What If OPEC Was Never Formed?

The Actual History

The Organization of the Petroleum Exporting Countries (OPEC) emerged in 1960 during a pivotal period of decolonization and growing resource nationalism. The organization was founded in Baghdad, Iraq, on September 14, 1960, by five founding members: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. These nations, primarily developing economies, shared a common concern: the dominance of Western multinational oil companies—commonly known as the "Seven Sisters"—that controlled the global petroleum market and unilaterally set oil prices.

OPEC's formation came in direct response to the decision by these major oil companies to reduce the posted prices for Middle Eastern crude oil in 1959 and again in August 1960. These price cuts significantly impacted the revenue of oil-producing countries, as their income was based on royalties calculated from these posted prices. The final catalyst was the unilateral decision by Standard Oil of New Jersey (now part of ExxonMobil) to cut its oil prices by 7% without consulting the producing countries.

Throughout the 1960s, OPEC remained relatively ineffective as the Seven Sisters maintained their control over the global oil industry. However, the dynamics began to shift in the early 1970s. The 1971 Tehran Agreement marked OPEC's first coordinated negotiation with oil companies, resulting in increased government take and greater control over pricing. The true watershed moment came during the 1973 Yom Kippur War, when Arab members of OPEC imposed an oil embargo against the United States and other Western nations that supported Israel. This action quadrupled oil prices and demonstrated OPEC's newfound power in the global economy.

By the late 1970s, OPEC controlled approximately 55% of global oil production and over 80% of proven reserves. The organization expanded to include Qatar (1961), Indonesia (1962), Libya (1962), United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), and eventually Angola (2007), Equatorial Guinea (2017), and Congo (2018). Some members have since suspended or terminated their memberships, with Indonesia, Ecuador, and Gabon each having left and rejoined at various points.

The 1980s and 1990s saw OPEC's influence wax and wane as new non-OPEC production came online and internal disputes over production quotas emerged. Saudi Arabia, as the organization's largest producer with the greatest spare capacity, often acted as the swing producer, adjusting its output to stabilize prices. The early 21st century brought renewed relevance to OPEC as oil prices reached record highs between 2003 and 2008, peaking at nearly $150 per barrel.

In 2016, facing competition from U.S. shale oil producers and a global supply glut, OPEC formed OPEC+, a larger coalition that included Russia and other non-OPEC oil exporters. This expanded group has coordinated production cuts to maintain price stability, most dramatically in response to the COVID-19 pandemic's devastating impact on oil demand in 2020.

Throughout its history, OPEC has transformed global energy politics, shifting significant power away from Western oil companies to producing nations. It has enabled member countries to assert sovereignty over their natural resources while providing them with a unified voice in international affairs. Critics, however, have characterized the organization as a cartel that manipulates markets, while proponents argue it brings necessary stability to volatile oil markets and ensures fair revenue distribution to developing economies that rely heavily on petroleum exports.

The Point of Divergence

What if OPEC was never formed? In this alternate timeline, we explore a scenario where the crucial 1960 meeting in Baghdad failed to produce a cohesive organization of oil-exporting countries, leaving petroleum-producing nations to individually navigate relations with the powerful Western oil companies.

Several plausible paths could have led to this divergence:

First, the personal dynamics and competing interests among the founding members might have proven insurmountable. The representatives from Venezuela, Saudi Arabia, Iran, Iraq, and Kuwait could have failed to reconcile their different political orientations and economic priorities. Venezuela's Juan Pablo Pérez Alfonzo, the intellectual architect behind OPEC, might have been unable to convince the Middle Eastern producers of the benefits of formal coordination. Saudi Arabia, already enjoying its special relationship with Aramco and the United States, could have decided that its interests were better served by maintaining its bilateral arrangements rather than joining a multilateral organization dominated by countries with more radical political orientations.

Alternatively, more aggressive intervention by Western powers and oil companies might have derailed the formation process. The Seven Sisters—Exxon, Mobil, Chevron, Gulf Oil, Texaco, BP, and Shell—controlled approximately 85% of global oil reserves in 1960. They could have offered more favorable terms to individual countries to prevent collective action, effectively employing a "divide and conquer" strategy. The United States, fearing the geopolitical implications of a unified bloc of oil producers, might have applied diplomatic pressure, particularly on its allies like Saudi Arabia, to abstain from joining such an organization.

A third possibility involves the internal politics of Iraq, the host country. The 1958 revolution that overthrew the pro-Western monarchy was still consolidating power in 1960. Had General Abd al-Karim Qasim's government been more preoccupied with domestic instability or faced a counter-revolution around this time, the Baghdad Conference might have been postponed indefinitely or abandoned altogether.

In any of these scenarios, the absence of a formal organization would have left the oil-producing countries to individually negotiate with the major oil companies and consumer nations, significantly altering the trajectory of global energy politics and economic development in oil-producing regions. Without the institutional framework to coordinate production quotas and pricing strategies, these countries would have continued competing with each other for market share and investment, potentially maintaining Western dominance over the global oil industry for decades longer than in our timeline.

Immediate Aftermath

Continued Western Oil Dominance

In the absence of OPEC, the "Seven Sisters" and other Western oil companies would have maintained their oligopolistic control over global oil markets throughout the 1960s and into the 1970s.

Pricing Power: Without a coordinated front from producing nations, the major oil companies would have continued their practice of setting posted prices with minimal input from host governments. The 1959-1960 price cuts that initially spurred OPEC's creation would have been merely the first of many unilateral adjustments that prioritized corporate profits over producer country revenues.
Concession Agreements: The transition from traditional concession agreements to more favorable production-sharing contracts would have been significantly delayed. Individual countries would have lacked the collective bargaining power to demand better terms, allowing Western companies to maintain their generous profit margins.
Technological Advantage: Western oil companies would have continued to leverage their superior technical expertise and capital resources to maintain operational control. Knowledge transfer to national entities in producing countries would have occurred at a much slower pace, delaying the development of indigenous technical capabilities in petroleum engineering and management.

Nation-by-Nation Approaches to Resource Nationalism

Without the institutional support and collective security provided by OPEC, oil-producing nations would have pursued individual approaches to asserting control over their resources, with varying degrees of success:

Venezuela's Path: As Latin America's largest oil producer with a longer history of petroleum development than Middle Eastern nations, Venezuela might have still pursued its resource nationalist policies. Under President Rómulo Betancourt's democratic government, Venezuela could have implemented higher taxation and more state involvement but would have faced stronger resistance from international oil companies without the support of other producers.
Iran's Vulnerability: Iran, having already experienced the consequences of resource nationalism during the 1953 coup against Mohammad Mossadegh, would have been particularly vulnerable. The Shah's government, dependent on Western support, would have likely maintained more favorable terms for foreign oil companies, potentially slowing Iran's oil revenue growth and exacerbating social inequalities that eventually contributed to the 1979 Revolution.
Saudi Arabia's Special Relationship: Saudi Arabia would have doubled down on its special relationship with the United States and Aramco. While this might have ensured continued American security guarantees, it would have likely resulted in slower increases in government take from oil revenues. Without OPEC's collective backing, the gradual Saudi acquisition of Aramco (completed in 1980 in our timeline) might have been significantly delayed or negotiated on less favorable terms.
Iraq and Kuwait: These nations, with smaller individual leverage than Saudi Arabia, would have struggled to improve terms with foreign oil companies. Iraq, under its revolutionary government, might have attempted unilateral nationalization as it did in 1972, but without OPEC's support, such moves would have risked stronger international backlash and potential military intervention.

The Unfolding 1973 Oil Crisis That Wasn't

The absence of OPEC would have most dramatically altered history during the 1973 Arab-Israeli War (Yom Kippur War):

Fragmented Response: Without OPEC's organizational framework, Arab oil producers would have lacked the coordination mechanism to implement the oil embargo against Western supporters of Israel. Some individual countries might have attempted production cuts or embargoes, but their effectiveness would have been limited by the inability to present a united front.
Price Stability: The quadrupling of oil prices that occurred in 1973-74 would have been unlikely without OPEC's collective action. While some price increases might have occurred due to supply disruptions in conflict zones, the dramatic spike that triggered global inflation and recession would have been averted.
Western Energy Security: The relatively moderate price changes would have reduced the immediate impetus for Western nations to develop comprehensive energy security policies. The creation of the International Energy Agency in 1974 might have been delayed or taken a different form with a less urgent mandate.
Economic Impacts: Without the massive wealth transfer to oil producers that occurred after 1973, global economic development would have followed a different trajectory. Western economies would have avoided the stagflation of the mid-1970s, while oil-producing nations would have experienced more gradual revenue growth, potentially leading to more sustainable but slower economic development programs.

Early Environmental and Alternative Energy Consequences

The absence of the 1973 oil shock would have had significant implications for early environmental awareness and alternative energy development:

Delayed Conservation Measures: The urgent fuel efficiency standards, speed limits, and energy conservation measures implemented after 1973 would have emerged more gradually, if at all. The American automobile industry might have continued producing large, fuel-inefficient vehicles for a longer period.
Nuclear Energy: The rapid expansion of nuclear power programs, particularly in countries like France that sought energy independence after the oil crisis, would have proceeded at a more measured pace, potentially resulting in fewer operational reactors by the 1980s.
Early Alternative Energy Research: Without the price signal from the oil shock, government funding for solar, wind, and other alternative energy sources would have remained minimal throughout the 1970s, delaying technological development in these fields by years or even decades.

These immediate consequences would set the stage for a radically different energy landscape as the 20th century progressed, with far-reaching implications for global politics, economic development, and eventually climate policy.

Long-term Impact

Alternative Trajectories for Oil-Producing Economies

The absence of OPEC would have fundamentally altered the economic development paths of traditional oil exporters over subsequent decades:

Middle Eastern Development Patterns

Slower Wealth Accumulation: Without OPEC's success in raising oil prices, Gulf states would have accumulated petroleum wealth more gradually. The massive sovereign wealth funds that now dominate global finance—such as Saudi Arabia's Public Investment Fund or Abu Dhabi's ADIA—would be substantially smaller, with reduced global investment footprints.
Infrastructure Development: The breakneck pace of infrastructure development seen in places like Dubai, Abu Dhabi, and Doha would have been more measured. The iconic skylines of these cities would be less dramatic, with fewer megaprojects and architectural statements. Development would likely have focused more on basic infrastructure and gradual expansion rather than speculative luxury real estate and prestige projects.
Labor Migration Patterns: The reduced pace of development would have altered labor migration patterns throughout Asia and the Middle East. The massive South Asian and Filipino worker populations in Gulf states might be significantly smaller, changing remittance flows and economic dependencies between these regions.

Political Stability and Regional Power Dynamics

Saudi-Iranian Relations: Without OPEC as a forum where Saudi Arabia and Iran had to cooperate despite their religious and geopolitical differences, their regional rivalry might have intensified earlier. Alternatively, without the massive oil wealth that fueled their competition for regional hegemony, their rivalry might have remained less consequential to global affairs.
Iraq's Development: Iraq, unable to capitalize on higher oil prices in the 1970s, might have faced greater economic constraints during Saddam Hussein's early rule. This could have either moderated his regional ambitions, preventing the devastating Iran-Iraq War (1980-1988), or alternatively, pushed him toward even more aggressive attempts to seize neighboring oil resources, as with the Kuwait invasion in 1990.
Venezuela's Political Evolution: Without the oil boom of the 1970s and subsequent bust, Venezuela's economic and political trajectory would have differed significantly. The conditions that eventually enabled Hugo Chávez's rise to power—extreme inequality, corruption associated with oil wealth, and economic volatility—might have developed differently, potentially altering South America's political landscape.

Transformed Global Energy Markets

Different Investment Patterns

Alternate Production Geography: Without OPEC production quotas constraining member output, development patterns of global oil resources would have followed different trajectories. Middle Eastern countries, with their low production costs, might have expanded production more rapidly, potentially delaying or reducing the economic viability of higher-cost production regions like the North Sea, Alaska, and eventually deepwater offshore fields.
Earlier Peak of Conventional Oil: Unfettered competition among producers might have led to more aggressive production throughout the 1970s-1990s, potentially accelerating the depletion of easily accessible conventional oil reserves. This could have brought forward the global peak of conventional oil production, creating energy security challenges earlier than in our timeline.
Major Oil Companies' Evolution: The "Seven Sisters" and other international oil companies would have maintained their dominance for decades longer. The rise of national oil companies like Saudi Aramco, National Iranian Oil Company, and Petróleos de Venezuela as major global players would have been delayed substantially. The current hybrid system where national and international companies coexist competitively might have emerged much later, if at all.

Price Stability and Volatility

Long-term Price Levels: Without OPEC's price management, global oil prices would have likely remained lower throughout the late 20th century, though with potentially higher volatility due to the absence of Saudi Arabia's swing producer role. The price collapses of 1986 and 1998 might have been avoided, but so would the price booms of the 1970s and 2000s.
Market Mechanisms: Financial instruments for oil trading, including futures contracts and derivatives, might have developed differently. The commodification of oil and the creation of sophisticated petroleum markets might have emerged more gradually, with different institutional features focused more on physical supply assurance than price hedging.

Altered Geopolitical Landscape

Middle East in Global Affairs

Regional Conflicts: The role of oil wealth in financing regional conflicts would have diminished. Iran's ability to sustain its regional proxy network, Saudi Arabia's military modernization, and Iraq's military expansion under Saddam Hussein would all have faced greater financial constraints, potentially moderating some regional conflicts.
U.S. Military Presence: The U.S. military footprint in the Middle East might have evolved differently. Without the dramatic oil price increases of the 1970s that highlighted the region's strategic importance, the expansion of American bases and naval presence might have been more gradual or focused differently, perhaps more exclusively on containing Soviet influence rather than securing oil supplies.
Arab-Israeli Conflict Dynamics: The leverage that Arab oil producers temporarily gained from the 1973 embargo would never have materialized, potentially altering the diplomatic landscape surrounding the Arab-Israeli conflict. The surge in Arab oil wealth that eventually funded Palestinian organizations and influenced Western approaches to the conflict would have been less significant.

Global Power Balance

Soviet Union's Trajectory: The USSR, a major oil exporter, would have received significantly less hard currency from its oil exports in the 1970s and 1980s. This might have accelerated its economic challenges, potentially hastening the Soviet collapse, or forcing earlier economic reforms similar to China's opening under Deng Xiaoping.
China's Development Strategy: China's economic rise coincided with a period of relatively affordable oil from the late 1980s through early 2000s. In a world without OPEC, the price dynamics would have been different, potentially altering the energy-intensive industrialization model that China pursued. This could have either accelerated or delayed China's economic emergence as a global power.

Climate Change and Environmental Implications

Carbon Emissions Trajectory

Transportation Sector Evolution: Without the 1970s oil shocks, transportation in Western countries would have evolved differently. The push for fuel efficiency standards would have been weaker, potentially resulting in higher per-capita emissions from the transportation sector. The American preference for larger vehicles might have persisted more strongly, affecting global automobile design trends.
Industrial Energy Efficiency: The urgency to improve industrial energy efficiency after the 1970s oil crises would have been reduced, potentially resulting in more energy-intensive industrial processes persisting longer in developed economies. This could have led to higher cumulative carbon emissions by the early 21st century.

Climate Policy Development

Delayed Climate Awareness: The interlinking of energy security, economic stability, and environmental concerns that began with the 1970s oil crises helped establish early frameworks for thinking about global energy challenges. Without this catalyzing moment, climate change might have emerged more slowly as a policy priority, potentially delaying international cooperation on emissions reductions.
Different Renewable Energy Landscape: Government support for alternative energy technologies would have followed a different trajectory without the oil crisis stimulus. Solar and wind power development might have been delayed by years or decades, though lower overall oil prices might have made the economic case for renewables more challenging once they did emerge.

Present-Day Implications (2025)

By our present day in this alternate timeline, the global energy landscape would be dramatically different:

Market Structure: Rather than the current situation where OPEC+ coordinates with Russia and other producers to manage supply, we might see a more fragmented market with multiple competing suppliers and no effective coordination mechanism.
Energy Transition Timeline: The global energy transition away from fossil fuels might be at a different stage—either accelerated due to earlier depletion of conventional resources, or delayed due to persistently lower prices making alternatives less competitive.
Geopolitical Alignment: The alignment of global powers would differ significantly. The special relationship between the United States and Saudi Arabia might be weaker, while different patterns of energy interdependence could have created alternative security alignments throughout Europe, Asia, and the Middle East.
Economic Distribution: The distribution of global wealth would be substantially altered, with less concentration of financial assets in Gulf sovereign wealth funds and potentially different patterns of economic development throughout the Global South.

This alternate world without OPEC would not necessarily be more peaceful or prosperous—merely different, with its own set of challenges, inequities, and power dynamics shaped by the absence of coordinated action among oil-producing nations.

Expert Opinions

Dr. Fatima al-Rashidi, Professor of Energy Economics at the London School of Economics, offers this perspective: "The absence of OPEC would have fundamentally altered the relationship between oil-producing countries and multinational corporations. Without the collective bargaining power provided by the organization, the transition from the old concession system to production-sharing agreements would have been significantly delayed. Individual countries would have been forced to accept less favorable terms, resulting in a substantially different distribution of oil rents between producing nations and international oil companies. The Middle East we know today, with its sovereign wealth funds, massive infrastructure projects, and significant influence in global finance, would be almost unrecognizable. Instead, we might have seen a continuation of the quasi-colonial economic relationships that characterized the pre-1960 oil industry, with Western companies extracting the majority of value from hydrocarbon resources well into the 21st century."

Professor James Henderson, Director of Natural Resource Governance at Columbia University, contends: "The most profound impact of a world without OPEC would likely be on the pace and pattern of the global energy transition. Without the price shocks of the 1970s that catalyzed early research into alternatives, renewable energy technologies would be less mature today. However, the likely lower and more stable oil price environment might have resulted in more gradual, economically efficient adaptations rather than the panic-driven policies we saw after 1973. The absence of OPEC might have actually produced a more sustainable trajectory for both conventional and alternative energy development. The energy transition would still be occurring due to climate concerns, but with different technologies at different stages of maturity, and possibly with less polarized politics surrounding fossil fuels versus renewables."

Dr. Mahmoud El-Gamal, former Chief Economist at the Saudi Industrial Development Fund, provides a contrasting view: "We should not assume that the absence of OPEC would have prevented resource nationalism entirely. Even without formal coordination, the historical forces of decolonization and sovereignty over natural resources were powerful throughout the developing world in the 1960s and 1970s. What would have changed is the timeline and effectiveness of these efforts. Instead of the dramatic shift we saw in the early 1970s, we might have witnessed a series of individual, uncoordinated nationalizations across different countries—some successful, others crushed by Western intervention as we saw with Mossadegh in Iran. The eventual outcome by the 21st century might have been similar in terms of national ownership, but the wealth accumulation and development trajectory would have been dramatically different, with much more uneven results across oil-producing regions."