During the period in which disputes intensified and debates escalated between Middle Eastern oil‑producing states and the major international petroleum companies regarding the implementation of the profit‑sharing principle, Venezuela—having previously secured the 50/50 profit‑sharing arrangement—took the initiative to increase taxes on the oil companies operating within its territory. This measure aimed to raise the country’s revenues from its petroleum resources.
In response, the multinational oil companies, acting collectively, reduced their imports of Venezuelan oil and simultaneously lowered the prices of Gulf oil. They justified this reduction as a necessary step to maintain competitiveness against Venezuelan crude and to hinder its marketing. This price cut adversely affected the revenues of the Gulf states, which consequently demanded an increase in the price of their oil, or at least a restoration of previous price levels.
These demands did not yield concrete results until 1953 (1373 AH), when the price of oil was raised from $1.751 to $1.97 per barrel. This price remained unchanged until 1957 (1377 AH), when Europe experienced a severe oil crisis following the closure of the Suez Canal. European states increased their oil production and raised prices, which in turn elevated shipping costs and production expenses. Despite these developments, the price of Gulf oil remained fixed until after the reopening of the Suez Canal, when it rose to $2.12 per barrel.
This price remained stable until February/April 1959, when Venezuela once again increased its taxes. The international oil companies responded by reducing Gulf oil prices yet again, invoking the same justification of competing with Venezuelan crude, which at that time was the world’s largest oil exporter—occupying a position comparable to that of Saudi Arabia today.
As a result of this second reduction, the price of a barrel of Gulf oil fell to $1.90, followed by additional reductions during 1960 (1380 AH). Saudi Arabia, Iran, Iraq, and Kuwait collectively lost approximately $232 million due to these successive price cuts—an amount of considerable significance at the time. Other oil‑producing countries also incurred substantial losses, generating widespread dissatisfaction among Third World petroleum‑exporting nations, particularly those whose economies depended primarily—or exclusively—on oil revenues.
Saudi Arabia viewed these unilateral actions by the multinational oil companies with deep concern, recognizing that such arbitrary measures harmed not only its own economy but also the economies of other developing oil‑producing nations.
Consequently, in 1380 AH, the Saudi government initiated consultations with Venezuela. It was agreed that Saudi Arabia would invite Iran, Iraq, and Kuwait to a meeting attended also by Venezuela to deliberate on the issue. The conference ultimately resolved to establish an organization of petroleum‑exporting countries whose principal objectives would include mutual solidarity, coordinated consultation on the determination and unification of global oil prices, and the protection of member states’ interests and rights in the field of oil production and investment.
As a result of these deliberations, the Organization of Petroleum Exporting Countries (OPEC) was formally established in September 1960 (1380 AH). The acronym OPEC derives from the English name Organization of Petroleum Exporting Countries.
Member States of OPEC
Founding Members
- Saudi Arabia
- Venezuela
- Iran
- Iraq
- Kuwait
Full Members
- Libya
- United Arab Emirates
- Algeria
- Nigeria
- Indonesia
- Qatar
- Ecuador
- Gabon (as an associate member)
Membership Criteria
To qualify for membership, a state must:
- Have crude oil as a principal and essential component of its exports.
- Possess a fundamental interest in joining the organization comparable to that of existing members.
- Obtain approval for membership by a three‑quarters majority vote of OPEC member states.
Saudi Arabia’s pioneering role in the establishment of OPEC was later complemented by its influential leadership within the organization. This leadership stemmed not only from its position as the largest oil exporter among member states but also from its balanced and prudent stance regarding excessive oil price increases.
Saudi Arabia consistently sought to restrain unjustified price escalations when they conflicted with global economic realities or threatened to trigger severe economic shocks. Moreover, the Kingdom endeavored to shield non‑oil‑producing and low‑production developing countries from the adverse effects of such price increases, which could raise the cost of their industrial and consumer goods to harmful levels.
In addition, Saudi Arabia has been the largest provider of financial assistance, loans, and scholarships to sister nations and developing countries among all major oil‑producing states