The Power and Peril of Oil
Read “The Power of OPEC” portion and answer the following
questions.
OPEC stands for ______________________________________________________
It was formed in ___________________
The goal of OPEC was to _______________________________________________
____________________________________________________________________
OPEC members meet regularly __________________________________________
____________________________________________________________________
Using the following map, list the 12 OPEC Member Countries. Using the reading, put a
star next to the five founding countries.
1) ____________________________
7) ___________________________
2) ____________________________
8) ___________________________
3) ____________________________
9) ___________________________
4) ____________________________
10) __________________________
5) ____________________________
11) __________________________
6)____________________________
12) __________________________
The Power of OPEC?
In 1960, Iran, Iraq, Kuwait, and Saudi Arabia joined with Venezuela to form the Organization of Petroleum
Exporting Countries (OPEC). Later, OPEC expanded to twelve members. The goal of OPEC was to end the
power of western oil companies over oil prices. Since OPEC’s founding, officials from member states have met
regularly to decide how much oil to produce (supply) and at what price to sell it.
As world demand for oil rose in the 1970s, OPEC’s power increased. Sensing their power, Middle Eastern oil
producing nations used oil as a weapon. During the Arab-Israeli war in 1973, OPEC stopped Middle Eastern oil
shipments to countries that supported Israel, including the United States. That action set off a global oil crisis
as prices rose and supplies dwindled. (The event was known in the West as the Oil Embargo).
Rising oil prices affected the world economy in dramatic ways. Developing nations were especially hard hit.
Many had to cut spending on social programs in order to pay for costly imported oil. In industrialized
countries, high oil prices caused inflation. In the Middle East, itself, nations that had to import oil, such as
Egypt and Turkey, suffered hardships, while their oil-rich neighbors earned huge profits. After the 1970s, many
nations reduced their dependence on OPEC oil. Some turned to conservation and alternative energy sources.
Others hunted for new sources of oil within their borders or in offshore waters. They also bought oil from nonOPEC nations.
In the 1980s and 1990s, oil prices fell from their highest point in the 1970s. Divisions within OPEC partly
account for the fall in prices. The way to raise prices is to cut supply. However, many oil-producing nations do
not want to cut production. Reduced production will cut into their income, for the less they produce, the less
they will have to sell.
While OPEC remains a key force in the global economy, it is less powerful today than it was in the 1970s. Some
oil-producing nations have never joined OPEC. For example, Russia, which has large oil resources, does not
belong to OPEC; nor does Mexico, which also has large oil reserves. These non-OPEC nations make their own
decisions about how much oil to produce.
Using the pie charts, answer the following questions:
OPEC controls _________% of the world crude oil reserves
Middle Eastern nations control _________% of the oil controlled by OPEC.
______________________ is the OPEC nation with the largest crude oil reserves.
Use your answers from the above questions to explain why OPEC and the Middle East have the ability
to set the price and quantity of oil produced around the world
Study the following chart on the last page which indicates the world price of oil per barrel and
complete the following questions:
What is the price of oil...
Before OPEC formed in 1960?
In 2006?
_______________
_______________
When was the price of oil per barrel at its highest? What was the cost?
Identify three different factors that have contributed to an increase in the price of oil in the last 50
years.
Identify two different factors that have contributed to a decrease in the price of oil in the last 50
years.
Use the information found in the text to complete the questions below:
One of the sharpest increases in the price of oil came in 1973 during the Yom Kippur War oil
embargo. (Your reading refers to this as the Arab-Israeli war in 1973).
What is an embargo?
Why would an OPEC oil embargo cause the price to increase?
Why were OPEC member nations motivated to impose an oil embargo on the United States?
Summary Questions:
How have Middle Eastern nations used OPEC for economic gains?
How have Middle Eastern nations used OPEC for political gains?