OPEC stands for “Organization of the Petroleum Exporting Countries.” It was founded in 1960. OPEC members collectively hold 79% of world crude oil reserves and 44% of the world’s crude oil production, giving them considerable control over the global market. The next largest group of producers (members of the OECD and the Post-Soviet states) produced only 23.8% and 14.8%, respectively, of the world’s total oil production.
Here are the member countries of OPEC as of June, 2011:
4. Saudi Arabia
7. Indonesia (currently suspended)
8. Socialist People’s Libyan Arab Jamahiriya
9. United Arab Emirates
Saudi Arabia has traditionally had the most influence on the cartel because it has the largest export capacity and the cheapest oil. It only costs $1.50 to produce a barrel of oil in Saudi Arabia. So when another member country doesn’t keep to the quotas everyone has agreed to (as sometimes happens when one of the countries gets greedy) Saudi Arabia will punish them by overproducing oil and thus crashing the world price of oil. Saudi Arabia will still make money because its oil is so cheap to produce, and it has plenty of reserves, but for all other oil producing nations, the low price of oil costs them dearly.
What OPEC does to control the world price of oil is illegal. They all agree to raise or lower their oil production for the purpose of keeping the price of oil high. As Robert Zubrin notes in Energy Victory, “Collusion by suppliers to fix prices is not only a crime under US law, it is banned by international law as well. The rules of the World Trade Organization (WTO) contain antitrust provisions that prohibit member nations from setting quota restrictions on import and exports.”