Frustrated by unilateral price cuts imposed by Western oil majors, five major oil-exporting nations formed OPEC to coordinate petroleum policy and defend their revenues. The organization, initially dismissed by Western observers, would go on to wield enormous influence over global oil prices, most dramatically during the 1973 oil embargo.
The immediate trigger was almost bureaucratic: in August 1960, Standard Oil of New Jersey and other Western oil majors unilaterally slashed the posted prices they paid to producing countries, cutting government revenues in oil-exporting states without consultation. Venezuelan and Middle Eastern officials, already conferring informally about coordinating policy, decided the moment demanded a permanent institution.
Delegates from Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela met in Baghdad and, over five days, hammered out the founding charter of the Organization of the Petroleum Exporting Countries. Western press coverage was minimal; the Cold War superpowers barely noticed a cartel of oil producers organizing themselves, and the immediate practical effect on oil prices was negligible for years.
That changed dramatically by the 1970s. OPEC nations nationalized oil assets, coordinated production cuts, and in 1973 wielded the oil weapon during the Arab-Israeli conflict, quadrupling prices and triggering stagflation across the industrialized West. What began as a defensive accounting maneuver by five nations became one of the most consequential economic alliances of the twentieth century, membership eventually growing to include a dozen or more oil-producing states.