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Ellen R. Wald

Is OPEC’s Power Over the Oil Market Broken?

Not necessarily, but it is certainly less effective now. Taking stock of an aging cartel at 60.

OPEC’s influence has waxed and waned based on global supply and demand.

OPEC’s influence has waxed and waned based on global supply and demand.

Photographer: Akos Stiller/Bloomberg

This week marks the 60th anniversary of OPEC, the cartel of major oil exporters that has, at times, held sway over the oil markets. It is a good time to ask: Is it still effective? The truth is that OPEC's power to impact the price of oil has waxed and waned over the past 60 years but has always been based on the portion of global spare capacity that it controls. With plenty of crude sloshing around in storage tanks worldwide, that makes it not so effective now.

When the Organization of Petroleum Exporting Countries was formed in 1960, it had two missions. The first was defend the price of oil through limits on oil production. The second was to foster the native governments’ control over the oil resources in their territories. But for more than a decade, OPEC was largely ineffective at achieving its goals. The cartel didn’t become a household name or a political talking point until 1973, when it succeeded in shocking the oil market by unilaterally forcing higher crude prices on both large international oil companies and consumers. (The oil embargo of that time was actually an act of Arab OPEC countries only).