil production rules. For example, in 1953, there was a coup against Mohammad Mosaddegh after he took control of Iran's oil. Oil companies could also slow down production in one country and increase it elsewhere.

OPEC's main idea is that if members limit the world's oil supply, prices will go up. This means more money for them. However, it's often tempting for individual members to produce more oil than they agreed to. This is because selling more oil can bring in more money for that country.

Some experts say OPEC has not always met its goals. They point out that members often don't stick to their agreements. This is partly because OPEC doesn't have strong ways to punish members who don't follow the rules.

In June 2020, OPEC+ countries agreed to a "Compensation Mechanism." This helps make sure everyone follows the agreed oil production cuts. This helps keep the oil market stable.

Leaders and Decisions

OPEC Conference delegates meeting in Quito, Ecuador, in December 2010.

The OPEC Conference is the top decision-making body. It includes delegations usually led by the oil ministers from member countries. The main leader of OPEC is the OPEC Secretary General.

The Conference usually meets in Vienna, Austria, at least twice a year. They also have extra meetings if needed. Decisions are usually made with everyone agreeing, and each country has one vote. All countries pay the same membership fee. However, Saudi Arabia is the largest oil exporter. It often acts as the main leader of OPEC.

Is OPEC a Cartel?

A cartel is a group whose members work together to reduce competition in a market. Sometimes, OPEC members have made agreements about oil production and prices that look like cartel behavior. Many economists call OPEC a textbook example of an international cartel.

However, OPEC members prefer to say they help stabilize the market. They argue that OPEC was formed to balance the power of the "Seven Sisters" oil companies. Also, other oil suppliers outside OPEC still have enough market share to create competition.

It's also hard for OPEC to act like a perfect cartel. This is because each member country benefits from selling more oil than its agreed limit. This often leads to members not following their quotas. This makes it harder for OPEC to control global oil prices.

OPEC has not faced legal issues related to competition rules from the World Trade Organization. A US court decided that OPEC's meetings are protected as "governmental" actions. This means they are not subject to US competition laws for "commercial" acts.

Challenges and Conflicts

OPEC often faces challenges in agreeing on policies. This is because its member countries are very different. They have different oil export amounts, production costs, oil reserves, populations, and political situations.

Conflicts in the Middle East, where much of OPEC's oil is, also make things difficult. Past conflicts like the Six-Day War (1967), Yom Kippur War (1973), and the Iran–Iraq War (1980–1988) have affected oil supplies. While these events can temporarily raise oil prices, they also make it harder for OPEC to work together in the long run.

OPEC's Journey Through Time

After World War II

In 1949, Venezuela suggested that oil-exporting countries should talk more often. This led to the idea of OPEC. At that time, big oil fields were just starting to produce in the Middle East. The world oil market was controlled by a few large companies, the "Seven Sisters." Oil-exporting countries wanted to form OPEC to have more power against these companies.

1959–1960: Growing Anger

In 1959, large oil companies suddenly cut the prices they paid for oil from Venezuela and the Middle East. This made oil ministers from these countries very angry. They decided to work together to demand better prices. In August 1960, the oil companies cut prices again.

1960–1975: Starting and Growing

OPEC headquarters in Vienna in 2009.

In September 1960, representatives from Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela met in Baghdad. They discussed how to increase oil prices and respond to the oil companies. Despite strong opposition from the US, OPEC was formed.

OPEC first chose Geneva, Switzerland, as its headquarters. But in 1965, it moved to Vienna, Austria. Austria offered good conditions to attract international organizations.

In its early years, OPEC members shared oil profits 50/50 with oil companies. But in 1970, Libya negotiated a better deal. This led other OPEC members to ask for more. In 1971, the Tripoli Agreement was signed, which raised oil prices and increased profit shares for producing countries.

Between 1961 and 1975, many more countries joined OPEC. By the early 1970s, OPEC members produced more than half of the world's oil.

1973–1974: The Oil Embargo

A US gas station closed during the 1973 oil embargo.

In 1973, oil markets were tight. This made it easier for OPEC members to take control of their oil production. In October 1973, Arab oil-producing countries (OAPEC) cut production and stopped selling oil to the United States and other countries that supported Israel in the Yom Kippur War.

This caused oil prices to jump from $3 to $12 per barrel. It led to an energy crisis. Countries had to limit gasoline sales and even work fewer days. The world faced a global economic slowdown.

A woman using a fireplace for heat during the 1973 oil crisis.

The 1973–1974 oil embargo had lasting effects. Many countries started to save energy and look for other energy sources. This showed that oil could be used as a powerful tool against other nations.

1975–1980: Helping Poorer Nations

OPEC started giving international aid even before the 1973 oil price jump. After 1973, some Arab nations became major providers of foreign aid. OPEC added a goal to use oil sales to help poorer countries grow.

The OPEC Special Fund was created in 1975. It became the OPEC Fund for International Development in 1980. This fund helps developing countries.

1975: Hostage Situation

On December 21, 1975, OPEC oil ministers were taken hostage at their meeting in Vienna, Austria. A group led by a Venezuelan terrorist, "Carlos the Jackal," carried out the attack. Three non-ministers were killed. The group wanted to free Palestine.

Carlos planned to take all eleven oil ministers hostage. He wanted to kill two of them. After some travel and hostage releases, only 10 hostages remained. The Algerian president convinced Carlos not to kill the ministers. All hostages and terrorists left safely after two days. Later, it was revealed that the operation was ordered and funded by a founder of the Popular Front for the Liberation of Palestine.

1979–1980: Oil Crisis and Glut

OPEC's oil export revenues from 1972.

In the late 1970s, oil prices went very high. This was due to oil nationalizations and disruptions from the Iranian Revolution and Iran–Iraq War. In response, industrial nations worked to use less OPEC oil. They switched to coal, natural gas, or nuclear power. They also found new oil fields outside OPEC, like in Siberia and the North Sea.

By 1986, the world needed 5 million fewer barrels of oil per day. Non-OPEC production increased even more. OPEC's share of the market dropped from 50% in 1979 to less than 30% in 1985. This caused oil prices to fall sharply, by more than half in 1986.

To fight falling revenues, Saudi Arabia tried to get OPEC to limit production in 1982. When others didn't follow, Saudi Arabia cut its own production. But this didn't work. So, Saudi Arabia then flooded the market with cheap oil. This caused prices to fall below $10 per barrel. This made it unprofitable for higher-cost producers.

Saudi Arabia's actions caused its revenues to drop a lot. This led to budget problems and increased debt. Faced with economic hardship, other oil exporters finally started to limit production in 1986. This helped oil prices go up again.

1990–2003: Stable Supply

One of the hundreds of oil fires set by Iraqi troops in Kuwait in 1991.

Before invading Kuwait in 1990, Iraqi President Saddam Hussein wanted OPEC to raise oil prices. This would help OPEC members financially. However, the wars between Iraq and fellow OPEC founders weakened the organization. Oil prices quickly settled after the short supply disruptions. Even the 9/11 attacks in 2001 and the US invasion of Iraq in 2003 had only small effects on oil prices. Saudi Arabia and other exporters worked to keep the world supplied.

Brent crude oil price fluctuations, 1988–2015.

In the 1990s, Ecuador and Gabon left OPEC. Ecuador left because it didn't want to pay the $2 million annual fee and wanted to produce more oil than allowed. Gabon left for similar reasons. Both later rejoined. Iraq remained a member, but its production was not part of OPEC quotas for many years due to political problems.

After the 1997–1998 Asian financial crisis caused oil prices to fall, OPEC, Mexico, and Norway worked together to slow oil production. In 2002, OPEC and other countries agreed to cut production again to boost prices.

In 2003, the International Energy Agency (IEA) and OPEC started meeting regularly. They work together to understand oil market trends and make the market more predictable.

2003–2011: Price Swings

OPEC members' net oil export revenues, 2000–2020.

From 2003 to 2008, oil prices rose sharply. This was due to conflicts in Iraq and Nigeria, and a big increase in oil demand from China. In 2008, oil prices went from a record high of $147 per barrel in July to $32 in December. This happened during the worst global recession since World War II. OPEC's oil export revenue also hit a record high of about $1 trillion in 2008.

In May 2008, Indonesia announced it would leave OPEC. It had become an oil importer and couldn't meet its production quota. OPEC accepted Indonesia's decision.

2008: Production Disagreements

Countries by net oil exports in 2008.

OPEC members often disagree on production quotas. Poorer members want to cut production to raise prices and their revenues. But Saudi Arabia wants to keep a steady flow of oil to support the world economy. Saudi Arabia worries that very high oil prices will make countries use less oil and find other energy sources. As one Saudi oil minister famously said, "The Stone Age didn't end because we ran out of stones."

In September 2008, Saudi Arabia disagreed with other members who voted to cut OPEC output. Even though they officially agreed, Saudi delegates privately said they would not follow the new quotas. Oil prices then dropped sharply.

2014–2017: Oil Surplus

Countries by oil production in 2013.

A gusher oil well in Saudi Arabia.

Shale "fracking" in the US.

In 2014–2015, OPEC members produced more oil than their agreed limits. Also, China's economy slowed down. At the same time, US oil production nearly doubled. This was due to new "fracking" technology. These changes led to a lot of oil in the world and a big drop in oil prices.

In November 2014, Saudi Arabia blocked calls from poorer OPEC members to cut production. Saudi oil minister Ali Al-Naimi believed the market should fix itself at lower prices. He wanted to make high-cost US shale oil production unprofitable. He said, "If I reduce, what happens to my market share? The price will go up and the Russians, the Brazilians, US shale oil producers will take my share."

By January 2016, oil prices were very low. They were less than a quarter of their 2014 high. As 2016 continued, the oil surplus decreased. This was because some production was offline in the US, Canada, and other countries. Oil prices slowly rose again.

2017–2020: Production Cuts and OPEC+

OPEC members decided to cut production for the first time since 2008. In November 2016, they agreed to cut about 1 million barrels per day. Russia and ten other non-OPEC countries also promised to reduce production. This group is known as OPEC+.

In December 2017, Russia and OPEC agreed to extend the production cut until the end of 2018.

Qatar announced it would leave OPEC on January 1, 2019. It wanted to focus on producing natural gas, which it exports a lot of. In October 2019, Ecuador also announced it would leave OPEC due to financial problems.

In December 2019, OPEC and Russia agreed to one of the biggest oil production cuts yet. This was to prevent too much oil supply in early 2020.

2020: Saudi-Russian Price War

In early March 2020, OPEC asked Russia to cut oil production. Russia refused. This ended their three-year partnership. Also, the COVID-19 pandemic caused global demand for oil to drop a lot.

Saudi Arabia then announced it would increase its oil output and lower prices. This caused oil prices to crash by over 30%. Many called this a "Saudi-Russian price war." Some thought Saudi Arabia wanted to hurt the US economy.

In April 2020, OPEC and other oil producers, including Russia, agreed to cut production by 9.7 million barrels a day. This was about 10% of global output. This was done to help raise prices, which had fallen to record lows.

2021: Saudi-Emirati Dispute

In July 2021, the United Arab Emirates (UAE) disagreed with Saudi Arabia's plan to extend oil output cuts. These cuts were in place because of the COVID-19 pandemic. The UAE wanted to increase its maximum oil production. A compromise was reached, allowing the UAE to produce more oil. Russia also agreed to increase its production. All members would slowly increase output each month to make up for the earlier cuts.

2021–Present: Global Energy Crisis

High energy prices in 2021 were caused by a big increase in demand as the world recovered from the COVID-19 recession. In August 2021, US President Joe Biden asked OPEC+ to increase oil production. By October 2021, oil prices were about $80, the highest since 2014. President Biden blamed OPEC+ for the rising oil and gas prices.

Russia's invasion of Ukraine in February 2022 changed the global oil trade. European countries tried to ban Russian oil. More Russian oil is now sold to India and China.

In October 2022, OPEC+ ministers agreed to cut oil production by 2 million barrels per day. This was the first cut since 2020. This led to renewed interest in a US law called NOPEC, which aims to limit OPEC's power.

2022: Oil Production Cut

UAE's President Mohamed bin Zayed Al Nahyan with Russian president Vladimir Putin, after OPEC+ cut oil production in October 2022.

In October 2022, OPEC+, led by Saudi Arabia, announced a large cut to its oil output. This was meant to help Russia. In response, US President Joe Biden said there would be "consequences" and that the US would "re-evaluate" its relationship with Saudi Arabia.

Saudi Arabia said the OPEC+ decision was "purely economic." They said all members agreed to it. The White House, however, accused Saudi Arabia of pressuring other OPEC nations. They said Saudi Arabia knew the decision would "increase Russian revenues."

In 2023, the IEA predicted that demand for fossil fuels would reach an all-time high by 2030. OPEC disagreed with this forecast. They said such predictions often lead to calls to stop investing in new oil and gas projects.

Who Are the Members?

Current Member Countries

As of January 2024, OPEC has 12 member countries. Five are in the Middle East, six in Africa, and one in South America. In 2016, OPEC produced 44% of the world's oil. It also held 81.5% of the world's known oil reserves. By 2022, OPEC countries were responsible for about 38% of total world crude oil production. They hold 79.5% of the globe's proven oil reserves.

For a new country to join OPEC, three-quarters of existing members must agree. This includes all five founding members. Sudan applied to join in 2015 but is not yet a member.

Country	Region	Duration of membership	Population (2022)	Oil production (bbl/day, 2023)	Proven reserves (bbl, 2022)
Algeria	North Africa	Since 1969	44,903,220	1,183,096	12,200,000,000
Republic of the Congo	Central Africa	Since 2018	5,970,000	261,986	1,810,000,000
Equatorial Guinea	Central Africa	Since 2017	1,674,910	88,126	1,100,000,000
Gabon	Central Africa	1975–1995, Since 2016	2,388,990	204,273	2,000,000,000
Iran	Middle East	Since 1960	88,550,570	3,623,455	208,600,000,000
Iraq	Middle East	Since 1960	44,496,120	4,341,410	145,020,000,000
Kuwait	Middle East	Since 1960	4,268,870	2,709,958	101,500,000,000
Libya	North Africa	Since 1962	6,812,340	1,225,430	48,360,000,000
Nigeria	West Africa	Since 1971	218,541,210	1,441,674	36,970,000,000
Saudi Arabia	Middle East	Since 1960	36,408,820	9,733,479	267,190,000,000
United Arab Emirates	Middle East	Since 1967	9,441,130	3,393,506	113,000,000,000
Venezuela	South America	Since 1960	28,301,700	750,506	303,220,000,000
OPEC total			491,757,880	28,956,906	1,240,970,000,000
World total			7,951,150,000	81,803,545	1,564,441,000,000
OPEC percent			6.18%	35.39%	79%

OPEC+ Countries

OPEC+ is a group of OPEC members and other oil-producing countries. They work together to manage oil supply. This group includes Azerbaijan, Bahrain, Brunei, Brazil, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan.

Their cooperation led to the Declaration of Cooperation (DoC) in 2017. This agreement helps them work together for a stable oil market. They also have a Charter of Cooperation (CoC) for long-term teamwork. This helps them talk about oil and energy markets. Their goal is to ensure a steady energy supply for everyone.

Observer States

Since the 1980s, representatives from countries like Canada, Egypt, Mexico, Norway, Oman, and Russia have attended OPEC meetings. They come as observers. This helps them coordinate their oil policies informally.

Former Members

Some countries have left OPEC because the membership fees and production limits were too much for them. Ecuador left in 1992 and again in 2020. It wanted to produce more oil than its quota allowed. Gabon also left in 1995 but rejoined in 2016.

Indonesia left OPEC in 2008 because it became an oil importer. It rejoined in 2016 but suspended its membership again when OPEC asked for a production cut.

Qatar left OPEC on January 1, 2019. It joined in 1961. Qatar wanted to focus on producing natural gas.

In December 2023, Angola announced it was leaving OPEC. It disagreed with OPEC's production quotas.

Oil Market Information

OPEC has greatly improved the information available about the international oil market. This helps with planning in the oil industry.

Reports and Research

Logo for JODI, which OPEC helped create.

In 2001, OPEC worked with other groups to improve oil data. They started the Joint Oil Data Exercise, now called the Joint Organisations Data Initiative (JODI). JODI covers over 90% of the global oil market.

Since 2007, OPEC publishes the "World Oil Outlook" every year. This report looks at the global oil industry. OPEC also publishes an "Annual Statistical Bulletin" and regular updates in its "Monthly Oil Market Report."

Oil Price Benchmarks

An "oil benchmark" is a standard oil product. It helps buyers and sellers set prices for crude oil. Oil prices can differ based on type, quality, and delivery location.

The OPEC Reference Basket of Crudes is an important oil price benchmark since 2000. It is an average price of oil blends from OPEC member countries.

North Sea Brent Crude Oil is another leading benchmark. It is used to price about two-thirds of the world's traded crude oil. Other well-known benchmarks include West Texas Intermediate (WTI) and Dubai Crude.

Extra Oil Capacity

"Spare capacity" means how much extra oil a country can produce quickly. It's the amount of oil that can be added to the market within 30 days and kept up for at least 90 days. OPEC's spare capacity shows how well the world oil market can handle problems that reduce oil supplies.

In 2014, the International Energy Agency (IEA) estimated OPEC's spare capacity. By 2015, the IEA noted that OPEC's spare capacity was getting low. This was because Saudi Arabia and its neighbors were pumping oil at very high rates.

See also

• Big Oil
• Energy diplomacy
• List of country groupings
• List of intergovernmental organizations
• Oligopoly
• World oil market chronology from 2003
• Gasoline
• Peak oil
• Peak gas
• Arun gas field