OPEC at 55

Birthdays are not just for celebrations; they are also for reflections. It is this Janus-faced phenomenon which hallmarked the Organisation of Petroleum Exporting Countries (OPEC) as it attained the age of 55 years on September 14, 2015.

The establishment of OPEC was rooted in the fact that, at a point in time, the price of oil was controlled by the international oil companies, popularly called the ‘oil majors’. These oil companies did not act alone, but rather in concert with their parent countries in what could be regarded as a symbiosis of interests. These countries are the United States, Britain and France. Thus it was that when OPEC was established, it virtually ranged itself against the hegemonic forces in the world.

Much of the immediate foregoing may well explain the relative obscurity of this inter-governmental body in its fledgling days. But by the late ’60s, a number of psychological and geo-political factors ultimately propelled OPEC onto the global stage, as a major force in oil politics and, by extension, international relations. One of these factors was the emergence, in 1969, of the mercurial leader, Muhammad Gaddafi, as the Libyan head of state.

It is instructive to note here that one of the main achievements of OPEC was that in the course of time, the body successfully displaced the oil companies from the driving seat of oil price. In turn, the hegemonic forces in the international system viewed OPEC with undisguised hostility. Washington was so piqued by this new situation that she threatened that the military invade the Middle-East oil fields. The OPEC initiative also led to the formation of the International Energy Agency (IEA), an organisation which sought to coordinate energy policies in the western world with a view to containing what was regarded as the menace of OPEC.

Meanwhile, such was the hostility towards OPEC that the organisation was even held responsible for the economic downturn of the ’70s and ’80s. In the bid to blunt this criticism, which was actively orchestrated by the western media, OPEC and its members instituted various forms of bilateral and multilateral aid programmes. These programmes were established to give succour to other Third World countries which had been led to believe that OPEC was the ‘enfant terrible’ of the international economic system.

In recent times, however, OPEC is beginning to have problems. The bottom, so to say, has dropped out of the bag. Partly in view of shale oil from social formations like the United States and Canada, the price of oil has steadily declined to around $46 a barrel from an all-time high of $100. In the process, many of the oil producing countries like Nigeria, Venezuela and Angola are grappling with economic difficulties of various proportions.

Even then, OPEC in its 55 years of existence has also had to contend with a spate of defections. Member-states like Gabon, Ecuador and Indonesia wanted out of the organisation – a situation which led to unfounded speculations about the imminent mortality of OPEC.

In view of the immediate foregoing, this inter-governmental body, as it turns 55, should not just celebrate. It should also reflect on how to make itself a much more viable and relevant body.

Perhaps the most important point here is that many of the member-states still lack the technology with which to exploit their God-given resource. The upshot is that many of them continue to depend on the self-same oil companies in this critical area, whereas there are alternatives which can easily wean them away from this state of dependence.

A second problem is the misplaced priorities of many of the OPEC member-states. This is more noticeable on the part of the political elite in these countries. Oil revenues have spawned a rentier mentality in which accumulation has been divorced from production. A very sad dimension of this is that much of the oil wealth which accrued to the OPEC member-states has been recycled to the west for the purchase of automobiles, jets, and other fripperies. The consequence is that many of the OPEC members have been afflicted with what is popularly known as the resource-curse.

Thus, as OPEC enters into its 56th year, the organisation should take stock and address these fundamental problems. The need for such introspection becomes compelling in light of the unassailable fact that oil is a finite resource which will be exhausted in the not-too-distant future. Nevertheless, from this corner of the world, we still say a belated Happy Birthday to OPEC.