Oil

        Most of all to these countries and to the companies developing the oil fields was the growing demand for petroleum thought out the world. This demand first appeared most acutely as a result WW2 U.S. military might depend on oil. U.S. leaders understood clearly their growing dependence on foreign oil, especially from the Middle East. They began to establish close ties with the oil-producing states, in particular with Saudi Arabia, the state with the greatest reserves. President Truman informed the Saudi king after the war that “no threat to your kingdom could occur which would not be a matter of immediate concern to the United States.” Strategic interest in Iranian oil led the Western states to intervene secretly in the political conflict that dividing Iran in the early 1950s, supporting the shah against his enemies who appeared hostile to the West. National interests brought Western involvement in Middle East politics whatever the wishes of regional leaders.

        But even a strong ally of the West such as the shah of Iran resented the power that the international oil corporations possessed over oil production and prices. The rulers of these states received royalties based on the profits of these corporations from production in their land. Industry leaders had a very different view of where their interests lay. Sensitive to western governments need for oil, they continued to limit production and control prices to avoid ruinous price wars. The postwar discovery of new oil fields continually put their efforts in jeopardy, and an economic recession in the west in the late 50s reduced demand. They agreed among themselves to lower prices below 2$ a barrel to promote sales, but in doing so they provoked the resentment of Middle Eastern oil-producing states, including Iran and Saudi Arabia. The rulers of these two states shared common interests both in preserving their monarchies against revolutions such as had occurred in Egypt, and in asserting greater control over their petroleum. They had begun expensive programs of economic development, paid for by their income from oil royalties, only to find these revenues curtailed by a decision of the oil industry. They hoped that by acting tougher they could force the international oil corporations to pay attention to their financial needs.

        In 1960 they obtained the agreement of all the major oil-producing states to form a new international association, the Organization of Petroleum Exporting Countries (OPEC). The immediate objective was to stabilize oil prices and to coordinate their petroleum policies to protect “their interests, individually and collectively." Behind this modest aim lay the audacious goal of fixing levels of oil production and prices.
 
        While their organization had in fact little immediate impact on oil policy, the tremendous increase in western demand for oil in the 1960s improved their economic situation substantially. By then petroleum use had risen so rapidly that it provided over half the West's energy supplies, so vital that industrial economies could not function without it. In the late 1960s oil prices began a slow increase, rising to over 2$ a barrel; revenues going to Iran and Saudi Arabia reached near 1 billion dollars. Although their policies were basically conservative, these two states had lent their political weight to a radical shift in the global economic balance of power. In the world of international finance and economics, these revenues and the possession of great petroleum reserves gave the OPEC countries new power and influence.
 

Bibliography
Brower,  Daniel.  The World In The Twentieth Century. Prentice Hall, New Jersey. 1996.

Links

 Organization of Petroleum Exporting Countries

 The Middle East Oil Crisis

 Imperialist Oil War in Middle East

Written and directed by Kirk Baldwin.
Fueled by Mr. T. vs. Saddam Hussein.