uce, and market oil from the respective countries. In Iran, Kuwait, Libya, the United Arab Emirates (U.A.E.), and Saudi Arabia, for example, the figure was 12.5 percent of the posted price; in Venezuela it was 16.2/3 percent (Indonesia was the exception, charging 60 percent of net profits instead.) But royalty payments were not paid in cash but as a credit against taxes to the host government. And the OPEC members wanted them to be treated as separate cash expense paid directly into their public coffers. It took three years of hard negotiation, at the end of which the oil firms finally agreed to expense royalties, but on a discounted price basis and only after their home governments allowed them to treat the royalties as a tax and use it as a credit against home country taxes. This was the first major victory on the part of the new organization, but it was not to be the last.
By the end of the 1960s, oil had turned into a seller's market. From this fundamental economic reality, OPEC was able to obrain a series of concessions from the oil companies, leading to the complete takeover of their respective operations within each member country.3 Of course, details differ among members, but generally the host government owns the production facilities and sells the crude to the oil firms, which do the international marketing and distribution. Within each OPEC nation, the oil companies usually act as subcontractors, paid to manage the wells, refineries, and other physical plant. This process took place in the 1970s mostly, and by the 1980s was finalized. Thus, in the 1970s, power had swung in favor of the oil-producing countries of OPEC with respect to the major international oil companies, and consumers, of the rest of the world.
Behind this seller's market that had evolved by the 1970s lay the near-tripling of world energy consumption between 1966 and 1975.4 In the United States alone, it had almost doubled, but domestic pro...