PETROANALYSIS || ARTICLE

OPEC: “Union makes strength”

Article by

Mazhar Al-Shereidah

As it will soon be the Anniversary of OPEC, on 14th September, people are discussing just how it came into being. Outside Venezuela not many people know that a Venezuelan – Juan Pablo Pérez Alfonzo – is known as “the father of OPEC”, but can this really be the case after careful consideration of the following text which was published by the then Venezuelan government?

“Documents, speeches and Venezuelan and world views Relating to the antecedents and creation of OPEC”

Republic of Venezuela, Imprenta Nacional, Caracas 1961

When the present problem is seen in all its complexity, it is obvious that International proration is not absurd, but necessary, despite the difficulties encountered in this application.

Because of the present circumstances and because of the importance which the supply of energy has on the life of the inhabitants of the country, an international compact is inevitable. Furthermore, the precedent has already been established with items such as wheat, sugar, coffee and tin. (…) the only explanation for the fact that an oil agreement has not emerged as an unpostponable necessity in order to safe guard the community, is that up to a short time ago, the Achnacarry Treaty has been tacitly in force. But now circumstances are such that it is hardly possible to delay the establishment of an International Compact which will be backed by the interested governments.

Meanwhile, in the rest of the world, which up to the present time has only consumed an equal amount to that which is consumed in the United States, this process, although what delayed, will have to follow the same course. The fight from markets and prices wars did not reach the social and national levels, while consumption remained insignificant. Later, the great private interest capable of defending themselves on an international level, organized the industry in accordance with the principles establish by the so called “Achnacarry Treaty” of September 17, 1928.

The system established by the International Cartel, despite the fact that it was established by private interest for their own benefit, permitted the rapid development of the utilization of hydrocarbons, since the constant and safe supply of the product determined the utilization of National advantages of this source of energy.

Furthermore, in the international field, the weight of the State as a regulator of the industry will be felt in the same way as it was felt in the United States when the use of hydrocarbons became of major importance to the community.

The license system (Restrictions) impose by the United States to defend the national interests… the statement made by President Eisenhower “Oil, wherever it may be produced in the free world, is important, not only for our own security, but also for that of the free peoples of the whole world”.

Regarding Venezuela, an a important member of the international press on oil matters said: “we except their viewpoint on international proration as long as it may be effected without political complications and without crushing private initiative, especially in the new countries which are beginning production.”

At the time the following comments came from the international press:

The Times
(London) 27-09-60
OPEC countries are fully conscious, first that they provide over 90 percent of world current exports (…)
One point clearly brought out in the Baghdad proposals is that basically the oil companies are regarded as natural allies rather than enemies of the producing countries (though the companies occasionally have an unfriendly manner to the producing governments). The com-mon interest is seen as the sale crude oil at a proper Price. Certainly the application of a common Price structure of the kind envisaged would require the cooperation of the oil groups.

Manchester Guardian Weekly
(United Kingdom) 27-02-60
Partnership in oil. The Second Arab Petroleum Congress in Beirut gas ended with a modest demand – that oil companies should not reduce prices without consulting the government of the producing country concerned.

(…) the Beirut demand is the logical next step: it asks for precisely the same kind of consultation that trade unions for the established sort expected for employers as a matter of course.
Analysis of the trend of thinking in Middle Eastern oil countries in terms of trade unionism can be better understood taken as a union producers.

Oil politics will be healthier if the Western oil companies accept that the principal aim of the organization is that the Middle Eastern countries be regarded as partners and not as opponents.

Carta Semanal #4
28-01-61
OPEC is not a dogma. It is a common need. It is open to all discussion. It is also exposed to all kinds of speculation, even to the most negative and farthest from reality.

Petrole Informations
(France) 05-02-61
The concessionaire companies of the Middle East and Venezuela seem to be ready to come to terms with the existence of OPEC, and made even find it useful to be able to negotiate with a joint organization. Thus the OPEC conference may have represented a step in the direction of cooperation and negotiation.

The Financial Times
16-02-61
(…) There is little in the official communiqué which will seriously offend the oil companies (…). The new-found unity of the producer nations may serve to weaken the bargaining strength of the international companies, as is evidenced by the fact that the companies are even more reluctant to cut their posted prices (…)

Petroleum Week
(London) 03-03-61
Shell welcomes any opportunity for improving mutual under- standing of the problems involved, and has always attached great importance to close cooperation between our companies and the governments of the countries concerned.

However, we have no doubt that the governments of the producing countries concerned are more than well aware of this, will wish to adopt such modifications as may prove necessary to ensure that the work of the association will be constructive and will provide a useful channel for exchange of information to the oil companies.

Petroleum Press Service
“Union makes strength” (British Petroleum Magazine). Petroleum Press Service analyses the importance of OPEC: “OPEC, well run, is potentially capable of fulfilling an important and constructive role”.

 

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