The Organization of Petroleum Exporting Countries, 1978

Topic A: Foreign Energy IndependenceTopic B: Domestic Pressures of Oil Production

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History of the Committee

During the Baghdad Conference, on September 10-14th 1960, the Organization of Petroleum Exporting Countries (OPEC) was founded.1 It had 5 founding members when it was formed being Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. OPEC later expanded to include: Qatar (1961), Libya (1962), United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), and Gabon (1975). OPEC was created during a time of decolonization, when many new nation states were forming.

The oil industry at the time was dominated by what were called the “Seven Sisters”, multinational companies with oil fields around the world. By 1969, OPEC had written the “Declaratory Statement of Petroleum in Member Countries.” This document emphasized one of OPEC’s main beliefs and goals, that every country had a right to control their own natural resources. These nations were tired of being controlled by foreign powers and wanted to take back their resources, and the economic and political power it afforded them. In the 1970’s member companies began acting on this mission and reclaiming their oil supplies. Many countries went as far as nationalizing their oil industry. With this nationalization, OPEC controlled a majority of the oil market, and thus oil prices.2 As will be discussed in Topic A, perhaps the largest show of OPEC’s new power came in December, 1973. OPEC nations stopped exporting oil to the Western nations after they supported Israel in what is known as the Yom Kippur or October War against Egypt and Syria, who led a group of Arab states against the nation. This doubled gas prices in the US and showed the true strength and power of OPEC.3 Recently, in 1975, the heads of state of each OPEC nation gathered and agreed that a larger amount of economic development and stability was needed around the world. This led to the creation of the OPEC Fund for International Development. This is an exciting new step for OPEC and shows its attempts to move beyond controlling the price of oil, and towards shaping the social, political and economic effects that oil has on a nation.

OPEC exists to both stabilize the volatile oil markets to the benefit of its member states, and as we see in the 1970’s, as a tool for its nations to leverage political power over the world. Welcome to the 52nd OPEC Conference, December 14th 1978. It has been nearly five years since OPEC has acted unanimously to change the world economy as we know it. As representatives and associates of OPEC, it is your decisions that will determine if OPEC can regain its global influence, or if infighting and foreign intervention will cripple the bloc’s unanimity and collective power.

1 https://www.opec.org/opec_web/en/about_us/24.html2 Ibid3 https://www.energy.gov/eere/articles/timeline-brief-history-oil-prices-and-vehicle-technologies

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Important Note from the Co-Executives:

Represented Nations: Algeria, Ecuador, Egypt, Gabon, Indonesia, Iraq, Iran, Kazakhstan, Kuwait, Libya, Mexico, Nigeria, Norway, Oman, Qatar, The USSR, Saudi Arabia, Sudan, UAE, Venezuela

This committee will be made of delegations from nations historically involved in OPEC at the time committee will begin (December 14th, 1978), along with other nations with notable effects on the oil economy due to their production. In the past, oil producing nations outside of OPEC have attended meetings and summits as a mechanism to coordinate policies. In a more flexible interpretation of history, the nations of Egypt, Kazakhstan*, Mexico, Norway, Oman, Sudan, and Russia* will be participating in this debate as Associate Members. There will be elements of crisis incorporated into committee.

Kazakhstan will be participating as the Kazakh Soviet Socialist Republic, and Russia will be participating as the Russian Soviet Federative Socialist Republic, separate somewhat autonomous republics within the Union of Soviet Socialist Republics.

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LETTER FROM THE CO-EXECUTIVE OF THE ORGANIZATION OF PETROLEUM EXPORTING

COUNTRIES, 1978

4 November 2018

Dear Delegates,

I am so excited to welcome you to MUNUC 31! My name is Emily Young and I will be your chair for OPEC 1978. I am a second year in the College hoping to double major in Public Policy and Political Science. I still have 2.5 years left so we will see how long that lasts. I have lived in New York City for my entire life and went to high school at The Spence School. Although I was only introduced to the wonderful world of Model United Nations in college, I did compete with my high school’s Model Congress team where I fostered my interest in policy, specifically educational policy. After transitioning to college, I decided to change courses and become involved in Model UN, I was an assistant chair for MUNUC 30 last year on the Commonwealth of Nations. Within the Model UN world, aside from being a Chair for MUNUC 31, I compete on our Model UN travel team and am an assistant chair for our collegiate conference, ChoMUN.

Outside of Model UN, I do research on Campaign Finance Reform for an on-campus public policy think tank called the Paul Douglas Institute. I am also a part of the Women in Public Service Program and complete projects on educational policy through a club called Block 58.

When thinking about OPEC 1978 both Michael and myself were very much drawn to the idea that OPEC can be about more than just the price of oil. The two topics for this committee, “Foreign Energy Independence” and the “Domestic Pressures of Oil Production” aim to push debate past simply economic manipulation. You as delegates are representing distinct countries with their own unique relationship to oil production and global consumption. I am excited to see how you will bring your individual perspectives to these important issues. I cannot wait to listen to you discuss the ways in which oil has impacted your countries’ domestic economies and people, as well as how you can harness your power as oil producers to impact the rest of the world in a positive way.

If you have any questions please don’t hesitate to reach out with an email. Michael, myself, and the entire staff of OPEC 1978 have been working hard to make sure you have a fulfilling, informative and most importantly fun time at MUNUC 31. We are ecstatic to meet you this February!

Best,

Emily YoungCommittee Chair, Organization of Petroleum Exporting Countries 1978

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LETTER FROM THE CO-EXECUTIVE OF THE ORGANIZATION OF PETROLEUM EXPORTING

COUNTRIES, 1978

4 November 2018

Dear Delegates,

Welcome to the Organization of Petroleum Exporting Countries! My name is Michael Wang and I’m excited to serve as one of your co-executives for MUNUC 31, in the role of crisis director. I’m looking forward to meeting all of you and hearing your ideas for the committee.

To introduce myself, I’m a second-year undergraduate at the University of Chicago, double majoring in economics and history. My involvement in Model UN began in college through MUNUC where I served on the United Nations Security Council my first year. In addition to MUNUC, I’m also a part of the University’s competitive Model UN team and help run our collegiate conference ChoMUN. Outside of Model UN, I’m part of the Chicago Men’s A Capella Group (CMAC).

OPEC is, simply, a group of countries that have collectively decided to use their one geographical advantage, possession of oil, and attempt to use it to take political and economic power from Western nations. The existence of OPEC is fundamentally opposed to the liberal democracies and laissez-faire international economy that it sells petroleum to. As a result, the organization is always one of contradictions: any improvement in relations with the West comes from the lowering of oil prices and the diminishment of state power while deteriorating relations usually accompanies a massive influx into state treasuries. Furthermore, the nations of OPEC are linked only by their commitment to safeguarding oil revenues, and thus they share nothing but mere individual self-interest. Even so, the power and influence of OPEC cannot be overstated. As delegates in OPEC, I and my chair expect you to turn OPEC into the international powerhouse that it is today. Good luck and we look forward to having you.

Please feel free to reach out with any questions.

Sincerely,

Michael WangCrisis Director, Organization of Petroleum Exporting Countries 1978

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TOPIC A: FOREIGN ENERGY INDEPENDENCE

Statement of the Problem

Why does Foreign Energy Independence Matter?

There was once a time when the United States (US) and the Soviet Union (USSR) were energy independent nations. In the 1950s, the US was the largest producer of crude, more than Venezuela and the entire Middle East combined.4 The USSR was able to match production with consumption, allowing its planned, autocratic economy to run without resorting to outside purchases.5 At a casual glance, this arrangement does not seem to be a major problem for oil producing nations. Why would it matter for an oil producing country if the US and the USSR are energy independent? Shouldn’t oil prices be the same regardless?

For the countries that constitute OPEC, energy independence for either superpower ensures that OPEC loses its power as a political and economic force. In 1970s, when the US and other countries in the Organisation for Economic Cooperation and Development (OECD) had long been dependent on OPEC oil to run its economy, unable to produce enough oil within domestic borders, OPEC had total control over the market. In July of 1970, oil prices were $2.08/bbl (bbl being the common oil unit of barrel).6 As the dominant supplier of oil, by the middle of December 1973, some OPEC countries were able to auction oil for $17.04/bbl.7 For some producers, the price change was a welcome windfall. For large-oil producing countries, the price increase quadrupled their Gross Domestic Product (GDP).

Moreover, the ability to manipulate such an important economic pressure inevitably led to OPEC countries selling price stability for non-monetary concessions in the realm of political power. Iran and Saudi Arabia, notably, were able to trade OPEC policymaking for diplomatic victories or military support.8 Thus, the connection is clear. OPEC only maintains its stunning political and economic power because the US is not energy dependent. What happens if, suddenly, the US and the world no longer need to submit to OPEC’s demands? Furthermore, if prices drop suddenly, what happens to the regimes whose lifeblood is oil revenue? The regime falls.

4 OPEC: Twenty-Five Years of Prices and Politics 35 Ibid 36 Ibid 607 Ibid 1008 Ibid 141

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1971-1973: Production Programming or Cartel?

Venezuelan Minister of Mines Perez Alfonso developed the following theory of oil production, “production programming.” Oil is a depleting, finite resource. It must be preserved for as long as possible, and out of each barrel of oil as many economic benefits as possible must be extracted. All producers must band together to limit competition and raise prices.

Coordination of behavior between OPEC nations peaked in 1971, but oil prices reached their highest in 1973 due to profit-seeking OPEC nations engaging in behavior that benefited their country at the expense of the collective. Before 1973, OPEC lacked the self-confidence to challenge superpowers and the established economic order, negotiating strongly and threatening action, but rarely committing. Even at the time of the greatest cooperation between member states, the actions of individual nations were what often served as the catalyst for drastic collective action.

The beginning of the unanimous action began first with General Muammar Qaddafi’s overthrow of King Idris of Libya in September 1969. Immediately, the dictator Qaddafi demanded, at literal gunpoint, a 40-cent/bbl increase in price by Occidental, a small oil company that depended almost entirely on Libyan oil production.9 Algeria followed in Libya’s footsteps with retroactive price increases on French oil interests while cutting production by 800,000 barrels.10 Emboldened by their nationalist counterparts, OPEC collectively negotiated a 40% revenue increase on February 1971 in an ostensible 5-year promise to keep prices stable. OPEC had been aiming for a 30 cents/bbl minimum increase, and exceeded their own goal by 5 cents/bbl. This marked a fundamental turning point in the demands OPEC would make of the world, finally committing to real and strong action. OPEC had tasted total victory for the first time. It would not be the last.

The breakdown of the Bretton Woods Agreement in 1971 caused the dollar to float, no longer bound to $35 per ounce of gold. Instead, the dollar was revalued at $42/ounce. Though OPEC had promised the world to keep prices stable, the floating dollar resulted in OPEC demanding an 8.59% increase in oil prices, in order to offset the diminished value of the dollar.11 Oil companies who were once able to control their own pricing ceded to the price controls of OPEC almost immediately. In this instance, of flux in the value of international currency, one can observe OPEC leveraging its control in order to respond to a globalized market.

Collective OPEC action would be used to for more than a response to economic change, with OPEC using its power to demand political change in the policy of foreign nations. In October of 1973 the states of Syria and Egypt, with the support of other Arab nations carried out a surprise attack against Israel, beginning the Yom Kippur War. In response, President Nixon pledged

9 Ibid 5910 Ibid 6011 Ibid 71

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substantive increased military support to Israel, in terms of supplies and finances. The Arab OPEC nations demanded US withdrawal of support from Israel and Israeli withdrawal from territory beyond the 1949 border with increased freedoms for the Palestinian people. Saudi Arabia, once a long-term supporter of Arab-Israel dialogue, bitterly denounced US policy and increasingly supported Egyptian military action.12 The United States believed that Saudi Arabia would not use oil policy to attack US policies on Israel and refused to withdraw support.

Saudi Arabia, in response, along with other Arab nations in OPEC, rallied the bloc to use an oil embargo to compel the US to stop supporting Israel. Eventually, the scope of nations targeted by the embargo would increase, punishing all nations that even tangentially supported Israel through ally ship with the US. During September 1973, OPEC cut 5% of oil production and then threatened to cut 10% in October and 15% in November, and so on and so forth.13 OPEC would continue, the bloc declared, until “total evacuation of Israeli forces from all Arab territory occupied during

the June 1967 war is completed and the legitimate rights of the Palestinian people are restored.”14 Then, during the October 8th, 1973 meeting with the oil companies, OPEC demanded a doubling of oil prices, from $3 to $6/bbl. When demands were rejected, OPEC lashed out by raising prices to $5.12/bbl, and cutting back on oil production. Some nations, such as Iraq, chose to cut off Western influence in the oil market by nationalizing holdings

The effects of the embargo were immediate. Importing governments experienced exorbitant cost hikes, with France and the UK faced a $1 billion import increase, Germany $1.5 billion, Japan $2.5 billion, and the US $3 billion.15 Oil is a product of inelastic demand. With multiple moving parts of an economy dependent on having oil, nations will pay almost any price for the oil required to keep the country moving. OPEC would no longer be negotiating on prices, and the inelasticity of oil demand left nations with no choice but to pay the dictated price.

Between 1971-1973, OPEC could be accused of not fulfilling its ostensible role as stated in Resolution 1.i from the first OPEC conference: “formulate a system to ensure the stabilization of prices by… the regulation of production.”16 Furthermore, OPEC claimed that its goal was to

12 Ibid 8613 Ibid 10014 Ibid 10015 Ibid 9016 Ibid 21

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maintain an “efficient, economic and regular supply of this source of energy to consuming nations, and a fair return on their capital to those investing in the petroleum industry.”17 In pursuit of political leverage, OPEC has moved away from these goals. Oil prices, in 1973, were less stable than ever before and OECD countries became racked with supply shortages and runaway inflation. Furthermore, OPEC nations began receiving far too much revenue, above the level to which they were accustomed.

Finally, OPEC had corrupted the ideal of Venezuelan production programming, where oil production is optimized for the longevity of the industry and pricing ensures the ability of people to extract further value from oil, maintaining such a viselike grip on oil supply that OECD nations had no choice but to pay exorbitant prices. Rather than act as a stabilizing force in the oil market, OPEC became a cartel.

1974-1978: A Confrontational West and the Failure of Cartel Politics

A cartel is an organization that brings together individual producers of goods or services intending to regulate or manipulate prices.18 These supposedly independent producers attempt to act as one unified producer to limit competition and maximize their own profits. Though a cartel lacks the same pricing power as a monopoly, its existence tends to exacerbate supply shortages and price hikes.19 OPEC, due to its 1973 price changes, manipulating the market price of oil through the coordination of suppliers rather than reacting to natural supply and demand, is commonly accused as acting as a cartel. However, after 1973, OPEC suffered from a lack of enforcement to keep individual players in line with coordinated policy, which prevented it from continuing to work together as a group to the end of increased profits.

Why is price competition, where each producer acts as a private entity trying to maximize its own profit, so deadly to profits? Assume that there are only two oil producers. They each produce 100,000 barrels of oil and agree to sell each barrel for $10. Each producer makes $1 million in revenue. Then, say producer A begins selling each barrel for $8, allowing it to steal an additional 25% of the market. Producer A now sells 150,000 barrels for $1.2 million while producer B sells 50,000 barrels for $500,000. In response, producer B cuts prices to $8 as well, recreating the equilibrium of each producer selling 100,000 barrels. Each producer now makes $200,000 less than the start, selling the same amount of product. This example shows the detriment of price competition while also showing the benefits of price collusion and collective price hikes that a cartel can facilitate. If both producers agree to double prices to $20 a barrel, consumers have no choice but to pay the new price.

17 Ibid 2118 https://www.investopedia.com/terms/c/cartel.asp19 Ibid

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A reasonable question to ask would be, why doesn’t OPEC continually raise prices and continue colluding? One major problem within OPEC and most cartels is that each producer has a strong incentive to act against the group. In the previous example, though producer A and producer B were greatly hurt by price competition, producer A maintained an early advantage by dropping prices first, allowing it to benefit temporarily from increased sales. Some countries, such as Venezuela20 and Iran,21 seek revenues and market share above all else. Iraq, in contrast, seeks greater profits above all else.22 This conflict, between revenue-seeking countries and profit-seeking countries, is the battle that broke OPEC’s unanimity as a legitimate economic force.

A cartel is at its “most powerful when there are high barriers to entry into the market or industry, and when all members can be ‘policed’ by a dominant member” who will enforce adherence to cartel pricing.23 The oil industry maintains extremely high barriers to entry, necessitating huge investment in technologies to efficiently extract oil and requiring enough supply to make the investment worthwhile. The United States fulfills half the equation of a powerful cartel, unable to produce enough oil for its economy after domestic reserves began running dry and barred from entrance to the industry due to the expense required to find and access remaining reserves. Saudi Arabia, however, lacked the ability to police its peers in a meaningful way, as OPEC lacks any enforcement mechanism to punish countries that subvert the group will. Though Saudi Arabia was the strongest nation in the group, its dominance would continuously be challenged, thus diminishing group cooperation.

In 1975, Saudi Arabia had established itself as the de facto leader of OPEC. It was Saudi Arabia that called for prices at $10.12 a barrel in December 1974, pressuring the rest of OPEC nations to sell at that price. For a time, OPEC acted as a “rubber stamp” on Saudi Arabian power and influence, with other Gulf nations particularly following Saudi Arabia’s will.24

Yet, influence does not equate to enforcement of will, and Saudi Arabia was unable to police its peers. Saudi Arabia pushed for OPEC to reinstate dialogue and negotiation with OECD countries to establish steady oil prices. In OPEC’s 45th meeting, Iran, backed by Iraq, Libya and Nigeria, openly defied Saudi Arabia’s plan to increase prices by a steady 5%. Iran demanded a 15% increase. Once simmering tensions began to boil over, as “it was increasingly clear that Saudi Arabia could not be outvoted on any pricing issue, either Saudi Arabia had to agree or OPEC would split.”25 Eventually, the two blocs came to an unsteady compromise of a 10% increase

20 OPEC: Twenty-Five Years of Prices and Politics 621 Ibid 2122 Ibid 13523 http://www.economicsonline.co.uk/Business-economics/Cartels.html24 Ibid 11625 OPEC: Twenty-Five Years of Prices and Politics 130

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followed by a 12-month price freeze.26 Gone were the days when OPEC doubled prices at a moment’s notice, the bloc was tearing itself apart.

OPEC faces the threat from a lack of enforceable unity among member states, while also facing the threat of global retaliation should nations no longer accept OPEC’s control of the cost and supply of oil. Secretary of State Henry Kissinger bluntly declared in an interview that military force might be necessary if OPEC threatened a “strangulation of the industrial world.”27 A US delegate to a Paris meeting with OPEC began his remarks by noting that the US aimed to “hasten the ‘demise’ of the [OPEC] cartel.”28 The US, and by the extension the West, rejects any notion of total OPEC price sovereignty over oil and may resort to diplomatic and military intervention if hawkish OPEC nations go too far with their price hikes.

Starting in December 1977, Iraq led a charge to increase prices while Saudi Arabia wanted to continue the price freezes. A bloc of eleven nations decided to raise prices by 10% on January 1st, 1978 and then by 5% on July 1st. Saudi Arabia and the United Arab Emirates publicly broke with the bloc, raising prices by only 5%. This was the first ever public OPEC split, which threatens the continued legitimacy, power and stability of OPEC. Saudi Arabia, as punishment to the nations that defied its will, increased production to 10million bbl/year and threatened OPEC with a greater increase, tanking oil prices and slashing oil revenues that had once been kept artificially high through OPEC collusion.29

The betrayal was acidic. The Iraqi oil minister called Saudi Arabia “a defeatist and uncompromising reactionary cell,” while Iranian state-backed media declared Saudi Arabia to be “a stooge of capitalist circles, a yellow belly, and a traitor, not only to his own kings and country but also to the Arab World and the Third World as a whole.”30 Infighting caused a rapid decline in importance and influence. Buyers desperately flocked to the market with orders for cheaper Saudi crude while many of the other producing nations were struck with unexpected bad weather and equipment fires, adding further instability to OPEC countries’ revenues.31

At the 50th OPEC conference, gridlock took over all debate, with Saudi Arabia demanding price freezes and a hawkish coalition demanding increased prices and neither side backing down. Thus, OPEC noted its first ever inability to establish a uniform policy, noting that “The Conference considered the question of a price adjustment, but the Member countries were unable to reach a common consensus on this issue.”32 Polite language masked a dangerous truth. OPEC cannot

26 Ibid 13127 Ibid 12428 Ibid 12829 Ibid 13530 Ibid 13531 Ibid 13632 Ibid 137

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survive for much longer if the bickering dove and hawk blocs refuse to work together to agree on pricing policy.

Further Issues: Iran

Iran, in 1978, has not seen its persistent economic and social issues solved by the presence of oil. Furthermore, as the Shah’s hold on power has become more and more tenuous, he has agreed to trade oil policy in exchange for US military support. Though the Shah is weakened, Iran remains one of the largest threats to OPEC unanimity. Seeing himself as the inheritor of Persian greatness, the Shah refuses to completely grovel to the United States. As the second largest oil producer in OPEC, after Saudi Arabia, and accounting for a sixth of OPEC’s total oil production, any instability in Iran will ripple out into the international oil market and the stability to OPEC nations. The recent labor unrest in Iran has deeply hurt the nation’s ability to continue functioning. Only recently, in September 1978, President Jimmy Carter, a noted humanitarian and protector of liberal democracy and human rights, called Iran “an oasis of peace and stability on one of the more troubled areas of the world.”33 A few weeks later, on October 13th, a huge batch of Iranian workers has begun relentlessly protesting the government. Iran produced 6 million bbl/day in September, but today, in December 1978, Iran is only producing 2.4 million bbl/day. The market is already panicking and global oil markets are threatening to begin stockpiling oil for the future. Such an eventuality, while beneficial to GDP, can turn world public opinion against the OPEC nations.

Further Issues: The United States

The US and the West have worked relentlessly to prevent OPEC from exercising price sovereignty and they seek a return to greater Western energy independence. Thus, as noted before, the two powers seek to pressure OPEC nations into working against the group will and the US is continually seeking replacement energy. Alaskan oil rigs and the United Kingdom’s North Sea are burgeoning to increase oil production to meet Western demand.34 Furthermore, the two most powerful countries in OPEC, Iran and Saudi Arabia, are both being promised huge military aid packages by US leaders in exchange for price stability. Saudi Arabia has already allowed the US to help dictate oil policy in part, while Iran’s increasingly instability may allow the US a greater foothold.

Further Issues: Unanimity and Bloc Politics

OPEC nations maintain many different perspectives on price increases and supply cuts. One thing is clear, however. Every OPEC nation is an emerging economy that lacks revenue diversification

33 Ibid 14534 Ibid 138

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a very stable governance. As noted before, the US and the West are seeking votes to block hawkish OPEC policy. Many OPEC nations will be exposed to secret side deals to sell more oil or trade OPEC votes in exchange for military aid, diplomatic victories or “foreign aid,” which is commonly stolen by the governments as bribes. Such conduct is expected in the normal workings of the international community but these actions can be fatal towards OPEC’s power and prestige. If multiple OPEC nations cheat on its commitments to the bloc, the results would prevent any effective policy from being reached. The Western blocs, the Communist blocs and other OPEC nations may especially bribe smaller nations in exchange for their votes.

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History of the Problem

Foreign energy independence, or conversely the lack of energy independence, impacts the political stability and economic success of oil producing nations. It is the demand of petroleum and related products that drives the necessity for OPEC, in order to put the control of pricing in the hands of the producers rather than the hands of its consumers. It is the goal of this history of the problem to reveal the tactics of foreign nations, as they have tried to wrestle control of oil production and export away from the very producing nations that produce the resource, and to comment on where OPEC has subverted or been subsumed by Western tactics considering their ability to cooperate or lack thereof. Furthermore, the history of the problem seeks to explain the history of energy consumption or exportation by Western and Soviet nations as to highlight possible strategies of oil producing nations to ensure global dependency on oil that allows your nations to set the terms of trade.

Historical Consciousness: The Effects of Colonialism

The Middle East, unlike Africa and the Americas, was colonized relatively recently by European powers. While the Americas were generally conquered and colonized by the early 1800s and African imperialism reached its peak similarly in the mid-1800s, the Middle East only started becoming colonized in the late 1800s.

A few OPEC nations, such as Iran, remained independent throughout this period, and were left generally alone to their own devices. Iran remained independent throughout this time, though it became divided into Russian and British spheres of influence. The conquest, or lack of conquest, by a European nation helps neatly divide a country’s historical consciousness into one of dependence on foreign countries or a firm history of independence. The Shah of Iran, for example, refuses to toady up to foreign powers. Throughout the previous price wars, Iran has remained a staunch bulwark against foreign influence through the process of setting oil prices and has acted to maximize profit and revenue for the regime rather than focus on stabilizing oil prices.35 However, Iran can still be aptly described as a moderate nation in the framework of OPEC, as the Shah commonly trades oil policy for diplomatic and military favors.36 Thus, countries that were lightly affected by colonialism like Iran tend to be moderates on oil prices.

A country that can be described as a hawk is Algeria. Unlike Iran, Algeria was brutally colonized by the French starting in 1830 and fought a terribly exacting war of liberation until the 1960s.37 Algeria is, by far, one of the most hawkish members of OPEC and constantly agitates for

35 OPEC: Twenty-Five Years of Prices and Politics 2136 Ibid 14137 https://coldwarstudies.com/2013/01/11/history-of-colonization-in-the-middle-east-and-north-africa-mena-precursor-to-

cold-war-conflict/

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further prices increases and a complete lack of consideration for Western price stability or economic growth. Instead, Algeria, along with fellow hawk Venezuela, seeks nothing less than total economic restitution for the pains of colonialism that were exacted on them by the West. Furthermore, they believe strongly in the idea that, because petroleum reserves are limited, it is essential that the OPEC nations band together to collectively pass regular and consistently high price increases to most effectively exploit their limited natural resources. This belief, known as production programming, guides those nations with socialist leanings and those countries that have been traditionally hawkish on price increases.38

Finally, countries such as Saudi Arabia, Kuwait and the United Arab Emirates, were created by British military and naval power. At first, these countries were ignored because they were deemed to have no important natural resources worthy of exploitation or control by European powers. As a result, these countries have historically felt more warmly towards the European powers, as they had less of a historical background of colonization and exploitation. This group of countries tends to prefer stability and the embrace of Western countries and influence. All countries tend to maintain high-tech militaries that are built with oil money and armies trained by Western advisers. These Gulf Countries, for example, allowed the United States to station aircraft carriers off their coasts and allowed Western military to operate bases pocketed within their territory.39

The Seven Sisters

Originally, petroleum was strictly an American industry. Discovered in Pennsylvania in 1859, petroleum quickly revolutionized the American economy. Suddenly, kerosene brought the ability to increase the working day through lamp light while coal would fire up industrial productivity. Not only did oil bring huge increases in employee productivity, but also the discovery began a brutal quest by companies and capitalists to secure monopolistic control of oil reserves. The most famous example of relentless capitalist control was Standard Oil, a textbook monopoly.

The major stakeholder, John D. Rockefeller, established control of the refining industry by purchasing his competitors or lowering prices to below-cost levels to drive out his smaller rivals. By creating huge economies of scale and increasing factory efficiency through huge capital investments, Rockefeller could keep prices low enough to force his competition to sell their businesses. The process led Standard Oil to control 88% of American refined oil production and transportation by 1890. The company grew so quickly that production exceeded American demand and Standard Oil became the first multinational oil corporation, selling to China and helping to begin the exploration of oil in the Middle East.40

38 OPEC: Twenty-Five Years of Prices and Politics 339 https://www.tandfonline.com/doi/pdf/10.1080/19370679.2010.1202316740 https://books.google.com/books?id=X21GnILv-KcC&pg=PA169#v=onepage&q&f=false

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Though Standard Oil was eventually brought down by government regulators, targeting its monopoly status, the lessons that the company imparted were not lost: control of oil leads to stunning profits and both political and economic influence. The brutal economic tactics that Rockefeller utilized were also repeated by the “Seven Sisters,” a group of oil companies that by 1973, controlled approximately 85% of the world’s oil supply.41 Oil, at this time, were as depoliticized as other resources for the nations that held petroleum reserves. The government treated the industry as any other: simply an extractable resource, but not as the symbol of national pride and independence that oil eventually became for certain countries.

By the 1940s, the Seven Sisters essentially established a near-total monopoly of the world’s oil reserves. The Seven Sisters were made up of Standard Oil of California, Texaco (later becoming Chevron), Gulf Oil (later becoming Chevron), Royal Dutch Shell, Anglo-Iranian Oil Company (eventually becoming British Petroleum, BP), Standard Oil of New Jersey (later becoming Exxon), Standard Oil of New York (later becoming Mobil, and joining with Exxon to form Exxon Mobil).

Notable on this list, is the Anglo-Iranian Oil Company. Known in the future as British Petroleum, the Anglo-Iranian Oil Company was granted nearly total access to Iranian oil reserves in exchange for giving the Shah a mere 16% of future profits. Compared to the future deals negotiated by OPEC, Iran was essentially allowing its oil to be stolen away. Early and often, the British government interfered in the company’s goals and strategies, inserting the needs of the Empire before the long-term health of the company. Exxon Mobil, combining the Standard Oil Companies of New York and New Jersey, is was one of the other few Seven Sister companies that continues to be a powerful oil conglomerate.

Case Study: British Petroleum and Nationalization, an Iranian Story

The story of BP yields multiple important realizations about the importance of oil during this time in global history. The establishment of British Petroleum allowed the British Empire to cease its reliance on Standard Oil and the Royal Dutch Shell companies for their petroleum needs. At this point in time, oil began to transition from an engine of economic growth to political and strategic asset of unquestionable importance. Starting in 1913, AIOC began supplying oil to the British Royal Navy to improve the distance ships could travel.42 Due to wartime needs and a necessity to ensure stable oil flows, the British government acquired majority holding of the company and AIOC essentially became a de facto state-run company. Though it was ostensibly run by shareholders, the company’s first priority was always the execution of British foreign diplomacy.43 This can be seen clearly in the exclusive government contracts given

41 https://web.archive.org/web/20100127022854/http://www.timeslive.co.za/opinion/columnists/article272352.ece42 Kinzer, Stephen (2003). All the Shah’s Men: An American Coup and the Roots of Middle East Terror. Hoboken, NJ: John Wiley

& Sons.ISBN 978-0-471-26517-7.43 Ibid

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to AIOC. The future company that would become BP was granted a monopoly on rights to Persian oil and the company employed future Prime Minister Winston Churchill as a consultant to lobby for the company’s interests.44 Whenever Iran would seek to adjust existing oil treaties, British government would use its full diplomatic powers to negotiate on behalf of the company, protecting British economic and political interests by protecting its stake in oil. The intersection of oil policy and foreign policy cannot be overstated.

Reza Shah continued to push for continued improvements in oil treaties, improved wages for laborers and infrastructure improvements. In World War 2, fearful that Reza Shah would be invaded by the Nazis or join their side, the Allies invaded Iran and swept aside the government. The monarch’s son, Mohammed Reza Shah took power, but he was essentially crowned by the British and Soviets as he was considered more pro-Allies than his father. Wartime necessities required the Allies to seize Iranian oilfields in order to fuel weapons industries running despite general wartime supply shocks.

After the Second World War, waves of nationalism spread across the world. One of the largest effects of the spread was the intersection of independence and nationalization of oil. One of the biggest barriers to moving from being a colony or semi-independent state to independence is the lack economic control. Many colonies rely on a constant stream of money from their colonizer for natural resources to keep the economy humming. Yet, this process constantly leads to the degradation of working conditions and various human rights atrocities against the colonized countries. The director of Iran’s Petroleum Institute stated, “Wages were 50 cents a day…  there was nothing—not a tea shop, not a bath, not a single tree. The unpaved alleyways were emporiums for rats.”45

Oil, if its economic proceeds were distributed equitably, would allow a compassionate government with large oil reserves to lift its entire population out of poverty. Alternatively, for a weak or cruel dictatorship, the flood of oil money allows for the purchasing of corrupt rivals and the development of secret police and a powerful military. As we will see, Saudi Arabia and Iran both diverted huge oil proceeds to purchase high-tech American weapons for the purposes of defending their monarchies both from outside powers and their own people.

The poster child of the nationalization of oil was Mohammed Mossadegh, the Prime Minister of Iran beginning in 1951. Mossadegh was hugely popular, democratically elected, and dedicated his life to improving the lives of Iranian people by redistributing oil revenues away from foreign companies and into the hands of oil workers. Furthermore, unlike the vast majority of individuals advocating redistributive policies, Mossadegh was firmly in control of Iran, as the Shah was

44 Ibid45 Kinzer, Stephen (2003). All the Shah’s Men: An American Coup and the Roots of Middle East Terror. Hoboken, NJ: John Wiley

& Sons.ISBN 978-0-471-26517-7.

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a mere figurehead for the democratically elected government. Western powers scrambled to secure a deal that would allow the AIOC to maintain control of Iranian oil while granting Mossadegh a diplomatic win and a portion of his demands.46 Stunningly, the Prime Minster refused compromise and continued to push for complete nationalization and the expulsion of the foreign companies and countries from Iranian oil.47

After protracted negotiations, Mossadegh agreed to a settlement in which the Iranians would purchase British assets in Iran for a relatively fair practice and would give the AIOC access to Iranian oil for 15 years. Compared to Mossadegh’s calls for total nationalization in exchange for no compensation, this deal would have preserved face for both Mossadegh and allowed the AIOC to continue operations as a leading producer and refiner of oil. However, it was not to be. The US carefully negotiated the agreement and presented it to the Conservative Government, but the British Empire chose instead to try and remove Mossadegh from power and establish the Shah as the absolute ruler of Iran. After a failed attempt to overthrow Mossadegh by the Shah, the British enlisted CIA support and instigated riots to give the Shah an excuse to use the military to remove Mossadegh in a coup that was completely unsupported by the people. Public opinion was deeply against the new regime and the Shah was forced to turn towards repressive squads of secret police to keep himself in power.

The countries of OPEC ought to learn the following lessons from Mossadegh’s overthrow. First, there will undoubtedly be foreign interference in both the domestic and foreign policy of your country. Agents from Western and Soviet secret services will attempt to get OPEC delegates to betray the coalition and seek favorable deals with the Western nations. Furthermore, there will continually be agents that attempt to stir unrest in the countries that are most aggressively anti-Western and use subsequent chaos to attempt to overthrow the government and establish a new regime. If the OPEC nations are to remain independent, they must band together or risk being attacked individually.

Around 1953, American CIA officials eventually helped train the squads of security forces that would eventually become SAVAK, the secret police that terrorized the Iranian people and entrenched the Shah’s control of the country.48 Moreover, foreign oil companies rushed into Iran with the Shah’s blessing and essentially reclaimed their place in extracting, refining and selling Iranian oil with little domestic involvement. The Mohammed Reza Shah, with the newfound windfall, took the oil money and began purchasing weapons from Western countries and again using it to defend his regime, both from internal threats and other Middle Eastern rivals.

46 Ibid47 Ibid48

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1959: The Creation of OPEC

As seen with the case study on Iran, the Seven Sisters essentially had complete control over the oil of foreign countries. They negotiated unfair treaties with the future members of OPEC and treated domestic workers with terrible disrespect and unfair living conditions. Furthermore, the oil revenues paid to the countries were low and the companies would use the power of their home governments during negotiations. Finally, we see that for those governments, oil policy became foreign policy and the militaries of great powers were constantly ready to overthrow foreign governments in the pursuit of keeping oil flowing.

Oil-producing countries first began agitating for a group to increase their collective power in 1959, when the 1st Arab Petroleum Congress met. The Congress was filled with angry denunciations of Western imperialism and the use of force to compel countries to comply with the Seven Sisters.49 They began to outline the beginning of a strategy to coordinate oil prices and policy. They sought a yearly conference to discuss:

a. Contracts and price changes

b. Collective approaches to the oil industry

c. Increasing national refineries

d. Establishing national oil companies

e. National coordination of conservation, production and exploitation of oil

In response, all the Seven Sisters decreased prices on Middle Eastern oil, thus cutting government revenues precipitously. The act sparked outrage. Foreign companies were attempting to blackmail supposedly sovereign nations into refusing to band together against foreign imperialism. Furthermore, the companies kept Venezuelan oil at the same price, seemingly rewarding its favorite countries for staying docile.50 The outraged nations responded with a meeting in Baghdad, where the nations all belligerently called for action. Saudi Arabia preferred to increase taxes on oil while Venezuela aggressively called for the establishment of production programming and raising prices unilaterally.

Five nations, the original founders of OPEC, would come together to protest the actions of the Western sister companies by banding together in a coalition that sought to protect the interested of the member nations from the companies that violated national sovereignty. These countries,

49 25 years of pieces and politics 1650 Ibid. 18

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Kuwait, Iran, Iraq, Saudi Arabia and Venezuela were very different. Kuwait, a British colony, never suffered the same humiliations, unequal treaties and total domination that many other British colonies faced. Instead, Kuwait maintained an amiable relationship with the West and would eventually join Saudi Arabia as a pro-Western and stabilizing nation.51

Iran, on the other hand, would tread a fine line between its tacit support of Western nations while remaining fiercely independent in its rhetoric. Since the time of the Shah and beyond, Iran would commonly be a vocal opponent of moderating the price of oil and instead call for OPEC to enact steady prices increases to increase Iranian revenues. Despite protest over moderate oil pricing, Iran was happy to see whatever revenues it received, immediately diverting oil rents to purchase American guns, arms and training to protect the Shah’s regime from collapse.

Iraq, which suffered a coup in 1958, was ruled by a heavily anti-imperialist, anti-colonial socialist regime that sought greater ties with the USSR. Iraq, when ruled by a socialist dictator, tended to push for OPEC to develop Soviet support and raise prices to hurt the West. Saudi Arabia, in contrast, was always one of the most pro-Western countries in OPEC. While the House of Saud resented the continued influence of the Western companies in national affairs, the rulers of Saudi Arabia universally pushed for dialogue and negotiation with the West. Venezuela, quite possibly one of the most anti-Western countries in OPEC, commonly pushed for the bloc to pursue a campaign on production programming to ensure that the gains of oil were always increased and the national governments themselves could be strengthened.

Resolution 1.i of what would become OPEC stated firmly and unequivocally that “Members will not accept any offer of beneficial treatment to prevent the implementation of a unanimous decision by OPEC.”52 Early on, OPEC showed its commitment to protect the bloc from foreign companies and countries who wished to interfere and prevent the group from acting cohesively and with one voice. However, due to the lack of any enforcement mechanisms to follow the collectively set policies, OPEC would always suffer from individual nations selling oil to foreign powers at lower prices and greater quantities than allowed by OPEC quotas.

After the formation of OPEC, USSR praised the organization as being a chapter in “the struggle of the peoples of economically underdeveloped countries against the domination of monopoly capital.”53 The Soviets, due to their own massive stores of petroleum, felt inclined to bolster OPEC as a defender of small states against the imperialist West. OPEC previously and continues to walk a fine line between accepting the support of the Soviets while continuing to provide oil to the energy-hungry West. Similarly, OPEC highmindedly espouses the lifting up of poor non-Western states and the redistribution of oil revenues while constructing gaudy petro-states,

51 Ibid. 1052 Ibid. 2253 Ibid. 22

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spending lavishly on Western luxury products and building up their militaries using Western weapons.

The Early Failures of OPEC: 1962 – 1967

Almost immediately, OPEC turned out to be a catastrophic initial failure. In 1961, Iraq ended up invading Kuwait without just cause and Kuwait responded by refusing to abide by OPEC decisions until Iraq was evicted from the bloc, which occurred immediately until its re-entry in 1963.54 In the early 1960s nations were fighting over export limits. While one of the purposes of OPEC was to coordinate exports in order to keep the price of oil stable and high, as individual nations OPEC countries wanted to flood the market with their own supply. Yet for any supplier to flood the market with their cheap oil would be to send the price of all national production plummeting. The fundamental problem with OPEC’s ability to act cohesively comes from the fundamental problem with all cartels: Simply put, it almost always makes sense for one country to betray the others, unless it can be sure of the other members’ commitment to the cause.

OPEC also failed to take collective action in the year 1967, the year that Israel launched a pre-emptive military strike against its Arab neighbors in what would be later known as the Six Day War.55 Many of the Arab members of OPEC wanted the bloc to subsequently boycott the state of Israel. As Six Day War only lasted six days, no embargo would have had time to be effective. Additionally, the bloc was not able to coordinate its action as the OPEC members of Iran and Venezuela refused to sanction Israel.

Non-OPEC National Dependence on Oil

While OPEC exists as a body to shift control and decision making over oil resources to the suppliers of oil from the nations demanding the natural resources, at the end of the day OPEC nations are pulling in their revenues from foreign nations and must be prepared to adapt as those demands shift. This next section will briefly elucidate the histories of Western and Soviet relationships to oil such that OPEC nations may be prepared for similar situations in the future.

United States and the West

It was in the United States where oil production began, first in Pennsylvania then generally shifting south and west, to Oklahoma, California, and predominantly Texas with the Texas Oil Boom of the early 20th century. At this point in time, as the predominant producer of oil, the US relied on no other nations to supply its need for kerosene and other oil products. Despite the steady growth of the the US oil industry until the 1970s, following the explosion of reliance on

54 Ibid. 2655 “OPEC (Brief History) - Energy Education,” accessed November 7, 2018, https://energyeducation.ca/encyclopedia/OPEC_

(brief_history).

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machines that required oil in the World Wars demand simply outpaced supply. There was a one to one ratio of imported oil compared to domestic production of crude.56

Despite growth of the oil industry up into the 1970’s, the rate of growth began to plateau, as the most accessible oil fields began to run dry, and it became more expensive to access the reserves that were left, in the deep seas off the gulf coast. The US demand for fuel and other oil derived products such as plastics to drive all facets of its economy simply outstripped what its natural resources could provide. The ratio of imports to exports continued to grow, up until the point that the United States, and much of the West would be brought to an economic standstill should oil imports be cut off. With a lower ratio of domestic to foreign oil usage, the United States lost it bargaining power over prices through its stake in the market, instead relying on military power and luck to ensure oil prices were in its favor.

In 1973 the utter reliance on imported oil caused ripples in the relationship of the United States to its oil dependency. When the United States provided military aid to Israel during the 1973 Arab-Israeli war, OPEC successfully cut off oil to the United States and all other western nations such as Portugal, the Netherlands, and South Africa who had even tangentially supported Israel. Western nations experienced massive oil shortages, massive increases in the market price experienced by consumers, and a slowdown in economic progress due to the lack of access to oil. While stockpiles of oil built up over the years, preparing for the threat of embargo, provided a small cushion to lessen the effects of a foreign shut down, the embargo still shut down vital industries and heightened economic instability. In response to the embargo, the United States lead by President Nixon embarked on a number of strategies to end the embargo, and prevent an embargo from putting the nation at risk ever again.57

The embargo provided exactly what OPEC had desired in 1973, political influence, as the United States was forced into parallel negotiations with Israel and the Arab nations who had launched the embargo. The United States was brought to the bargaining table, bringing Israel to the bargaining table, as Israel was pushed to pull out from Sinai and the Golan Heights and peace negotiations between Israel and its neighbors of Syria and Egypt began.58 While the embargo encouraged the United States to negotiate on the political sphere, the United States also embarked on a quest to prevent such a reckoning form occurring again, pursuing development in alternative forms of energy to oil (wind, solar, and coal), focusing on energy conservation through a 55 mile per hour speed limit on interstate highways among other interventions, and the creation of the International Energy Association.59 While the United States may be dependent on OPEC for

56 “U.S. Field Production of Crude Oil (Thousand Barrels per Day),” accessed November 7, 2018, https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus2&f=a.

57 “Milestones: 1969–1976 - Office of the Historian,” accessed November 7, 2018, https://history.state.gov/milestones/1969-1976/oil-embargo.

58 Ibid59 Ibid

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its oil, many OPEC nations as individuals are dependent on the United States for military and financial aid, have caved on political aims in order to have access to the resources of the West.

Soviet Union and its Allies

From 1927 to 1953, the Soviet Union pursued a strategy of energy autarky, meaning independence and self-sufficiency in regards to energy production. Stalin pursued this policy through the explicit development of the Soviet energy sector, as a form of economic nationalism.60 With autarky, the limits of a nation’s economy should start and end entirely within the bounds of the nation state. This generally manifests in the cultivation of a large spectrum of domestic industries, such that there exists no foreign monopoly that can make economic demands of the nation because the nation possesses enough of a share of the industry. Trade with the outside world is leveraged for the benefit of the nation, but not to the extent that if international demand plummeted the domestic economy would be drastically hurt. The policy of autarky was heavily dependent on the Soviet Union’s access to raw natural resources within the bounds of its state. Thankfully for the USSR, its lands were laden with coal, oil, and natural gas, enough to drive economic growth and power the industry the central government wished to foster with its central government.

Central authorities of the Soviet Union realized that there was a vast amount of untapped much more potential for economic growth should the economy export its resources, to greater levels then had been seen previously. Furthermore, around the 1960’s, the Soviet Union was experiencing a period of notable economic stagnation, possibly due to the lack of investment in technological innovation strong enough to replace dependency on the energy economy, and an agricultural industry that while successful was losing market share in comparison to capitalist nations.61 As oil resources from Western Russia were decreasing, the government revived the industry by tapping into the resources of Siberia and the Far East, and ensured European dependency on Soviet resources by building direct pipelines of oil and liquified natural gas into European nations.62

Utilizing its large reserves of oil resources, and its ability play the long game in the energy exportation market, the Soviet Union has set the world up for dependency on its natural resources. Besides building essential pipelines funneling oil and natural gas from Siberia and the Far East, the Soviet Union has engaged in price manipulation for key states to its foreign policy such as Vietnam, Cuba, and Eastern European nations in the Soviet bloc, providing lower prices.63 In the case of the 1973 Oil Embargo, when OPEC nations decided to cut off oil resources to nations

60 “The Economics of Autarky,” September 11, 2018, https://www.aier.org/article/economics-autarky.61 “1964-1982 - The Period of Stagnation,” accessed November 9, 2018, https://www.globalsecurity.org/military/world/russia/

cccp-history-period-of-stagnation.htm.62 “The Use of Energy Resources as Foreign Policy Tools: The Russian Case,” European Scientific Journal 12, no. 11 (April 30,

2016), https://doi.org/10.19044/esj.2016.v12n11p78.63 “Comecon | International Organization | Britannica.Com,” accessed November 9, 2018, https://www.britannica.com/topic/

Comecon.

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even tangentially allied with Israel, the Soviet Union was encouraged to increase its foreign trade with First World, meaning nations on the opposite side of the Cold War, nations as there was no competition in the market. Specifically, Europe grew more dependent on Siberian national gas, while Japan turned to the USSR for oil.

Regardless of the substantive growth of the Soviet share of the energy market, as the world reaches the late 70’s, demand for energy in the global market is growing at a slower rate than in years past. Soviet production of oil, natural gas, and coal is once again stagnating. Despite past policy of the Soviet Union to undercut OPEC prices and efforts, the Soviet Union will join OPEC for this 1978 summit due to its vested interest in ensuring global demand for oil, at stable prices. The joining Soviet Republics of Kazakhstan and Russia will join in debate on how to participate in a flexible oil market, able to meet high energy demands without wasting precious reserves (such as in 1977 when the Soviet Union flared 700 billion ft3 of natural gas due to inadequate storage facilities with the drive to meet high demand), while collectively curbing production when demand is low in order to maintain higher oil prices.64

64 “The Use of Energy Resources as Foreign Policy Tools: The Russian Case,” European Scientific Journal 12, no. 11 (April 30, 2016), https://doi.org/10.19044/esj.2016.v12n11p78.

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Past Actions

Stabilizing Prices and Adjusting Supply

The very creation of OPEC was a strategy by oil producing nations to ensure stable prices in the volatile oil market. Article 2C of the OPEC statute clearly states the benefits that stable oil prices provide for member states being “a steady income to producing countries; an efficient, regular and economic supply of petroleum to consuming nations; and a fair return on their capital to those investing in the petroleum industry”.65 A predictability in demand and supply allows producers the ability to efficiently extract oil resources, and gives producers the confidence that their investments in better technology or new wells will pay off and thus stable prices incentivizes such investment in better oil extraction. Additionally, stable oil prices allow producing nations to predict oil revenues, assisting in better governance as nations will better understand their available resources to invest back into the general nation, and what government programs may be rolled out in the nation.

The adjustment of oil production, through a coordinated quota system is one of the strategies that OPEC has implemented in the past to ensure stable prices, especially as it sought to wrest control away from the Seven Sisters oil companies and maintain profits in the 1960’s.66 As individual member states became more emboldened in the 1970’s to demand revenue increases, OPEC attempted to keep prices stable through agreements to raise revenue to a predictable and explicit amount and no further such as the 40% revenue increase negotiation in 1971.67 Generally keeping prices stable, despite internal political turmoil, was possibly one of the tools used to keep the military powers of foreign nations at bay, as if OPEC was allowed to keep operations as normal, nations would keep their access to the liquid gold.

OPEC has also provisioned for stable prices in the past by responding to currency fluctuations in the global markets. In 1971, when the dollar was no longer attached to the gold standard, floating from a value of $35 per oz of gold to $42 per oz of gold meaning that the American dollar was less powerful, OPEC nations collectively agreed to raise the prices of oil in order to adjust to the actual value of the currency that would be used on the international market. Despite producers raising the cost per barrel, the OPEC manipulated prices to reflect the real value of the currency that its producers would be taking in.68

As discussed in Statement of the Problem, OPEC has not always manipulated prices for the sake of stabilization. Nations in the cartel in pursuit of larger profits, such as Iran, Iraq, Libya,

65 “OPEC : Oil Prices: To the Sky or Stabilisation?,” accessed November 9, 2018, https://www.opec.org/opec_web/en/889.htm.66 “1960’s Oil Production - The History of Global Oil Production,” accessed November 9, 2018, https://sites.google.com/site/

globaloilproduction12/1960-s-oil-production.67 OPEC: Twenty-Five Years of Prices and Politics68 Ibid

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and Nigeria during OPEC’s 45th meeting, had demanded explosive rather than steady increases in the pricing of OPEC oil.

As OPEC setting prices in the international market is only possible with correlating production, and thus a large part of pricing policy has been to set production limits for the entirety of the cartel. With the laws of supply and demand, high prices are only possible with high demand and low supply. Thankfully for OPEC, demand for petroleum in the 1970’s is still on the rise and continues to rise. Yet, only with a limited global supply of oil is OPEC able to extract the highest price form the market. OPEC depends on setting production limits, and all nations cooperating to keep their portion of supply within that limit, in order to keep prices at the agreed upon price point. Should any one nation put a toe out of line and produce more than the allotted amount at any time, they risk collapsing the price of oil for all producer nations. More than just pricing, OPEC seeks to preserve the amount of its market share that its oil crude oil has in comparison to foreign supply.

The ability of a nation to increase or decrease oil production can vary vastly depending on the number of existing oil wells, the amount of untapped oil reserves within a region, and the accessibility of those oil reserves. For nations with lower numbers of oil wells, the process of drastically increasing oil production can take years as new oil reserves are found and tapped into. Meanwhile, the process of cutting supply in order to avoid crashing prices can be as simple as halting the operations of its wells. In the more distant past, all of OPEC has collaborated in order to lower their production at even relative values across the bloc. However, as more rebellious nations such as Iran and Libya have pushed the envelope with their own production, the burden of offsetting their over production through production cuts has disproportionately fallen to Saudi Arabia, most able to shift production in a meaningful way as the largest producer.69

The Embargo of 1973

In 1973, OPEC nations relied not on the energy independence of other nations, but on their very dependence on OPEC’s supply in order to leverage political power. While the 1973 oil embargo by the Middle Eastern nations of OPEC against nations connected to Israel certainly motivated nations to come to the diplomatic negotiating table, the embargo in many ways sowed the seeds for future difficulties for the bloc.

Oil importing nations, by having built up substantive oil stores due to the risk of unexpected oil shortages, were able to slightly buffer the transition from oil to lack thereof. Other oil producing nations stepped up, shifting the normal distribution of their supplies, selling their own oil to new

69 Douglas Martin, “Opec: Trying to Be a Cartel,” The New York Times, March 16, 1982, sec. Business Day, https://www.nytimes.com/1982/03/16/business/opec-trying-to-be-a-cartel.html.

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customers who were desperately searching for a supplier, thus undercutting the market share of participating Arab nations. The Soviet Union was able expand its sphere of economic influence, especially in Asian and European markets.

Nations were also incentivized by the embargo to invest in technologies and policy that would lead to a reduction in dependence on foreign producers, through investing in the expansion of domestic production, renewable energy resources, bio-fuels, and more efficient machinery. OPEC decisions to keep prices lower and stable had made it too expensive for new oil companies or renewables to get off the ground, as low prices of oil would lead to revenues too small to possibly compensate for the large investment necessary to get and keep the ball rolling. Yet, the embargo, leading to skyrocketing prices and signaling futures with equivalently high prices, reconfigured the potential value of such investments and technological advancement.

The Special Fund of 1975

One of the problems with Foreign Energy Dependence, or Independence, is that due to the necessity for access to a wide pool of cheap natural resources, oil among them, powerful foreign nations will always try to bring underdeveloped nations into their sphere of influence. In order to decrease disproportionate influence and control that others had over developing nations in the Third World, leaders came together with “The Solemn Declaration of Algiers”, declaring a Third World based strategy to strengthen the nations of, and strengthen the solidarity of the Third World with the Special Fund of 1975.70 The OPEC Special Fund (OSF) was to coordinate all aid efforts of OPEC, existing to spur economic development and limit poverty, generally to remove unwanted global influence. This very fund would later become known as the OPEC Fund for International Development (OFID).71

70 Ibrahim Shihata, “The Opec Special Fund and the North-South Dialogue,” Third World Quarterly 1, no. 4 (1979): 28–38.71 “ABOUT US,” accessed November 10, 2018, http://www.ofid.org/ABOUT-US.

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Possible Solutions

Responding to Alternative Energies

As nations develop alternative energy resources, in order to reduce their dependency on the oil of OPEC, nations can propose a variety of strategies to adapt for new patterns of consumption. Many of these incorporate tactics seek to establish oil as the dominant fuel source, by making it the most convenient and cost-effective fuel source in a region, thus disrupting the development of alternative fuel industries. One of the tactics utilized by the Soviet Union to motivate future consumption of its natural gas and oil resources was to build a pipeline from Siberian oil resources directly to Eastern European nations such that is simply the most economic choice to purchase oil from the Soviet Union regardless of political relationships between the nations.

OPEC can generally work to improve the efficiency of oil production and transportation of oil, providing a better and more products from the process of extraction and refinement of oil fields. One such product, from oil production but underutilized as an alternative energy resource to oil as of yet, is natural gas. The majority of current industry is unprepared utilize its natural gas resources from wells, burning off the flammable gasses rather than capturing the resource for further use.72

72 Eman A Emam, “GAS FLARING IN INDUSTRY: AN OVERVIEW,” 2015, 24.

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Oil producing nations might also elect to invest in renewable resources of their own. The development of renewable energy sectors can aid in the diversification of OPEC economies, which might assist these nations in responding flexibly to changing demand or prepare OPEC nations for the eventuality of oil scarcity. However, investing in renewables like wind, solar, nuclear, biofuel, or tidal energy in response to the development of these renewables of other nations does not make much sense for the region. Even if nations have access to geography with vast amounts of sun, wind, or potential tidal power, the cost of necessary technology to access this energy is overwhelmingly high at this point in time in comparison to existing resources.

Price and Supply Manipulation

OPEC nations are able to manipulate the price and supply of oil in order to adjust the revenues and profits of oil production and to leverage political power, all the while responding to global demand for the resource. In order to make policy decisions with any weight, all members of OPEC must behave as a cohesive unit, adhering to quotas, price hikes, or temporary embargos.

Looking to the future, OPEC requires mores strategies to keep individual nations in line should there be decisions that require cooperative action, selling, producing, and distributing within the set limits. Delegates should decide how to incentivize adherence, or punish deviation. Recognizing the importance of other producers in the global market, contributing to the price and supply, OPEC producers will need to solidify where, when, and how coordination between the bloc and other producers can occur.

Regional Development

OPEC exists to ensure the upper hand of oil producing nations in the oil market, putting the control of production in the hands of the nations where production occurs rather than in the hands of consumers. While OPEC protects the sovereignty of its nations over their own resources, other Third World nations need assistance in preventing the exploitation of their resources by foreign bodies. The dependency of foreign nations on access to an excess of cheap raw resources within the Third World is much of the motivation of expanding influence in those borders of those developing nations. The OFID is a tool to share some of the wealth of oil production within the Third World nations with Third World nations without, hopefully cutting out the disproportionate influences of Western and Soviet nations. If development can be catalyzed from within the Third World, the region can phase out aid that comes with the strings of foreign influence attached. OPEC is left with the decisions of how to best utilize OFID, where and how to direct the use of the fund and its associated resources.

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Bloc Positions

Pro-West, Anti-Soviet

Saudi Arabia, Iran, Venezuela, UAE, Norway, Kuwait, Indonesia

This bloc of nations, led by Saudi Arabia, maintains the position that the West is a better friend to OPEC than the USSR. These nations have traditionally sought to open themselves up to foreign direct investment from the West. Furthermore, this bloc of nations tends to seek a fair amount of stability in the oil markets, yet Venezuela and Iran typically push the group to adopt a more nationalist and strident voice to fight against Western neo-imperialist actions. As a result, the leadership of the pro-Western nations will come down to an ideological difference between being “pro-Western” and being a pawn of Western interests and money. Today, Iran is facing calls from its people to abandon its support from the CIA and various other foreign actors that influence Iranian politics.

Non-Aligned Nations

Egypt, Indonesia, Algeria, Qatar, Nigeria, Ecuador, Gabon, Oman, Sudan, UAE, Kuwait

The so-called “Third World Countries” seek to differentiate themselves from either the pro-Soviet or pro-West blocs. These countries have either been neglected by both sides, such as Qatar and Nigeria, or they have been pulled ideologically by both sides and have refused to make a final alignment with either bloc, such as Egypt or Algeria. Egypt especially has always been a leader in calling for a rejection of either Soviet or Western influences, and instead call on OPEC and its fellow nations to accept help from both sides as they refuse to give up any autonomy to either side. A principal case study can be found in Egypt’s actions during the Suez Canal Crisis, in which Egypt experienced a triple invasion by Israeli, French, and British forces in order to regain Western control over the recently nationalized Suez Canal. The canal was instrumental in transporting oil resources from the Persian Gulf to the west. The wave of Egyptian nationalism which motivated the nationalization of the Suez Canal, won the nation Soviet support for its potential in removing Western influence in the Middle East. The Soviet Union, in addition to providing arms to Egypt, vaguely threatened nuclear intervention should the invaders not withdraw. President Egypt never lost the support of the United States throughout the ordeal, wherein President Eisenhower called upon its British, French, and Israeli allies to withdraw from Egypt in order to restore economic order, and called upon the Soviet Union to refrain from excessive nuclear force.

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Pro USSR, Anti-US

Iraq, Russia, Kazakhstan, Libya, and Mexico

This group of nations have been the few that are highly pro-Soviet. It is clear that the Soviet Republics of Russia and Kazakhstan will aggressively call for OPEC to adopt a more Communist and anti-imperialist tone. However, the nations of Iraq, Libya and Mexico tend to have strong socialist tendencies, as well as strong and unapologetic nationalist movements that have swept new leaders to power. This group of nations tends to reject the idea that OPEC ought to serve to maintain steady oil prices, but instead that OPEC should work for the benefit only of OPEC nations. Similarly, they reject the idea that OPEC should have any sympathy towards the West, but rather that OPEC should act more as a collection of formerly imperialized nations that can regain power after decades of colonialism.

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Glossary

Bretton Woods Agreement: The Bretton Woods Agreement created an international financial system. It regulated the relationships between the value of gold and national currencies, insuring smooth conversion between gold and currency. The Bretton Woods Agreement, while establishing many long-lasting institutions such as the International Monetary Fund (IMF), broke down in the late 60’s and early 70’s as the US dollar was untethered to the gold standard.

Cartel: An organization that brings together individual producers of goods or services intending to regulate or manipulate prices.

Gross Domestic Product: Gross Domestic Product (GDP) is a financial measure of the productivity of a nation, measuring the market value of all goods or services produced in a period of time (monthly or yearly).

Gulf States: Countries in the Middle East and Asia which border the Persian Gulf. The Gulf States are: Iran, Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar, United Arab Emirates, and Oman.73

OFID: The OPEC Fund for International Development. Founded in 1975 at the Algiers Summit. It was created to help nations develop greater levels of infrastructure and provide aid for their people. The fund does this by providing grants and loans to countries with the hope that with further development, they will become self-sufficient.

Profit: The total value of production that can be enjoyed by the seller. Profit is the total income from the sale of a good or service after subtracting the cost of production.

Revenue: The total income received by a seller for its goods and services.

First, Second, Third World: The First, Second, and Third World refer to particular blocs of nations during the cold war. The First World consists of the United States, Western Europe, and associated Allies. The Second World refers to the Communist Bloc. Nations aligned with neither group are considered the Third World.

73 https://www.merriam-webster.com/dictionary/gasoline

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Bibliography

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“ABOUT US.” n.d. Accessed November 10, 2018. http://www.ofid.org/ABOUT-US.

“Cartels.” Cartels and Complex Monopolies. Accessed November 05, 2018. http://www.economicsonline.co.uk/Business_economics/Cartels.html.

“CIA-RDP85T00287R001400830001-7.Pdf.” n.d. Accessed November 9, 2018. https://www.cia.gov/library/readingroom/docs/CIA-RDP85T00287R001400830001-7.pdf.

Coldwarstudies.com. Accessed November 05, 2018. https://coldwarstudies.com/2013/01/11/history-of-colonization-in-the-middle-east-and-north-africa-mena-precursor-to-cold-war-conflict/.

“Comecon | International Organization | Britannica.Com.” n.d. Accessed November 9, 2018. https://www.britannica.com/topic/Comecon.

“Comments on Crude Oil Gravity Adjustments - LA DNR - Technology Assessment Division.” 2006. May 2, 2006. https://web.archive.org/web/20060502160519/http://dnr.louisiana.gov/sec/execdiv/techasmt/oil_gas/crude_oil_gravity/comments_1989.htm.

Denovo, John. “American Interests and Policies in the Middle East, 1900 ...” Accessed November 5, 2018. https://www.jstor.org/stable/10.5749/j.ctttt5c9.

Diebold, William, and Ian Skeet. “OPEC: Twenty-Five Years of Prices and Politics.” Foreign Affairs68, no. 4 (1989): 201. doi:10.2307/20044134.

“Emam - 2015 - GAS FLARING IN INDUSTRY AN OVERVIEW.Pdf.” n.d. Accessed November 10, 2018. http://large.stanford.edu/courses/2016/ph240/miller1/docs/emam.pdf.

Emam, Eman A. 2015. “GAS FLARING IN INDUSTRY: AN OVERVIEW,” 24.

“Flaring - Energy Education.” n.d. Accessed November 9, 2018. https://energyeducation.ca/encyclopedia/Flaring.

Lessmann, Janeth, Javier Fajardo, Jesús Muñoz, and Elisa Bonaccorso. 2016. “Large Expansion of Oil Industry in the Ecuadorian Amazon: Biodiversity Vulnerability and Conservation Alternatives.” Ecology and Evolution 6 (14): 4997–5012. https://doi.org/10.1002/ece3.2099.

Martin, Douglas. 1982. “Opec: Trying to Be a Cartel.” The New York Times, March 16, 1982, sec. Business Day. https://www.nytimes.com/1982/03/16/business/opec-trying-to-be-a-cartel.html.

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“OPEC (Brief History) - Energy Education.” n.d. Accessed November 7, 2018. https://energyeducation.ca/encyclopedia/OPEC_(brief_history).

“OPEC : Oil Prices: To the Sky or Stabilisation?” n.d. Accessed November 9, 2018. https://www.opec.org/opec_web/en/889.htm.

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Shihata, Ibrahim. 1979. “The Opec Special Fund and the North-South Dialogue.” Third World Quarterly 1 (4): 28–38.

Staff, Investopedia. “Cartel.” Investopedia. January 17, 2018. Accessed November 05, 2018. https://www.investopedia.com/terms/c/cartel.asp.

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Sun, Degang. “The US Military Bases in the Gulf Cooperation Council ...” Accessed November 5, 2018. http://www.mesi.shisu.edu.cn/_upload/article/e1/06/3678418a4c55b2e226d4f11ced11/ba1a738c-5ac3-4e40-aa80-52603f103057.pdf.

“Times LIVE.” Shaky Industry That Runs the World - Times LIVE. Accessed November 05, 2018. https://web.archive.org/web/20100127022854/http://www.timeslive.co.za/opinion/columnists/article272352.ece.

“The Economics of Autarky.” 2018. September 11, 2018. https://www.aier.org/article/economics-autarky.

“The Use of Energy Resources as Foreign Policy Tools: The Russian Case.” 2016. European Scientific Journal 12 (11). https://doi.org/10.19044/esj.2016.v12n11p78.

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TOPIC B: DOMESTIC PRESSURES OF OIL PRODUCTION

Statement of the Problem

The focus of OPEC has traditionally been to assert collective influence over the global oil markets. By coordinating the production and pricing of oil with the greatest oil producing nations, each member state seeks to improve outcomes for their homeland by ensuring high prices and a stable oil market. In the past, the debate of the body has been confined to the rise and fall of oil prices, linking the production of oil in OPEC nations to the international economy. While focus has been on the international market it is incredibly important to consider the role of oil production in each nation individually, as domestic turmoil directly decides how much each nation may contribute towards the shared efforts undertaken by OPEC.

Throughout this committee we hope to challenge you as delegates to think beyond the scope of international economics and discuss the social, domestic, economic, and environmental concerns surrounding the production and distribution of oil. When thinking of the domestic pressures associated with producing oil in OPEC nations, these pressures can fall into 3 general categories: social, environmental, and domestic economic pressures.

Social Pressures

The social pressures of oil of concern the rights and working conditions for oil workers, as well as the effects of oil production on the economies and sociopolitical landscapes of individual countries. The boom of the oil industry lead to a massive influx of migrant workers seeking employment in new nations and regions. Both migrant workers and local communities are put at risk by unethical hiring practices by those running the oil rigs. Throughout the Middle East, the discovery of oil led to a boom in labor migration. In the early days of Middle Eastern oil industry, many nations lacked enough skilled and unskilled workers to run their oil rigs, making it necessary to recruit from abroad.74 This led to an influx of people into oil-rich nations, causing some oil rigs to even have larger worker populations of foreigners and migrants than domestic workers.75

Increased educational infrastructure soon provided the skilled labor domestically that oil production required.76 Unfortunately, problems still exist in the realm of unskilled labor, which oil rigs are dependent on. Although the profits from extracting oil are large, the extraction

74 Finnie, David. “Recruitment and Training of Labor: The Middle East Oil Industry.” Middle East Journal 12, no. 2 (1958): 127–43.

75 Ibid76 Ibid

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itself does not provide a large amount of jobs to the surrounding population, both because oil production creates a limited volume of jobs, and because there exist many incentives to hire migrant workers over local laborers. It is instead oil refinement that generates large amounts of jobs, but this usually takes place in European and North American countries.77 To combat low rates of hiring of local workers, some countries have laws mandating that oil workers are hired from the area surrounding oil rigs, however incentives to hire migrant workers remain high. Many of these migrant workers enter the country looking for work illegally and their employers take advantage of this in order to exploit more labor for lower wages.78

Migrant oil workers are subject to human rights abuses, such as their employers threatening to expose their illegal status if they do not accept decreased salary or do not continue working on the rigs. In the United Arab Emirates (UAE), migrant workers cannot leave their jobs for 2 years even if the job they receive once entering the country is vastly different from the one they thought they were going to have.79 In Saudi Arabia, migrant workers often times cannot leave the country as they need their papers indicating country of origin, which are usually held by their employers.80 The influx of migrant workers into the population also increases tensions and creates rifts between them and the local population. This can lead to internal strife within countries.81

Other oil producing nations have laws that mandate hiring locals from the population. However, many of these practices are just as problematic. Many locals are drawn to the oil industry because of its moderate salary, food and lodging accommodations and paid leave days.82 However, this draws them away from their families, devastating the local villages and causing shortages of young men to do the agricultural work. This leads to a dependency on imported foods and a loss of skilled labor within the community. Additionally, when these men move away many of them leave their land behind, devastating the agricultural economy that sustains many local villages. When the men return years later, they find that they can no longer use their land as it is overgrown and out of use, and many instead move on to pursue other jobs outside the village. Additionally, oil work is not as stable as it may seem and can operate on a boom and bust cycle. Oil jobs may stay in a village for a few years before the resource has been depleted and the work moves somewhere else. As most of the locals hired on the rigs are unskilled laborers, many of them are laid off when the company relocates, causing massive amounts of unemployment in

77 Hallliday, Fred. “Labor Migration in the Middle East.” MERIP Reports, no. 59 (1977): 3–17. https://doi.org/10.2307/3011699.78 Frederic C. Thomas, Jr. “The Libyan Oil Worker.” Middle East Journal 15, no. 3 (1961): 264–76.79 “Forget about Rights.” The Economist, August 10, 2013. https://www.economist.com/middle-east-and-africa/2013/08/10/

forget-about-rights.80 Ibid81 Hallliday, Fred. “Labor Migration in the Middle East.” MERIP Reports, no. 59 (1977): 3–17. https://doi.org/10.2307/3011699.82 Frederic C. Thomas, Jr. “The Libyan Oil Worker.” Middle East Journal 15, no. 3 (1961): 264–76.

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rural villages and devastation of the economy, which in many cases has been built around the oil extraction, and is no longer able to support an agricultural economy.83

Overall you as delegates will have to grapple with the effects of oil production on the workers themselves and the surrounding villages where the rigs are located. It is clear that although oil work provides many benefits to the worker themselves, it is very dangerous work. Oil production can be devastating to local economies and does not do much to solve problems of unemployment within nations seeing as many workers are laid off once the oil production shifts.84 The large number of migrant workers who come to countries looking for oil work are subject to numerous rights violations while working and their presence can cause vast changes in the local culture and economy. It is clear that something has to be done to protect migrant workers’ rights and to protect the local communities from the long-term devastation that oil work can cause.

Environmental Pressures

Oil production also has disastrous and destructive effects on the environment globally but particularly on the communities surrounding oil rigs. A large amount of oil drilling is done offshore in the sea, and that extracted oil is shipped around the world by boat. This can cause a large amount of pollution within the water both surrounding the rigs, and in the larger ocean when the oil is being shipped abroad, threatening local ecosystems, the health of local residents, and industry dependent on a healthy environment.

Oil spills during the extraction and shipping process can cause severe damage to the surrounding natural habitats and the organisms which reside in them. It has been found that with successive spilling in designated areas, such as those that take place regularly during drilling, sediments at the bottom of the water and on the shore can become saturated with large volumes of oil, trapping the oil in local water systems for long periods of time.85 These successive spills can cause serious damage to the surrounding wildlife, killing between 30%-100% of local wildlife according to one study.86 Studies show that natural habitats can recover from such spills but only for up to 4 continuous months before the oil begins to have permanent effects.87

Spilled oil can contaminate drinking water by running into streams nearby drilling sites on land. Additionally, spilled or “free” oil can create oil coatings on water purification basins, pipes and filters and can render natural water sources un-drinkable for livestock, which has disastrous

83 Ibid84 Ibid85 Blumer, Max, and Jeremy Sass. “Oil Pollution: Persistence and Degradation of Spilled Fuel Oil.” Science 176, no. 4039 (1972):

1120–22.86 Templeton, W. L. “Ecological Effects of Oil Pollution.” Journal (Water Pollution Control Federation) 44, no. 6 (1972): 1128–34.87 Ibid

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effects on local agricultural communities.88 If oil is being drilled on land the waste from drilling can be deposited on farm lands, killing crops and hurting the agricultural industry.89 Thus it is clear that frequent oil spills around drilling locations can have effects not only on the surrounding wildlife, but also on portions of the local economy not related to oil, such as the agricultural industry.

Larger oil spills have a large impact on birds and fish in particular. This oil coating can reduce the number of fishes in bodies of water and can cause the remaining fish to take on an “oily” taste, rendering them inedible.90 Birds land on the oil-coated water and damage their feathers, making them unable to fly. This causes the birds to die from cold or hunger, or some even drown from the weight of the oil and their inability to move. While we do have the ability to clean some of the birds using solvents, soap, and emulsifying agents without human efforts birds who land in and become covered by oil almost certainly die.91

The type of oil has an enormous effect on the amount of damage that it has on the surrounding environment. Crude oil around the world possesses a wide range of densities and sulfur contents, dependent on the exact reserve that the oil is pulled from.92 Each type will require a different sort of refinement, in order to produce different petroleum products. One example of the effect of oil type on environmental impact is that Middle Eastern crude oil is usually lighter in consistency to other crude sources, and therefore does not stick to shores as much as other types of oil can.93 This being said, the oil itself is still quite toxic and can have harmful effects on the wildlife, as stated above. Heavier oils tend to blanket shores or areas of land and kill animals and plants by quite literally covering them, causing asphyxiation or starvation.94 Both heavy and light oil can seep into the sediments on shores and on land, causing the toxic effects of oil to remain present within an environment for long periods of time. Hydrocarbon, a main component of oil, degrades very slowly especially when it seeps into sediments, having harmful effects on the environment for a very long time. Gasoline, a product of refined oil, has a higher toxicity for a shorter period of time, causing a vast amount of short-term damage. A study found that in fact the most devastating damage from oil spills to the environment has been from traditionally “lighter” oils, such as those typically found in the Middle East.95

88 “Oil Pollution and Refinery Wastes.” Sewage Works Journal 7, no. 1 (1935): 104–15.89 Ibid90 Ibid91 Lincoln, Frederick C. “The Menace of Oil Pollution.” The Auk 47, no. 4 (1930): 546–50. https://doi.org/10.2307/4075854.92 “Comments on Crude Oil Gravity Adjustments - LA DNR - Technology Assessment Division,” May 2, 2006, https://web.archive.

org/web/20060502160519/http://dnr.louisiana.gov/sec/execdiv/techasmt/oil_gas/crude_oil_gravity/comments_1989.htm.

93 Baker, Jenifer M. “Marine Ecology and Oil Pollution.” Journal (Water Pollution Control Federation) 50, no. 3 (1978): 442–49.94 Blumer, Max, and Jeremy Sass. “Oil Pollution: Persistence and Degradation of Spilled Fuel Oil.” Science 176, no. 4039 (1972):

1120–22.95 Ibid

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Overall, it is clear that oil can have a disastrous effect on the environment as a whole, but especially in the environment surrounding drilling sites. This is because there are more frequent spills in these areas. Oil spills kill a large number of organisms within a habitat and effect not only animals, but people too. Spilled oil can mean consequences for the fishing industry as well as the agricultural industry, two economic markets that are very important especially in the small villages surrounding drilling sites within OPEC countries. While there are ways to manage and mitigate the effects of oil spills on the environment, they require a large amount of money and physical labor. It is clear that something needs to be done to make sure that the number of oil spills around drilling sites decreases and that the effects of these oil spills are not as disastrous to the surrounding environment as they currently are.

Domestic Economic Pressures

The drilling of oil within OPEC countries can also have effects on the local and national economies of OPEC countries. While companies producing oil contribute large percentages of the wealth in the national GDP, it has been shown that oil drilling does not have as large an effect on local economies as one might think. As stated before in discussion of Social Pressures, the drilling of oil near local villages does not necessitate that those locals will be involved in the extraction and refinement of oil, or in the industry at all. There are not as many jobs within the oil industry at drilling locations as in other parts of the oil production process, meaning that oil drilling does not have a large effect on the unemployment rates within local villages, and therefore does not a large effect on their economies. The few jobs there are may be filled by migrant workers, making the oil industry contribute even less to the local economy.96

The profits OPEC countries gain from private or nationalized oil drilling are often kept among the elite, Due to corruption or disorder in government in many OPEC nations, the profits from oil drilling are pocketed by high level officials and other rich citizens. Profits are diverted away from the communities suffering the greatest damages from oil industry, resulting in loss of agricultural and natural resources from pollution, worse health outcomes, and stagnant economic growth. Without the profits of oil, local communities are often left unable to adapt to the changing demands of the market, and income inequality is exacerbated.

96 Finnie, David. “Recruitment and Training of Labor: The Middle East Oil Industry.” Middle East Journal 12, no. 2 (1958): 127–43.

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This being said, the effects of the oil industry on national economy depends on the type of OPEC country. In largely undeveloped OPEC countries with large populations living in rural areas, their economy is entirely dependent on oil production, considering that the other main economic resource is agriculture. These countries are usually underdeveloped and lack the necessary level of industrialization to be able to provide for their people without the oil industry. These countries usually have high levels of unemployment as their population is expanding more rapidly than the number of jobs created.

In OPEC countries with larger amounts of desert, the majority of OPEC nations, there oil production is not only essential to their economies but also run by immigrants, both skilled and unskilled. Because of their small population size, these countries lack the number of trained workers needed to work within the oil industry, and therefore have an influx of migrant workers. These workers contribute to the majority of the population and are mainly the ones working within the oil industry, although the profits from oil drilling still go to the desert nation itself.97 Other OPEC nations are small with small populations and although they are not necessarily comprised of deserts, the effects of oil on their workforce and economy are similar to that of OPEC countries with larger amounts of desert.

Overall, oil production comprises a large portion of all OPEC countries’ economies. It generates a number of jobs not just within the actual production of oil but also indirectly through the need for goods and services to aid in oil production.98 Yet, as stated before, the production of oil can have very little positive impact on local economies. This is because oil companies do not usually make investments into the communities surrounding their drilling sites because of the mobile nature of the oil drilling industry. Additionally, many of the jobs that oil production generates are based on the oil industry and are very temporary, such as construction work. This means that the economies of oil producing countries can be more fragile and are very much impacted by changes in the international oil market.99 On the local level, the local communities do not receive a large benefit economically from the production of oil near them. It is clear that something needs to be done to assure that local communities gain more economic benefits from oil production, and that the economies of OPEC nations are not as fragile or oil-dependent as they currently are. The lack of a diversified economy, except for agriculture, in many OPEC nations leave local communities both desperate for and victims of the oil industry.

Looking Forward

The domestic pressures of oil production have for too long been forgotten or ignored as the topic of oil production and OPEC nations almost always becomes associated with international

97 Hallliday, Fred. “Labor Migration in the Middle East.” MERIP Reports, no. 59 (1977): 3–17. https://doi.org/10.2307/3011699.98 Ibid99 Ibid

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markets and oil prices. However, oil has a tremendous effect on the economy, environment, and citizens of each OPEC nation. The success of OPEC as a body is dependent both the ability of member states to produce oil, and the resilience each nation has against the negative impacts of the oil industry in their own country. OPEC nations have a responsibility to think about the people within their countries and the effects these large-scale international deals, as well as their participation in the oil industry, has on them. In essence, stronger member states create a stronger OPEC. Oil production does not just affect nations, it affects wildlife, oil workers, the surrounding communities, the economies of nations, and even those within those nations who do not work in the oil industry. We challenge you as delegates to expand your notion of the oil industry and OPEC’s role in it to include all of these topics and more.

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Past Actions

Past actions involving workers’ rights, as well as the environmental and economic impact of oil can help you, as members of OPEC, decide how to proceed and tackle some of the challenges facing OPEC today. While some of the topics have not been addressed by OPEC directly, looking to the successes and failures experienced by other nations while addressing similar issues may serve to guide the solutions you present to the larger OPEC body when we convene.

Workers’ Rights

In relation to the concerns of oil workers, a number of strikes, mostly led by union efforts, have already occurred around the world and the reaction of the individual countries to these incidents has been both successful, and disastrous. One of the most disastrous workers strikes to date was what is now known as the Ludlow Massacre, which occurred in the United States. On April 20th, 1914 members of the United States National Guard attacked striking coal miners, as well as their family members, killing 14 adults and 11 children. 10,000 miners had been striking as a union since September 13th, 1913 and had developed tent cities near their working place as their employer had evicted them from their company-owned homes. The strikers were protesting bad working conditions and low pay within the coalfields.

Official retaliation to striking efforts occurred on April 20th, when National Guard members surrounded the tent city near Ludlow, housing 1,200 workers, and fired a machine gun at the camp after workers refused to turn over a now unknown individual to government forces. National Guard members began setting the tent-city on fire. Women and children living in the tents had retreated to the cellars dug beneath them when the gun-fire began. After the fires died down, the bodies of many children and workers were found, burned beneath the tents. After the massacre, workers attacked anti-union officials and took control of about lands near the coal fields. During this retaliation period 50 people died and the US president had to send in federal troops in order to stop the violence.100 Although this event did not occur within any OPEC nation, the low pay and abysmal working conditions that the coal workers were striking against are similar to the conditions workers on oil-rigs face and OPEC nations should take into consideration the effect violence has when deciding how to deal with worker complaints.

While the Ludlow Massacre was a devastating national event, deploying the military to help curb workers strikes can help alleviate the tension and restore order relatively peacefully and quickly, as was the case in Australia. After Australian coal workers went on strike, the army was sent in and began mining the coal instead. The army was so successful in its coal production that many attribute the deployment of the army as the reason workers were convinced to return to

100 https://www.britannica.com/event/Ludlow-Massacre

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work.101 Thus, strategies that involve deploying the army to curb strikes have the potential to be effective, and can help ensure workers return to their duties without adhering to the striker’s demands. This method was also shown to be effective in 1945 when 300 members of the Oil Workers International Union went on strike in the United States to press for higher wages. The strike spread across the country until about 43,000 oil workers in 20 different states were on strike, making this strike the first nation-wide strike in the history of the oil industry. During this time about 50,000 of the oil workers working in oil refining were in unions, or about 65% of total oil-refinement workers. This strike resulted in 30% of America’s gasoline production to be halted. In this case, the president at the time sent in the Navy to seize control of the oil-fields and asked the workers to continue production on behalf of the Navy, a compromise the workers agreed to. Eventually, the oil-companies gave in to the pressure of the strike and negotiated with the workers, resulting in a significant increase in wages. The events of 1945 show that oil-worker strikes, in debilitating a country’s oil production, can be successful in garnering national attention and advancing workers benefits.102 There was, however, a difference in outcome between Australia’s deployment of the army, in which the workers’ demands were never met, and America’s deployment of the Navy, which resulted in an increase in pay for the workers. The combination of three of these three events shows that the deployment of a military body to stop a strike can be non-violent but does not always lead to the same outcome.

The Environment

Recent events, and effective or ineffective responses to them, can also help OPEC nations decide how to best address the growing impact of oil on the environment. The aftermath from some of these events is still playing out and thus, should be taken into consideration by delegates when deciding how to move forward. One of the worst oil-related environmental disasters to date happened very recently. The oil tanker Amoco Cadiz, carrying crude oil from the Gulf of Persia

to Europe, was holding 220,000 tons of oil when it sank off near the English Channel on the 16th of March, 1978. The oil tanker was owned by Amoco, originally Standard Oil Company, of the United States, but was registered to a Libyan Port. Water to leaked into the boat’s steerage, rendering it unable to move, it eventually broke in half and sank after 12 hours on the coast of France.

101 https://www.jstor.org/stable/27516355?read-now=1&seq=1#page_scan_tab_contents102 https://www.jstor.org/stable/1053825?seq=1#page_scan_tab_contents

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Oil spread across a large expanse relatively quickly, and eventually led to the entirety of the tanker’s 200,000 plus tons of oil to spill into the ocean. The spill caused certain populations of fauna to drop by up to 54% in the surrounding area and some species of animals have been completely eradicated. At this point in time, much native fauna is expected to be replaced by non-native species.103 While the long-lasting effects are unknown, there is still a layer of oil covering many beaches and large stretches of water, which could have prolonged negative effects on many already devastated species.104

Following the spill, most of the fish caught in the area were either dead, had serious health-related issues, or posed serious health risks to those that would consume them, all of which can directly be attributed to the oil. This may have drastic effects on the economies of those countries near the spill. The clean-up from this spill is expected to take significantly longer than it could because of a dispute of who should bear the financial burden for the effort, thus causing the effects of the oil spill to be amplified because bodies are busy squabbling. Furthermore, due to a lack of a rapid enough response, oil made its way to, and began to sink into permeable sediments, ensuring that oil would stay in the environment for years to come. The general loss financially is estimated at about 250 million dollars, but it is expected to have a much larger economic effect on France.105 More notable than the action taken concerning the Amoco Cadiz is the lack of actions surrounding the oil spill. There exists a commonly used maritime document, Lloyd’s Open Form, that dictates a contract between a boat owner and a salvager which should have been used to dictate the terms of salvage for the Amoco Cadiz. Yet, disagreements over the final price of salvage led owner the Amoco Cadiz to decline the service that would have gotten the oil leaking ship out of the water. Policies must be put in place such that oil spills are responded to quickly and effectively such that OPEC shores are not harmed if an oil tanker goes down closer to its parental nation.

The discussion of how to more sustainably utilize the world’s energy resources has become increasingly apparent on the world stage and should also be taken into consideration by the OPEC body. In 1972 nations came together at the United Nations Conference on the Human Environment to discuss environmental problems for the first time. One of the main topics discussed during the conference was the need for greater environmental protection (especially from industry focused on resource extraction. To act as a counterbalance, many nations brought up that the strain that too guidelines for environmental responsibility would temper the growth of an economy. At the end of the conference the United Nations adopted the U.N. Stockholm Declaration on the Human Environment, which was the first step towards the development of international environmental laws.

103 https://www.marineinsight.com/case-studies/the-gruesome-amoco-cadiz-oil-spill-incident/104 https://www.jstor.org/stable/2396578?seq=1#page_scan_tab_contents105 https://www.marineinsight.com/case-studies/the-gruesome-amoco-cadiz-oil-spill-incident/

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One section that is of the utmost importance to OPEC is Principle 21, which states that nations have the “sovereign right to exploit their own resources pursuant to their own environmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction.”106 As oil is shipped across the globe it can inevitably do damage to the environments of foreign nations, as seen in the Amoco Cadiz spill had on France, but as oil is produced on domestic lands there must be some accounting for the damage that oil brings to the environment of the homelands. Additionally, with nations prepped to begin creating legislation to protect the environment, you as an OPEC body will have to find ways to balance protecting the environment with the potentially negative economic effects this may have on your countries. Overall, the United Nations Conference on the Human Environment began a longer, global conversation on environmental protection and you as delegates must decide how your nations will react to this new-found world concern.

Economic Impact

` Lastly, recent action can also help OPEC nations decide how to address the growing impact of oil production on local, national, and global economies. One of the most significant events relating to this topic was the OPEC Summit of 1975 in Algiers, Algeria. At this conference OPEC heads of state came together and discussed the economies of their own nations, as well as those of their neighboring states. At the end of this summit a “Solemn Declaration” was written outlining what as stated at the summit as well as any agreed-upon actions moving forward.107 In this document, all of the heads of state of OPEC nations discuss the need to protect the rights and interests of their people and the need to band together in solidarity to protect themselves. They stress their desire for peace, but also their desire for all nations to be seen as equal and sovereign on the world stage. Perhaps one of the most important takeaways from this conference is their assertion of the “sovereign and inalienable right of their countries to the ownership, exploitation and pricing of their natural resources.”108 Through this conference the OPEC nations showed that they wanted to be taken seriously, discussed oil’s impact on the economy, and asserted their power over other nations through their control of one of the most important resources on earth, oil.

At this conference, heads of state also shared their fear over the growing inequalities between nations in both economic and social realms. They noticed that many countries close to them were under-developed and were thus being exploited by foreign governments for their natural resources, leading to their lack of progression and development.109 The Solemn Declaration

106 https://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=2684&context=facpub107 https://www.opec.org/opec_web/static_files_project/media/downloads/publications/Solemn_Declaration_I-III.pdf108 Ibid109 Ibid

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outlines OPEC’s assertion that it is not the price of oil that has driven this inequality, but foreign nations that exploit underdeveloped ones. They discussed how interdependence between nations makes the development of all nations even more important, and stressed the need for countries to help each other develop and succeed.110

In order to put into the goal of nations helping each other develop and succeed into action, at the Algiers Summit OPEC nations developed OFID, the OPEC Fund for International Development. The goal of this fund was to help “stimulate economic growth and alleviate poverty in disadvantaged regions of the world.”111 The idea behind OFID is that OPEC member nations will pledge a certain amount of money to OFID, which will then use the money to provide under-developed nations with loans and grants to help spur their development and provide basic needs for their people. The hope is that once these nations have developed further they can be more self-reliant and no longer need the support of foreign aid.112

110 Ibid111 “ABOUT US,” accessed November 10, 2018, http://www.ofid.org/ABOUT-US.112 Ibid

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Possible Solutions

Social

It is clear that the oil industry effects oil workers in many different ways, as outlined in the Statement of the Problem. As delegates it will be your job to balance ambitious goals for oil extraction while maintaining a labor force to extract that oil. States can be proactive in improving working conditions for oil laborers, finding ways to ensure that the negative effects of oil production on the workers can be mitigated, or focusing on policies that seek to put down labor unrest and strikers. You will have to find ways to ensure that the tensions between oil workers and your respective governments are curbed. The ways that you do this, whether through helping oil workers create unions, raising standards within the industry, or simply ignoring worker’s concerns, is up to you. While the majority of oil workers at the moment are not on strike, nor planning to strike, that does not mean that OPEC nations should not address their growing concerns. OPEC as a body must show that it cares for the oil workers who ensure that OPEC continues to hold the power that it does.

As mentioned in the Statement of the Problem, another large problem within the social realm of oil production is the rights of migrant workers while in foreign nations. Rather than allowing migrant workers to exist in a legal limbo, subject to abuse by employers, states must make decisions about the legal status of migrant workers and create a framework in which all people have access to systems of justice and be treated with a modicum of humanity. This might include the creation of special citizenship statuses, and the expansion of the criminal justice system to provide fair judgement for all residents, punishing employers that engage in human rights violations or general abuse against their workers. OPEC must find ways to meet the needs of all oil laborers, lest they put production at risk if they ignore the complaints of their oil laborers.

Environmental

When discussing how to approach to the environmental problems caused by oil there generally see two paths: how to prevent accidents, and how to improve responses for accidents that do happen as to prevent accidents from having long term consequences.

While the Amoco Cadiz oil spill happened far away from OPEC nations, off the coast of French Brittany, it important to consider how the accident could have happened anywhere along the transit route, and how future mistakes may put OPEC shores and regional allies at risk. Steps towards the prevention of oil spills during the drilling and transport of oil must be discussed. Delegates should identify critical points in the production and transport of oil where a spill may occur, such that safety protocols may be incorporated. Delegates should also consider how

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to incentivize adoption of these safety protocols, in order to make sure that they are actually implemented.

More than just working to prevent accidents from happening, OPEC nations must provision for protocols to follow should spills accidentally occur. In the most recent case of Amoco Cadiz case off of the coast of French Brittany, damaged to the local environment was amplified because international bodies were unprepared to answer the questions of who should clean up the oil spills, how to clean up oil spills, and who should pay for the damages. Regardless of how much your nation would be willing to assume responsibility for an oil spill, there must be a definite answer such that whatever bodies are expected to act may launch into motion as soon as possible after disaster.

Efforts to diminish the environmental effects of oil spills, once they occur, can mainly be placed into three categories: physical removal, cleaning, and thinning. In physical removal workers use bulldozers, buckets and spades to physically remove any, usually thicker, oil they find. This method is mainly used in areas without many biological species as it can be invasive. Physical removal is mostly avoided in places with marshes or soft mud or on rocky shores because the physical removal of oil can have more devastating effects on the organisms inhabiting these areas. For cleaning, workers usually cut away or remove oily vegetation or burn it, as well as clean any live animals affected. This technique is mainly used on shorelines where the use of bulldozers or other physical means of removal would be impractical and very damaging to the surrounding environment.113 This being said, the process of cleaning shorelines is more labor intensive. The final approach is thinning, or strategies to reduce the amount of oil that will reach the shoreline. Strategies can include burning the oil on the surface, utilizing chemicals that disperse oil throughout the water such that less will stay on the surface making its way to beaches and general shoreline sediment.

With a shift in global attention towards the environment, some nations have begun turning towards new, more renewable energy sources. The United States in particular, as a result of what is sometimes referred to as the 1973 oil crisis, has begun encouraging their citizens to use more renewable fuel sources. The president of the United States has recently acknowledged the need to “develop alternative energy sources for public and private consumption in order to reduce our dependence on such sources as petroleum products, natural gas, nuclear and hydroelectric generation.” The US administration is currently conducting tests on the ways in which petroleum negatively affects the environment, and looking for ways to create more renewable energy sources. Additionally, they have made their cars more fuel-efficient, reducing

113 https://www.jstor.org/stable/pdf/1733840.pdf?refreqid=excelsior%3Ac8aec972eba636784fb47cd0b5312ee9

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their need for gas, and have created fuel-efficiency standards. Since the US has become a leader on the world stage, it can be assumed that other countries will follow suit very shortly.

You as OPEC nations will need to decide how to deal with the emergence of new types of energy such as solar energy. Should these new energies be rejected or embraced by OPEC? As OPEC nations are flush with their own energy resources, investing in renewable energy is not a priority. What is a priority is the question of how OPEC should adjust its oil pricing, production, and marketing should other nations adopt renewable energy in the name of energy independence and environmentalism. How should OPEC change the ways in which it markets petroleum, if at all? Is renewable energy really a threat? These are the questions you as delegates should grapple with to decide the future of OPEC, and the future of energy.

Economic

OFID itself has just been created, and now it is up to you as OPEC nations to decide how to use this new resource, in order to pursue a functional system of wealth distribution in oil producing nations. What types of projects should OFID help fund? In what areas? How should OFID be used to promote the idea that OPEC is about more than simply regulating oil itself? While OPEC has clearly begun focus on the effects that oil can have internationally, OPEC has not yet discussed what can be done within their own nations to curb the negative effects of oil production on local economies, as outlined in the Statement of the Problem. OFID is a good first step towards acknowledging the connection between economic development and oil, but now you as delegates will have to decide how to use this resource, and how to capitalize on OFID to deal with the economic effects of oil within your own nations.

OPEC itself has only begun to grapple with workers’ rights, the environment, and on economic impact of oil production. Thus, it is unclear what the best way to move forward on these issues is. However, OPEC nations can learn by looking to other nations as well as recent international developments in relation to these topics. You as delegates can use the lessons you learn from these historical events to begin debating how OPEC should move forward and what international stance it should take on these issues that have recently moved into the spotlight on the world-stage.

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Bloc Positions

Should Domestic Pressures of Oil Production be selected as the topic of debate, nations will generally find themselves making policy choices around categories of social pressures, environmental pressures, and economic pressures. While two nations may agree on social policy, they may have vastly different approaches to environmental problems, or find a fault line on economic policy. At the end of the day, it is the hope that both come prepared with the solutions to problems based on national trends, and with solutions that exist outside of possible partisanship. While it may be difficult to find your delegation’s exact national policy, educated conclusions are welcome. For example, if your government happens to be a more authoritarian or nationalistic regime, they may be more inclined towards hard handed approaches to possible labor strikes, even if they have never experienced labor strikes of their own.

Social Pressures

In the realm of social pressures, nations generally have to decide their fault lines surrounding the rights of labor strikers, and migrant workers. These divisions are simply starting points, and not meant to be taken as hard fact.

Burgeoning Democracy

Algeria, Ecuador, Mexico, Libya, Nigeria, Norway, and Venezuela

Nations with democracy, those who are willing to transition away from authoritarianism, or those with leaders that place particular value on appearances of their benevolence despite a more authoritarian regime may be more proactive about promoting worker’s rights, or lean towards appeasement of worker demands should they strike. The oil fields in majority of these nations are staffed by local individuals or highly educated foreign workers. While there may be workers who have migrated to work within the oil fields of that nation, the majority of the time “migrant workers” will have merely come from another part of the nation. This is not to say that workers who find themselves working far from home are not abused nor exploited by employers as many migrant workers can be in the Middle East, but rather to say that this set of nations must mostly grapple with general worker’s rights.

Authoritarian Rule

Iran, Iraq, Kuwait, Saudi Arabia, Qatar, Indonesia, United Arab Emirates, Gabon, Egypt, Oman, Sudan, Soviet Union, and Kazakhstan

In the context of worker’s rights, the dividing line is to what extent does your nation rely on migrant workers, and to what extent must your nation maintain total control over industry. In nations lead by absolute monarchy, military dictatorship, or generally maintained by authoritarian control,

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nations are faced with the choice of absolute control, or appearing weak and promoting political instability by granting power to potential opposition. If these nations are to promote worker’s rights, it cannot be due to the demands of laborers, but due to the beneficence of the leader. Opposition must be crushed, then eradicated. The rights of migrant workers may also remain in limbo, as nations are able to extract more profit from wells run by the easily exploitable.

Environmental Pressures and Economic Pressures

Oil as a Principal Export

Iran, Saudi Arabia, Qatar, Libya, UAE, Algeria, Equador

Nations may find themselves divided, in regards to their environmental and economic policy, based on their reliance on oil as the primary “fuel” of their economy. When oil production constitutes the majority of a nation’s GDP, preventing environmental and economic problems caused by the production of oil take a backseat to the goals of increased oil revenues. While these nations are unlikely to promote solutions that resolve environmental concerns, such as the impact of oil spills, or economic concerns, such as the possible drawbacks of nationalized industries, if these solutions require the government to relinquish their flexible and unchecked control over the oil industry. To sacrifice any control over the oil industry is to sacrifice economic prospects. This bloc would be willing to invest in solutions that improve responses to environmental and economic concerns, such as establishing protocols to determine what parties should hold responsibility to act in case of an oil spill, or determining how OPEC should direct the efforts of OFID to help in regional development.

Oil in a More Diverse Economy

Egypt, Kazakhstan, Mexico, Oman, Sudan, Soviet Union, Norway

Nations with more diversified economies may have more flexibility to adjust and adapt the ways that they produce oil, if it means protecting other facets of the economy from the externalities of oil production. Just as with nations where oil is the predominant source of national revenue, nations in slightly more diversified economies must reckon with how these revenues are responsibly being shared with and invested back into the local economy as to improve the standard of living for all.

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Glossary

Allocation States: A large amount of a country’s revenue is generated from oil production. The state itself usually receives the revenue from oil production, and then distributes this money amongst its people or uses it to provide resources and basic necessities for its people.

Amoco Cadiz Spill: A large oil spill that occurred on the 16th of March, 1978 off the coast of France near the English Channel. It was caused by the sinking of the Amoco Cadiz oil tanker, which was owned by the American company Amoco, due to weather. The spill resulted in 220,000 tons of oil spilling into the water, covering almost 300 miles of land and water, and causing more than $250 million in damage.

Arab Socialism: A political period and movement in which a number of Arab states began to nationalize businesses, with emphasis on those which did business in foreign markets. Nations that adopted this movement also invested a greater amount of money into the public sector.

Boom and Bust Cycle: A term used to describe markets which go through periods in which there is a large amount of demand, followed by those in which demand is decreased. In regards to the oil industry, this term is used to describe when oil companies move into an area, increase production for a short period of time until the oil resource has been depleted, and then move to a new area to re-start the process.

Crude Oil or Petroleum: Oil that has been extracted but has not yet been refined. Crude oil is what is pulled directly from oil fields before it is refined and turned into the oil that can be used as energy. It is made from hydrocarbons and usually found in the upper strata of the earth.114

Developed Country: A country that has undergone modernization and industrialization efforts and which usually has developed infrastructure to aid the people of the nation.

Diversified Economy: A country which generates revenue from a variety of sources and is not dependent on one market or resource to maintain the economy of a nation.

Externality: An externality is a positive or negative consequence of economic activity that is experienced by third parties, rather than the producer of the economic activity.115

Free Oil: Oil that has been spilled.

114 https://www.merriam-webster.com/dictionary/petroleum115 Investopedia Staff, “Externality,” Investopedia, November 19, 2003, https://www.investopedia.com/terms/e/externality.asp.

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Gasoline: A version of refined Petroleum, made of hydrocarbons, that is used as fuel mainly in internal combustion engines.116

Gulf States: Countries in the Middle East and Asia which border the Persian Gulf. The Gulf States are: Iran, Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar, United Arab Emirates, and Oman.117

Hydrocarbon: An organic compound made only of hydrogen and carbon, naturally occurring and found in Petroleum and Natural Gas.118

Industrialization: The development of industries and manufacturing on a large-scale, as well as the implementation of technological knowledge to further economic growth in a region.119

Infitah: A political period and movement in which many Arab states opened their countries to foreign investment and encouraged investment in the private sector.

Kerosene: A lighter fuel made from distilling petroleum.120

Labor Migration: The movement of laborers to either a new area within a country or a new country because of an increase in work opportunities in that region.

Ludlow Massacre: The attack on striking coal workers by American National Guardsmen on April 20th, 1914 in response to the coal miners striking for better working conditions and higher pay. The attack resulted in 14 adults and 11 children being killed, and prompted a response by the miners in which 50 more people were killed.

Member State: A state that is a member of and participates in the Organization of Petroleum Exporting Countries.

Migrant Workers: Workers who move to a different area within a state or a separate state to work and usually send money to their families who continue to reside in the worker’s original home.

Nationalization: The process by which a market or industry is taken over and controlled by the government.121

116 https://www.merriam-webster.com/dictionary/gasoline117 https://www.merriam-webster.com/dictionary/gasoline118 https://www.merriam-webster.com/dictionary/hydrocarbon119 https://www.dictionary.com/browse/industrialization120 https://www.merriam-webster.com/dictionary/kerosene121 https://www.merriam-webster.com/dictionary/nationalize

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Natural Gas: A gas that comes from the earth’s crust. It is usually a mixture of hydrocarbons and methane and is extracted from the ground through drilling when there are natural fissures in the earth.122

Oil Extraction: The process of retrieving oil from below the earth’s surface. The most popular method of extraction is drilling.

OFID: The OPEC Fund for International Development. Founded in 1975 at the Algiers Summit. It was created to help nations develop greater levels of infrastructure and provide aid for their people. The fund does this by providing grants and loans to countries with the hope that with further development, they will become self-sufficient.

Oil Refinement: The process by which crude oil, or Petroleum, is turned into a number of other types of oil such as Gasoline and Kerosene which can then be used for a number of different purposes. Oil refinement is usually conducted in a different location, and many times even a different country, then where the oil was extracted.

Oil Rig: A structure with equipment for drilling and removing oil, stationed above an oil well.123

Oil Seeps: A location where crude oil has accumulated once escaping to the surface of the earth.

Oil Traps: Dome-shaped compartments deep within the earth where oil and natural gas build up and are found.

Production States: States who generate revenue from a variety of different markets. These states usually have their oil supplies controlled and owned by private companies, and the state bargains with these private companies to gain revenues from oil production.

Renewable Energy: A natural source of energy that is not depleted after it is used and technically never runs out.124

Skilled Workers: A worker with a special set of trained skills. Usually associated with workers who make larger amounts of money and who required a specific type of education before being able to conduct their work.

Solemn Declaration: The document that is written after an OPEC heads of state summit. The Solemn Declaration summarizes the conference, what was agreed upon by the heads of

122 https://www.merriam-webster.com/dictionary/natural%20gas123 https://www.merriam-webster.com/dictionary/oil%20rig124 https://www.dictionary.com/browse/renewable-energy

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state, and details any actions the heads of state have agreed to take. The most recent Solemn Declaration was written at the Algiers Summit in 1975.

Under-developed country: A country which has not invested heavily in industry or undergone many efforts to modernize. These countries usually have smaller gross domestic products, meaning their economies are smaller and they are usually unable to provide a large amount of services and aid for their citizens.

United Nations Conference on the Human Environment: A conference that took place in 1972 in which all states which were members of the United Nations convened to discuss humans’ impact on the environment. This conference was the first-time environmental problems had been acknowledged and discussed on an international scale. At the end of the conference the U.N. Stockholm Declaration on the Human Environment was written and adopted.

U.N Stockholm Declaration on the Human Environment: Written at the end of the United Nations Conference on the Human Environment, this was the first document that showed there was an international interest in environmental problems. It was also the first step towards the development of international environmental laws.

Unskilled Workers: A worker who does not require a special set of trained skills in order to perform their job. Unskilled workers are usually paid less money than skilled workers and do not usually require a high or specified level of education before being able to conduct their work.

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Bibliography

“AMOCO CADIZ, France, 1978 - ITOPF.” n.d. Accessed October 29, 2018. https://www.itopf.org/in-action/case-studies/case-study/amoco-cadiz-france-1978/.

Baker, Jenifer M. “Marine Ecology and Oil Pollution.” Journal (Water Pollution Control Federation) 50, no. 3 (1978): 442–49.

Blumer, Max, and Jeremy Sass. “Oil Pollution: Persistence and Degradation of Spilled Fuel Oil.” Science 176, no. 4039 (1972): 1120–22.

“Extreme Oil . The History | PBS.” Accessed August 13, 2018. https://www.thirteen.org/wnet/extremeoil/history/prehistory.html.

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