OPEC and the Oil Shocks

The Organization of the Petroleum Exporting Countries was founded in Baghdad in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, seeking more control over oil prices and revenues then dominated by Western companies. Its power became clear in October 1973, when Arab oil producers imposed an embargo on countries supporting Israel during the Yom Kippur War and cut production.

Oil prices roughly quadrupled within months, from around $3 to about $12 a barrel. Importing countries suffered 'stagflation', a combination of high inflation and rising unemployment that existing policies struggled to handle. A second shock followed the 1979 Iranian Revolution.

The crises led to energy conservation, new oil fields in the North Sea and Alaska, strategic petroleum reserves and the founding of the International Energy Agency in 1974. Oil exporters' surpluses were recycled through Western banks as loans to developing countries, a link to the later debt crisis. OPEC's influence has varied as non-member production has grown.