|Socialism Today The monthly journal of the Socialist Party|
OPEC INFLICTED TWO devastating oil shocks on the advanced capitalist countries, in 1973 and 1979. For most of its existence, however, OPEC has been a weak and ineffective cartel, largely trailing trends in the world oil market. The mixed character of the oil-state regimes and their divergent interests has rendered OPEC incapable of exerting a sustained influence over output levels and prices.
The Organisation of Petroleum Exporting Countries (OPEC) was set up in 1960 by Venezuela, Saudi Arabia, Iran, Iraq and Kuwait. They were later joined by Qatar, Indonesia, Libya, United Arab Emirates, Algeria and Nigeria. The world's second-biggest oil producer, Russia, is outside OPEC, as are Mexico and China. The major advanced country producers, the US, Britain, Norway and Canada, are also outside OPEC. In 1997 OPEC produced 28.36 million barrels per day (mb/d) while non-OPEC countries produced 37.91 mb/d (a barrel equals 35 UK gallons, 42 US gallons or 158.9 litres). Most of the oil countries also produce natural gas, which accounts for an increasing share of world energy.
For the first ten years OPEC achieved very little. In the closing phase (1970-73) of the post-war economic upswing, however, when demand for oil was very strong, OPEC producers forced the big oil companies to concede a share of ownership and a bigger share of the profits.
The Arab-Israeli war of 1973 (the 'Yom Kippur' war) led to an oil embargo by the Arab states, aimed particularly against US imperialism which backed the Israeli state. OPEC took advantage of this to push up oil prices four-fold between 1972 and 1974. While the Arab states wanted to strike a blow against Western imperialism, all the OPEC producers (with the Shah of Iran, a close ally of the US, to the forefront) were determined to restore the real price of oil which had been drastically eroded by world inflation and the decline of the US dollar (in which oil prices are always set).
The quadrupling of oil prices provoked the 1974-75 slump, which marked the end of the long post-war upswing. Dearer oil gave a further twist to the spiralling inflation of that period, which in turn triggered massive movements of the European working class, then at the height of its post-war organisation and combativity. The Portuguese revolution erupted in 1974, and revolutionary insurgencies brought new Stalinist regimes to power in Angola, Mozambique, Ethiopia and elsewhere.
The Western bourgeoisie angrily blamed the oil producers for provoking economic crisis and awakening the spectre of revolutions and civil war. In reality, the oil price rise was merely a trigger for a crisis already prepared by the productivity slowdown and profit crisis within the advanced capitalist countries. Capitalist leaders, however, have never really forgiven the oil producers - nor entirely lost their fear of oil shocks.
The oil price rise of 1979 contributed to a second world slump in 1980-81, though the 'Volcker shock', when the chairman of the US Federal Reserve massively raised interest rates, was a far bigger factor. This marked a turn away from the Keynesian policies of the post-war period to the neo-liberal policies that have prevailed ever since.
A further sharp rise of oil prices in 1982 was the result of the Islamic revolution in Iran rather than concerted OPEC action. That was followed by a 'counter-shock' (1985-86), when oil prices plummeted to a third of the previous level.
During the 1980s the Western powers took strenuous measures to reduce their dependence on OPEC oil, and especially on oil from the Middle East. They adopted various energy-saving policies, used new technology to reduce industry's energy requirements, and opened up new oil fields in areas such as Alaska and the North Sea. OPEC was further weakened by the Iran-Iraq war (1980-88).
The US intervention against Iraq in the Gulf war of 1990-91 temporarily strengthened the hand of imperialism against the Arab oil-producing states. At the same time, the imposition through the IMF and the World Bank of neo-liberal policies on the underdeveloped countries reinforced the domination of the Western corporations and big banks. Historically low oil prices were one of the forms of intensified exploitation of the toiling people of the underdeveloped countries.
Strategists of imperialism proclaimed that the threat of further oil shocks was now buried for ever. Now they are being forced to eat their words.
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