OPEC is an intergovernmental Organization that was formed in 1960. It was set up as a reaction to an international oil market dominated by ‘Seven Sisters’ multinational companies. Based on the ‘inalienable right of all countries to exercise permanent sovereignty over their natural resources in the interest of their national development’

The four founding members of OPEC include Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. These members were later joined by Qatar (1961), Libya (1962), the United Arab Emirates (1967, Algeria (1969), Nigeria (1971) and Angola (2007). Two countries joined than suspended their membership (Indonesia, member 1962 to 2009, and Gabon, member 1975 to 1994) and one country suspended then reactivated its membership (Ecuador, member 1973 to 1992, and 2007 onwards).

Members are ‘any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries, may become a Full Member of the Organization, if accepted by a majority of three-fourths of Full Members, including the concurring votes of all Founder Members.’

Following a price crash in 1986 due to a big oil glut and a move by consumers away from oil and gas, the organisation introduced a Reference Basket for pricing. The basket price is made up of the Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

This reference basket price has been increasing to USD 107 per barrel for 2011, to date. Although on the monthly scale, the basket price has fallen since April 2011 due to falling demand. A group production ceiling was introduced, divided among Member Countries. Overall production allocations have increased since April 1981. Although, in some years a target was given and actual production allocations were very low both for each country and overall. It is worth noting that these allocations are guidance, and there are no penalties for non-compliance.