OPEC - Episode 235

Added: 2026-05-23

[00:00:00]Today we have an interesting episode.

[00:00:01]Hopefully not too boring for you uh lovely people. Um we'll be covering OPEC uh and what it is, why it came to be, what are the boring Marxist analysis of how it came to be integrated into the petro dollar system and its future. Oh boy. I know. I know you're getting just juicy thinking thinking about these.

[00:00:20]>> Brother, I was a journalism major. Why are you making me talk about money and petro dollars and [ __ ] And I was a business major, so I'm like, "Yay, finally I get to use my >> Which way podcast man?"

[00:00:32]>> Exactly. Right. You know, my favorite part is Yugo is the one who keeps us always on track. So he's like, "Yeah, what? We have a whole his list of ideas, but we decide, you know, like a couple of days before uh and then we start doing the prep. Uh, and sometimes I the prep falls to me." So I'm like, "Hey guys, should we do the OPC episode?" And you go like, "Yes, absolutely. Let's go ahead. Let's do it." Uh, and I'm like, "All right." I don't really wait for JT to give me his approval. Yeah, just [ __ ] it up.

[00:00:59]>> I just write three paragraphs of notes.

[00:01:01]I'm like, JT, here's your [ __ ] homework.

[00:01:04]>> Get to work.

[00:01:05]>> Work, boy.

[00:01:07]>> Oh my god. But he knocked it out of the park. Uh, we have a great episode for you today.

[00:01:11]>> Hey, uh, >> okay. What is an OPEC? Is it like a style of barbecue? Like, what is it for people that absolutely don't know anything about it?

[00:01:19]>> JT is going to get into that very deliciously in a second. Thank you to everybody who of course supports us. Uh, we can't do this without you. We really appreciate uh all the love you give us, all the uh both financial and and and u other forms of social forms of support where you give us lovely kind words that tickle us and help helps us sleep well.

[00:01:37]>> Um exactly right.

[00:01:40]Spam JT with the foot pegs. Um >> it's it's a bad joke because there's so many podcasters and streamers and [ __ ] that [ __ ] unironically do it.

[00:01:53]>> Yeah. Yeah.

[00:01:53]>> So I'm like convincing. Yes. Oh yeah.

[00:01:56]>> Yeah. Do not send anything to JT, please. Or me or or you go. None of us are interested. All right. If you want, we look look. We We'll meet in the middle. We'll send you guys feed picss.

[00:02:05]How about that?

[00:02:06]>> There we go.

[00:02:07]>> There we go.

[00:02:08]>> I think that's We'll put it on the Patreon. Okay. Um JT, do you want to take it away?

[00:02:13]>> Yeah, you got it, Bucko. Let me pull up my copious notes to talk about this boring [ __ ] All right.

[00:02:19]>> You got plenty. That's copious, baby.

[00:02:23]Okay, here we go. As with everything podcasters talk about, uh, we got to start way back to to pad the episode length. I mean, uh, establish the context of what we're talking about today.

[00:02:37]>> Um, but honestly though, there's a lot. I mean, we do need to know some background, right? So, the history of OPEC begins well before 1960. Uh, because the organization emerged out of a a much >> No, no, it's about oil. You got to start with So there were dinosaurs and a meteor hit >> way way back. Yeah. And then they died and they fell in mud and they turned into oil somehow and then we put the dinosaur juice in our cars and that's why everything sucks. I think that that about covers the prehistoric era.

[00:03:07]>> But yeah, the the organization came out of a a much older structure of global oil power. And to understand why oil producer states eventually coordinate like they ended up doing with OPEC, you have to look at how oil capitalism first developed as an international system and how tightly it binds to this day energy empire and industrial development. So >> OPEC for the for the people organization of petroleum exporting countries uh is is the silly title. They have the stupidest logo you've ever seen. It's like an OP EC that they've made three circles with a blue thing. It's just bad. has a great job, guys. It's really well done.

[00:03:44]>> Graphic design is our passion type [ __ ] >> Exactly right. That's what I thought.

[00:03:48]>> It's really bad, by the way. Those who don't know. Actually, I'll put it as a as a thumbnail. Just look at the thumbnail. It's >> We'll put it on.

[00:03:55]>> Wow.

[00:03:57]>> All right.

[00:03:57]>> It's like somebody took the old Twitter logo and like who just [ __ ] butchered the bird. These are like the stakes. The stakes that are about to drop on barbecue. Yeah.

[00:04:07]>> Oh, that's so sad. You keep doing your thing, OPEC. You know, it's all right.

[00:04:11]It's all right.

[00:04:12]>> Um, >> no, don't. Yeah, sorry.

[00:04:14]>> Yeah, true. Yeah. Yeah. Yeah. But oil became a a um a central thing to modern capitalism pretty early in the 20th century, but it didn't step into a neutral marketplace, right? It was it was joining a world that was already structured by empire. So British and American capital dominated global shipping lanes and finance uh industrial manufacturing and oil fit into that structure as the fuel that made everything move faster. Right? So mechanized warfare, uh long-distance trade, automobiles, aviation, uh industrial chemistry. Yes, very true. Uh you need it to to manufacture plastic goods.

[00:04:54]>> Bought the plugs >> as well as lubricant.

[00:04:56]>> Yeah. Basically everything. Yeah.

[00:04:58]>> But once oil replaced coal as the uh dominant strategic fuel, control over oil fields, it started to look like control over the tempo of global development itself. It quickly became really really central to like everything. Uh and that control obviously quickly metastasized by the inter war period and especially after the first world war. A small group of multinational oil corporations consolidated their reach across the major producing regions. And these firms later became known as the seven sisters.

[00:05:28]Exxon, Mobile, Chevron, Gulf Oil, Texico, BP, and Shell. But they didn't operate as isolated competitors in a pure market as Chuds would have you believe. Instead, they formed a coordinated igopoly that managed production, transport, refining, and pricing across continents. And that coordination was just as important as the ownership because these companies shared information. They aligned pricing strategies and they influenced production levels in ways that stabilized their collective profits. So like the famous ANA agreement of the 1920s which was >> super famous like every Yeah, it's >> if you've done any kind of research at all, you've heard of this. It's it's sometimes called the ASIS agreement.

[00:06:08]>> Great singer from Bulgaria.

[00:06:09]>> Oh wow. I'm so culturally enlightened.

[00:06:12]Thank you. But >> he is one of the greatest gay icons in history. You knowing more about [ __ ] OPEC than Aziz is insane. Okay. But but continue.

[00:06:24]>> I don't even know American singers at this point. It's so sad. But um this that that agreement kind of reflects this collaborationist logic that they came up with like the firms basically shook hands to preserve existing market shares and avoid making trouble for each other through destructive competition.

[00:06:41]And that agreement um it didn't just reflect their own corporate strategy. It was more of like a hint at the state power behind corporate expansion, right?

[00:06:52]So why bother with the facade of competition and survival of the fittest when you can keep a handle on things and make a [ __ ] ton more money? So you had British naval dominance securing Middle Eastern routes. You had American financial institutions providing credit structures. Colonial administrations enforced concession contracts. And it's just the capitalist state doing what it does best, right? And then handing it off to the quote unquote private sector, which uh they had their their grubby little fingers in. So oil production under this system didn't look like industrial production in like the classic factory sense. It was more like extraction uh under external control. So companies negotiated long-term concessions with governments that often lacked the bargaining power, the technical expertise, or the fiscal independence to say no to the big boys.

[00:07:37]And these concessions granted foreign firms exclusive rights to explore, drill, refine, and export oil over vast territories for decades at a time. Very exploitative. And the structure of these agreements produced a a kind of specific political economy.

[00:07:53]>> Oil companies control infrastructure and output decisions. Governments receive royalties that remain fixed or only loosely tied to market fluctuations.

[00:08:00]When global oil prices rise, the additional profit flows to corporate balance sheets in New York or in London as intended. And when prices fall, the risk is absorbed by the producing states that rely on royalties for public budgets. So this asymmetry creates a strict hierarchy inside global capitalism and that hierarchy goes on to shape development itself. Industrial economies in the United States and in Western Europe consume cheap energy and convert it into manufactured value.

[00:08:27]producing regions export crude oil and import finished goods. So the thick and juicy flow of value gets slurped outwards from the periphery towards the core not just through trade but through control over pricing systems over shipping insurance uh refining capacity and financial settlements the whole nine yards.

[00:08:46]>> I'm almost there.

[00:08:47]>> Oh you just let me keep going. I'll talk I'll talk about this really other boring [ __ ] I don't know what you people want to hear about OPEC but here we go. Let's >> very important. Oh yes.

[00:08:56]>> Yeah. This this business nerd [ __ ] I just want to talk about vibes. Now Marxist political economy describes this through the concept of surplus value, right? Labor produces value. Capital captures a portion of that value as surplus. We all understand this. In the global system, surplus extraction does not operate only inside factories, right? It operates through ownership of production networks and control over exchange mechanisms. So the humble oil worker in middle of nowhere, Iran, produces energy that becomes global value, right? The firm headquartered in London or New York captures a disproportionate share of that value through holding the official pieces of paper that show they have contractual control and pricing authority. This is imperialism 101. Capital does not remain confined within national borders, right?

[00:09:44]It always expands outward seeking raw materials, labor, markets. Uh, oil concessions in the Middle East and Latin America function as as like nodes of that expansion. The system locks peripheral regions into a role as exporters of raw materials and importers of industrial goods. Pricing control becomes the decisive mechanism in this system. Now, before the rise of producer coordination, oil companies would set what were called posted prices, which functioned as official reference prices for taxation and royalty calculations.

[00:10:18]These posted prices, surprise, surprise, did not necessarily reflect actual market transactions. They were just like administrative tools that determined how much revenue flowed to any given state.

[00:10:31]So a unilateral change in a posted price could reduce national income in an oil producing country without any change in physical output. Like this is stroke of a pen kind of stuff. And this system became especially clear in the Middle East after World War II. Iran gave us one of the clearest early confrontations with this stupid ridiculous structure.

[00:10:53]Uh 1951 Muhammad Mosedc led the nationalization of the AngloIranian oil company. The nationalization was intended to redirect oil revenue towards Iranian development and end British control over production infrastructure.

[00:11:06]Right? So, it sounds pretty reasonable.

[00:11:08]Yeah, I'm I'm sure the British took that very well.

[00:11:11]Alas, the the the vampires never take that sort of thing very well. And the response was immediate and coordinated.

[00:11:18]Britain imposed sanctions and organized an embargo that absolutely crippled Iranian oil exports. And then in 1953, British intelligence and US intelligence coordinated to remove Mosedc and restore monarchical authority under the Sha Phil Leotardo. Anybody? Anybody?

[00:11:36]>> Anybody? Come on. Come on.

[00:11:38]>> Tough. Tough room. I'm trying to make this fun.

[00:11:41]>> No, it's a classic.

[00:11:42]>> Yeah.

[00:11:43]>> But the Anyway, the coup reinforced a global lesson, right? Attempts to reclaim resource control are going to get you bonked when they threaten core energy interests. And that lesson spreads across postcolonial and decolonizing states all around the world to varying degrees. Now after the second world war, colonial empires formally began to dissolve across Asia, Africa, and the Middle East. But the economic architecture of colonialism stuck around just in new forms. So many newly independent states inherited export-dependent economies built around raw materials, including oil. uh foreign firms continued to dominate key sectors through concession systems, technical dependence, financial leverage and oil became the central strategic commodity inside this transition. So the formation of OPEC in 1960 in Baghdad reflects this shift. Baghdad, that's for you, Hakee, reflects this shift.

[00:12:40]>> It's okay. You get a pass.

[00:12:42]>> Thanks. Thanks. I appreciate it. I'm going to I'm going to hit you with Qatar in a little bit, too.

[00:12:45]>> Yeah, I know.

[00:12:48]Kuwait there.

[00:12:49]>> Yeah, >> quitear. Uh, now the founding members included Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. The immediate catalyst might seem fairly technical, right? Like Western oil companies reduced posted prices unilaterally, cutting state revenues across the producing countries. But the real issue runs a bit deeper. producer states recognized that they collectively supplied a strategic input to global industry while individually lacking control over its valuation. So OPEC began as a coordination mechanism inside an existing system, right? It wasn't an outright rejection of global capitalism.

[00:13:31]Um it was an attempt to renegotiate terms within it. So you know obviously we got to do the Marxist thing here and say not your finest work, baby girl.

[00:13:41]like OPEX mo represented a a redistribution struggle over surplus value rather than an abolition of the system that generated it. So in other words, they were trying to win a rigged game.

[00:13:54]Now the early years of OPEC revolved around institutional learning, how to coordinate output, how to negotiate with multinational firms, how to convert geopolitical advantage into fiscal power. The organization gradually built technical capacity, pricing benchmarks, and political solidarity among members who fairly often held divergent interests. And those divergences, they weren't insignificant. Like some member states had vast reserves and low extraction costs such as Saudi Arabia.

[00:14:27]Um some others faced higher extraction costs or larger populations or greater fiscal pressures such as Nigeria or Venezuela. And these differences shaped how each state related to production quotas. Coordination required restraint, but individual states were faced with constant incentives to exceed quotas when budget pressures rose. So even before major geopolitical crises, this tension between collective discipline and national revenue needs defined OPEC's internal dynamics. By the late 1960s and early 1970s, resource nationalism expanded across a lot of these producing states. Right. Okay. So, uh, resource nationalism referring here to the assertion of state control over natural resources within national borders and the attempt to use those resources to fund domestic development.

[00:15:17]Right.

[00:15:17]>> Oh, I thought it was like when uh resources are patriotic, like all the cucumbers are fighting all the tomatoes and they're like, we want to be extracted.

[00:15:25]>> They're genetically engineered to be red, white, and blue on the inside.

[00:15:28]Yeah, exactly.

[00:15:28]>> We got it. What's the most reactionary uh vegetable? Uh, okra >> kind of the cucumber phallic object blah blah blah.

[00:15:36]>> No, no, you're not allowed okra >> because okra is an old people food and and old people are intensely reactionary.

[00:15:42]>> Okay. Well, >> but now you're associating them with with the class that consumes them.

[00:15:46]That's like Yeah, that's like calling one commodity worse than another one because like rich people consume it more. That's liberal >> carrots that are a different color like the the the Yeah, purple and the white and all these other but not turnipss.

[00:16:01]just the the people who pay extra just cuz it's a different color.

[00:16:04]>> Uhhuh. I think >> I've never seen that in my life. Holy [ __ ] Yeah. But still by by the consumers. Yeah. Is there one that is like inherently parasitic like like grows from the >> This is why we need like a fourth member that's a biologist or something uh >> to talk about reactionary vegetables.

[00:16:21]Yeah.

[00:16:21]>> Was like biologists are not real. Shut up. Talk about >> I care so much about this.

[00:16:31]to knock it down a warm wall in my apartment. Please, please hurry.

[00:16:35]>> Oh my god.

[00:16:35]>> Anyway, so that's what resource nationalism is. It has nothing to do with vegetables generally speaking.

[00:16:41]Yeah.

[00:16:42]>> But this this >> why if not if not dildo, why dildo shape cucumber? I >> asking the important questions as always, comrade younik.

[00:16:52]>> This philosophy, >> we should be grateful. Okay, sorry.

[00:16:55]Yeah.

[00:16:56]>> Do you know how many people just reuned in? Do you know how many people just stewed back in? Okay.

[00:17:01]>> Yeah. Yeah. And all the nerds like they left. All right. So this philosophy came about as part of the broader postcolonial project, right? Building sovereign industrial capacity after formal independence. It's common sense stuff in a vacuum, but as we can see here, it does lead to some challenges.

[00:17:20]So Libya under Gaddafi renegotiated oil contracts after 1969 increasing state revenue shares and asserting stronger control over production. Algeria after independence from France expanded state control through Sonatra and gradually displaced foreign operators. Iraq nationalized the Iraq Petroleum Company in 1972 moving a major consortium of Western firms from direct control.

[00:17:42]Venezuela expanded state participation in oil production and eventually moved towards full national ownership in 1976 with the creation of PDVSA Saudi Arabia >> alliance with 100 gillion and and iPhone shut the [ __ ] up oil company. Yes.

[00:18:03]>> Hello dear listener editor JT here. This has been a little sneak peek of one of our monthly exclusive Patreon episodes.

[00:18:10]If you want to hear the rest, support the show, get episodes a week early, and lots of other benefits like access to our Discord, check out our Patreon at patreon.com/thedprogram.