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   Issue 5/6, Winter 2005/Spring 2006

Industry Cartels & Organizations

Overview     OPEC     IEA     OAPEC
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Overview

The term cartel, can be defined as "a group of parties, factions, or nations united in a common cause; a bloc" as well as "a combination of independent business organizations formed to regulate production, pricing, and marketing of goods by the members." 1 History shows many examples of successful and not so successful cartels - they have been around for hundreds of years. The steel industry and diamond industries are some examples. However, one of the most powerful modern cartels is the Organization of the Petroleum Exporting Countries more commonly referred to as OPEC.

Prior to the rise of OPEC, the oil industry was dominated by the large oil companies often known as the Seven Sisters that possessed the technology and skills for exploration and production that the countries lacked. OPEC was born, to some extent, to reduce the influence the oil multinationals. As Skeet suggests in his book, "The governments of the oil producing countries in varying degree, but in all cases with increasing fervor, viewed the systems under which the companies operated as an outdated example of imperialist domination."2 In fact, one of the first things written in the 1st OPEC Conference Resolution in Baghdad states, "Members can no longer remain indifferent to the attitude heretofore adopted by the Oil Companies in effecting price modifications."

Organization of the Petroleum Exporting Countries (OPEC)

OPEC is a permanent, intergovernmental organization created at the Baghdad Conference on September 10-14, 1960. It was an outgrowth of the 1st Arab Petroleum Congress in 1959 when the Oil Consultation Commission, created by a few of the oil producing countries, signed what was known as the Maadi Pact at the end of their meetings.

BERA - Business & Economics Research Advisor - A Quarterly Guide to Business & Economics Topics

Issue 5/6: Winter 2005/Spring 2006
Updated July 2013

The Oil & Gas Industry

Table of Contents

Introduction
History
Cartels & Organizations
Production
Refining
Transportation & Storage
Marketing & Distribution
Natural Gas Industry Trends
Alternative Energy Sources
Company Research
Statistical Sources
News & Analysis
Electronic Resources & Catalog Searches

Drilling Rig Near Sable Island
Image (above): Photograph of
drilling rig near Sable Island.
Courtesy of the Maritimes Region of the Department of Fisheries and Oceans, Canada.

While this pact was originally kept secret and there was no official confirmation that such a group existed, a move by Esso and other oil companies to reduce the posted price for Middle East crudes prompted Perez Alfonso of Venezuela and Abdullah Tariki - both influential in the meetings of 1959 - to convene meetings in Baghdad which resulted in the creation of OPEC. 3 Early members were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela with Qatar, Indonesia, Socialist Peoples Libyan Arab Jamahiriya, United Arab Emirates, Algeria, Nigeria, Ecuador, and Gabon joining later (Gabon left in 1994/1995 and Indonesia left in 2009). Its goal is to co-ordinate and unify petroleum policies among Member Countries. However, there are large producers who are not members of OPEC, notably Russia, Norway, Mexico, and the United States.

The early years of OPEC - as with many newly formed groups - were difficult. The organization spent its early years consolidating its position with the major oil companies. However, this caused OPEC to lose some control. Starting in the early 1970's, OPEC influence grew. The first few years of the 1970's saw so much instability in the oil industry as a whole that no player was left unaffected. Then came the oil crisis of 1973, which marked a turning point for the oil industry and OPEC in particular. The crisis was sparked by the announcement in October, that the Arab members of OPEC would not ship oil to countries that supported Israel in the Yom Kippur War. Because OPEC countries have about 2/3 of the world's oil reserves and hold about 40% of the world's oil production and half of the exports, the announcement by the Arab OPEC members was an enormous blow to the industry and the world economy as a whole.

OPEC technically doesn't set oil prices, but because the OPEC countries produce about 40% of the world's oil supply and their exports account for about 55% of the total export in oil, their decisions do play a part in prices.

The purpose of OPEC is to agree on the quantity and price of the oil their countries export. They state their primary objectives as:

To coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.

The members meet twice a year (usually March and September) at the OPEC Conference to co-ordinate and unify their petroleum policies and consider the current situation and forecasts of economic growth rates and petroleum demand and supply scenarios. Delegates are normally the Ministers of Oil, Mines and Energy of Member Countries.

The Conference is the supreme authority of the Organization. However, there are three main organizational units which oversee the operations of the organization:

OPEC Secretariat - This group functions as the Headquarters of OPEC. It is responsible for carrying out the executive functions of the Organization. It consists of the Secretary General and the Research Division, headed by the Director of Research, who oversees the Petroleum Market Analysis, Energy Studies, and Data Services Departments.
Board of Governors - The Board is composed of Governors nominated by Member Countries and confirmed by the Conference for two years. The Board directs the management of the Organization, implements Resolutions of the Conference; draws up the Organization's annual budget, and submits it to the Conference for approval.
Research Division - is a specialized research oriented body operating within the framework of the Secretariat. It consists of three Departments, namely, Data Services, Energy Studies and Petroleum Studies.

Much about the actual operations and decision making process of OPEC is unknown. The organization is quite secretive about itself so there is not much written about its internal workings. This secrecy has often lead to misunderstandings or conspiracy theories, which are prevalent in some books and articles written on OPEC.

International Energy Agency (IEA)

The International Energy Agency (IEA) is one of the larger organizations involved in the oil and gas industry. The IEA is the energy forum for 26 industrialized countries. Formed by the Organization for Economic Cooperation and Development (OECD) as an autonomous intergovernmental entity within the OECD in 1974 in direct response to the oil crisis, its members include: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary Ireland, Italy, Japan, Republic of Korea, Luxembourg, The Netherlands New Zealand, Norway, (participates under a special Agreement), Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States. One of the overall objectives of the IEA, which reflects the original reason for the group's establishment, is to seek ways to reduce the members' vulnerability to a supply disruption.

Organization of Arab Petroleum Exporting Countries (OAPEC)

The Organization of Arab Petroleum Exporting Countries (OAPEC) was established in 1968 and is based in Kuwait. Membership is limited to petroleum producing Arab countries. The three founding members were Kuwait, Libya, and Saudi Arabia. The OAPEC is not a cartel in the same sense as OPEC. OAPEC is devoted to developmental activities and increasing the cooperation among its members.

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Selected Print Resources

Evans, John. OPEC and the World Energy Market: A Comprehensive Reference Guide. 2nd edition, fully revised by Gavin Brown. Burnt Mill, Harlow, Essex, U.K.: Longman, 1993. 749 p.
LC Call Number: HD9560.1.O66 E92 1993
LC Catalog Record: 93139571

This is a specific look at OPEC and OPEC countries, it also spends much time on an overview of world oil and gas. While, much of the data is specific to a certain time frame, there is a look at the time period of 1960-1990 as well as historical statistics of world oil production.

The International Petroleum Cartel. Staff Report to [i.e. of] the Federal Trade Commission Submitted to the Subcommittee on Monopoly of the Select Committee on Small Business, United States Senate. Washington, U.S. Govt. Print. Off., 1952. 378 p.
LC Call Number: HD9560.5 .U63 1952
LC Catalog Record: 52061818
Chapter 1, pp. 5-20 External Link
Chapter 2, pp. 21-36 External Link
Chapter 3, pp. 37-46 External Link
Chapter 4, pp. 47-84 External Link
Chapter 4, pp. 84-112 External Link
Chapter 5, pp. 113-136 External Link
Chapter 6, pp. 137-162 External Link

Information on the early control of the petroleum industry. Specific topics include: general information of the resources, reserves, concentration and control, specific information on the Iraq Petroleum Company, other areas in the Middle East and the oil companies that dominate, Venezuela petroleum industry, production and marketing agreements, etc. Also, includes fold out flowcharts and graphs.

Sampson, Anthony. The Seven Sisters: The Great Oil Companies and the World They Shaped. New York: Bantam Books, c1991. 414 p.
LC Call Number: HD9560.5 .S24 1991
LC Catalog Record: 91159189
Table of Contents and Selected Text External Link (Biofuel Library)

This is a history of those companies that make up what is known as the Seven Sisters and includes a chapter on OPEC and other seminal events in the history of the oil and gas industry.

Scott, Richard. The History of the International Energy Agency, 1974-1994: IEA, the First 20 Years. Paris: OECD/IEA, c1994. 3 v.
LC Call Number: HD9502.A2 S424 1994
LC Catalog Record: 94182424
Volume 1 External Link [PDF: 1.25 MB / 428 p.]
Volume 2 External Link [PDF: 1.23 MB / 396 p.]
Volume 3 External Link [PDF: 1.56 MB / 544 p.]
Volume 4, 2004 supplement to Volumes 1-3 External Link [PDF: 1.60 MB / 353 p.]

Skeet, Ian. Twenty-Five Years of Prices and Politics. Cambridge; New York: Cambridge University Press, 1988. 263 p.
LC Call Number: HD9560.1.O66 S57 1988
LC Catalog Record: 88004354

Historical look at the creation and development of OPEC. Appendices include: OPEC organization, member countries, production and revenue statistics of OPEC countries from 1960-1986, oil consumption statistics from 1960-1986, and resolutions of the 1st OPEC conference in 1960.

Tarbell, Ida M., and Chalmers, David Mark.The History of the Standard Oil Company. Mineola, NY: Dover Publications, 2003. 227 p.
LC Call Number: HD9569.S8 T37 2003
LC Catalog Record: 2002034979
Publisher Description

The 2003 reprint of the briefer version of a book that was originally serialized by McClure's Magazine from 1902 to 1904, recounts the history of John D. Rockefeller's Standard Oil Company, the first major industrial monopoly in the US. The story, which became a model for investigative journalists, explores corporate abuses perpetrated by the company. This is an unabridged re-publication of the Harper Torchbook edition originally published by Harper & Row, Publishers, Incorporated, New York, 1966. Annotation by Book News, Inc.

Tugendhat, Christopher. Oil: The Biggest Business. London: Eyre Methuen, 1975. 404 p.
LC Call Number: HD9560.5 .T8 1975
LC Catalog Record: 75308198

A relatively early history of OPEC that also includes are a number of chapters on the oil and gas industry between the years 1859-1960.

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Selected Internet Resources

Documents on the International Energy System. Mount Holyoke College.
http://www.mtholyoke.edu/acad/intrel/energy.htm External Link
Many documents of a historical nature are included, including Chapters 1 through 6 of The International Petroleum Cartel (Staff Report to [i.e. of] the Federal Trade Commission).
International Energy Agency.
http://www.iea.org/ External Link
Includes the Monthly Oil Survey, Monthly Energy Price Survey, the Energy Information Center, and energy statistics.
Ministry of Energy (Oil). Kuwait. Ministry of Energy.
http://www.moo.gov.kw/default.aspx?pageId=3 External Link
Linked from this departmental home page is a quarterly magazine, Al-Naft Magazine, and a Fact & Figures area.
Oil and Commodity Cartels. (Jeffrey Hart, University of Indiana).
http://www.indiana.edu/~ipe/oilbib.htm External Link
A selected bibliography of sources on the cartels from The Politics of International Economic Relations, 6th ed., by Joan Spero and Jeffrey Hart, (Belmont, CA : Thomson/Wadsworth, c2003).
Organization of Arab Petroleum Exporting Countries (OAPEC).
http://www.oapecorg.org/ External Link
The web site contains Annual Reports, the OAPEC Monthly Bulletin, as well as other useful publications and statistics.
Organization of the Petroleum Exporting Countries (OPEC).
http://www.opec.org/opec_web/en/index.htm External Link
Publications available on this site include the Oil Market Report, OPEC Bulletin, Oil Outlook, and the Annual Statistical Bulletin as well as speeches, press releases, and other data and graphs.
U.S. Dept. of Energy. Energy Information Administration (EIA): OPEC.
http://www.eia.doe.gov/a-z_index/Energya-z_o.html
These EIA webpages provide an overview and country analysis [PDF format/ 34.5KB 4 p.], revenue fact sheet, production capacity, and production statistics on an annual and monthly basis for OPEC countries.   EIA also provides information on the latest oil prices as well as international petroleum imports and exports.

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Library of Congress Catalog Searches

Additional works in the Library of Congress on the oil cartels and organizations may be identified by searching the Online Catalog under appropriate Library of Congress subject headings. Choose the topics you wish to search from the following list of Library of Congress subject headings to link directly to the Catalog and automatically execute a search for the subject selected. Please be aware that during periods of heavy use you may encounter delays in accessing the catalog. Please see the individual sections of this guide for catalog searches relating to those specific topics. For assistance in locating the many other subject headings which relate to this subject, please consult a reference librarian.


 1. The American Heritage Dictionary of the English Language, 4th ed.,
http://www.answers.com/cartel External Link

 2.Skeet, Ian. OPEC: Twenty Five Years of Prices and Politics. (Cambridge: New York: Cambridge University Press, 1988), p. 5.

 3. Ibid., pp. 15-17.

 4. OPEC web site
http://www.opec.org/opec_web/en/about_us/23.htm External Link

Last Updated: 07/16/2013

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   Issue 5/6, Winter 2005/Spring 2006
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  July 24, 2013
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