Saudi Arabia and OPEC

Saudi Arabia is one of the world's major oil-producing countries and is a key force in the organization known as OPEC, the Organization of the Petroleum Exporting Countries. This organization has become more vital in world affairs in the last two decades and in the lives of Americans ever since the oil crisis of the early 1970s when OPEC limited exports and raised prices. Developing the oil sector has been a vital element in the economic well-being of Saudi Arabia, and this effort has been of vital interest to the West as well. Protection of the oil fields must be seen as one of the key elements in the Gulf War, for instance, as U.S. and other troops worked to protect Saudi Arabia from any incursion from Iraq and to expel Iraqi troops from Kuwait, another oil-producing nation. An examination of the role of Saudi Arabia in OPEC will indicate the nature of the oil sector in that country, the dimensions of the Saudi role in OPEC, the present situation, and the outlook for the future.

The Kingdom of Saudi Arabia is a creation of this century, and the House of Saud has ruled the country since its foundation. Abd al Aziz bin Abd ar Rahman Al Saud was the one who established the state through a combination of tribal conquest and diplomatic maneuvering over a period of 25 years, and in 1932 he proclaimed the establishment of the Kingdom of Saudi Arabia, named after the House of Saud and ruled by its first two monarchs as if it were a t

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worked informally together to control most of the world's markets for oil, but by 1959 these companies were under pressure in the marketplace and from each other as well as outsiders to reduce their tax commitments to the producing countries by reducing the posted prices for crude oil. In the case of most oil-exporting countries at the time, these prices determined the level of payments to governments, so this decision caused a strong reaction in the countries concerned. The short-term result was that the companies had to restore some of the price cuts, but the longer-term result was the formation of OPEC as the Middle Eastern oil-producing countries were finally persuaded by Venezuela that such an international producers' organizations was essential to curb the freedom of action of the international companies. Venezuela had strong economic motivations for this move, but the Middle Eastern countries had political reasons, for their reserves and production potential were such as to ensure rising total revenue even with reduced revenues per barrel. OPEC and its actions were essentially political until 1971: Politically, it demonstrated the potential power of a group of developing nations against the international companies, wh

Category: Economics - S