So since the sloppy 1970s of skyrocketing been slumping oil prices, OPEC has sought to actively manage oil production in its member countries by setting production targets like we talked about, you guys make this much you guys make that much will make this much, which in turn means they can pick the price they all collectively sell their oil for and they are much more hesitant to use oil as a political weapon, it still happens my friends, it still happens, but nothing is as huge straightforward and with this huge Impact of the entire world is that 1973 oil embargo. So now they all work together, it's much better. There's one big OPEC happy family now, right? Yay, they're all hanging out drinking all, toasting each other, oil in martini glasses, hold the phone on the happiness. First off don't don't drink oil and martini glasses, but not every member in OPEC agrees with all the stuff all the time. In fact, a lot of these OPEC meetings can be real throwdown, showdowns between competing powers within the organization. So, since the 70s the organization has held it together and gotten its business done and done well on the world stage, but within organization there are competing centers of power that piss each other off regularly and I do and should be aware of the biggest rivals in the room as you think about how it affects Middle East politics, wars in the Middle East, and everything else, okay? Not all OPEC members are created equal. Remember this map I showed you way back when, hours and hours of lecture ago, where the major oil fields production centers are of just the Middle East, not all of OPEC members, just the Middle East and I pointed out the Persian Gulf and I said, "wow this is like the richest of the richest centers oil on planet Earth, Eastern Saudi Arabia, Western Iran, Eastern Iraq, all the way up there to the mountains of Iraq, Iran where the Kurds are, these small countries of the Gulf are entirely within this the UAE, Qatar, Bahrain, they're completely in the super-rich, these are the super-rich power players of OPEC because they have so much oil. Within the Middle East, Saudi Arabia has, of just the OPEC members, has one quarter of all the proven reserves, Saudi Arabia alone is the giant, Iran is the second-biggest, strangely enough Venezuela actually is the true second-biggest improving reserves of OPEC, but they're not in the Middle East so, Saudi Arabia and Iran have the biggest shares of proven reserves and typically are the biggest producers with an OPEC. Iraq is not far behind Iran by the way. So, first off, within OPEC, it's the middle eastern states that have the most collective power in OPEC. Once you get outside of the Middle East, yeah, not so much. So you know, Angola has a seat at the table but they don't have much of a voice. Nigeria is there, Ecuador is there, yeah, I mean I guess they get access to the free buffet, but in terms of voting this isn't necessarily a democracy because the second thing I want you to know for sure is that the head honcho of this group with no reservations of Saudi Arabia Saudi Arabia. Saudi Arabia is the one holding the gavel at the meeting, Saudi Arabia they don't have veto power or anything, they're just the most powerful player, not only because they have the biggest reserves, but because them combined with their Arab allies, Kuwait, Bahrain, Qatar, UAE, Oman, that collectively together that's kind of the team Arab and Saudi Arabia is the leader of that and with those countries all put together it's like, yeah that's the majority of all in OPEC. So, they have the biggest voice Saudi Arabia is the natural leader of this entity, no ifs ands or buts, okay? However, it's not just Arab States. Of course, the second-biggest producer and second-biggest reserves of the Middle East is Iran. And Iran, if you don't know this yet, is not an Arab state, they're Persian, but they're the second-biggest in terms of production and supply, so there is a real rivalry between the House of Saud and Iran. And this by the way, I'm getting way ahead on this lecture but in trying to talk about oil right now, but this is part of the major rivalry of the entire region, is between Saudi Arabia and Iran and even within OPEC part of it is about oil. Both of these countries have a bunch of it, both of them produce a bunch of it, and they have Alternative views on how OPEC should be run, differing views let's say, counter opposed views let's say. Saudi Arabia for its part is the head honcho, it wants to stabilize things, always wants to keep the price fluctuations lowest, typically fights for the lowest price. I know it seems counterintuitive to most of you. You're like what Saudi Arabia is fighting to have a lower price of oil that they would set? Yes, because Iran is the country that's always saying pushing higher push it higher push it higher and usually Venezuela is in the room right after they got finished with the buffet going, yes we agree, push it higher, push it higher. Now, why is that? Well, let me ask another question? Whose side you think the United States is on in this enter OPEC scrabble? The United States and Saudi Arabia have long time been allies, long time and we're starting to get into politics here but you have to understand this to understand the dimensions of why different OPEC members fight for different things. The US and Saudi Arabia been fast friends since Saudi Arabia became an independent sovereign state back after World War I. So, we're looking at a hundred years the United States has said, hey we respect Saudi Arabia, we like Saudi Arabia. It was United States American companies that went in initially exploring for oil in the kingdom. It's so funny because that was all these a British and French and other national companies that were mostly poking around in Iran and Iraq and they were finding much oil up there and they largely ignored Saudi Arabia. American companies came in and said yeah, we think there's a bunch of oil here. I'll cut to the chase, there was. So, early on Western companies established relationships with the Saudi government, and the United States government established relations with the Saudi government and it was western technology, and western capital, and western businesses that help build up the whole Saudi pipeline. So, in return Saudi Arabia has always been like, okay, well cool, you guys have helped us, we've always been friends, oh by the way go Google this you can probably find every single US president has probably visited Saudi Arabia for the last hundred years, like all of them, if not, they've met with the Saudi King somewhere but that's how important the relationship is between Saudi Arabia and the United States and it starts with oil, let's just be honest be frank, let's be real. Alright, and in return Saudi Arabia has said, well yes, you're a friend and so we know the United States doesn't want super high oil prices because you guys are so super reliant on oil, it would hurt your economy, we don't want to hurt the economy of our very good friend and in return the United States has said cool, and we're basically your military. Now, that's simplifying it perhaps a little bit too much. I don't care. I'm usually about simplification We, the United States, has basically been the guarantee or of supporting the kingdom, supporting the monarchy. If anyone were to ever have attacked Saudi Arabia, the United States invariably would have stepped in to protect its interest, which is keeping the Saudi Arabian monarchy in the country going, keep the oil pipelines going so this is the relationship that has existed and has become so strong over the last century and that's why Saudi Arabia is the head honcho of OPEC that says, no we're not taking the price of oil to $300 a barrel and Iran is like, but we hate the United States and Venezuelans like yeah, we hate them more so let's make it five hundred dollars a barrel and Saudi Arabia's like, sit sit sit down children no, no, no, $80 a barrel is what we're gonna set it at. And times past by the way, Iran or Venezuela said we don't care we're gonna charge 100 or we're gonna make the price $100 a barrel and Saudi Arabia has the power and the resources to say, oh okay, so you're not going to listen to the prices we've set at the OPEC meeting? Okay, cool check this out. We're going to start producing trillion gallons starting tomorrow because we can and we will flood the oil market worldwide, which means the price goes down and Iran and Venezuela and all the rest of you, you will lose money. See how it works it's fascinating stuff. It's exactly how it works and it's still working that way here in the 21st century, which is why even though they're rivals, the Iranians and the Saudis have finally said, okay and the Venezuelans and everybody else is like well alright, Saudi Arabia it has the power to manipulate, by itself, has the power to manipulate price worldwide and within OPEC, so you can't really cross them. Does that made sense? Okay, and again another side note, now do you see why there's so many so much US interest in Saudi Arabia and the Middle East and why there's the US bases in Saudi Arabia, why there's a huge naval fleet, the fifth fleet, is in Bahrain? You see how all of this works? Okay, these are issues we should be talking about more once we explain out the whole Team Arab story, and it's the United States role in it, but let me summarize for now. The role of OPEC, the importance of OPEC, summary, remember back in the day when I said that from about 1900 to 1950 Middle Eastern oil was westernized, run by western companies, and then by 1960s and 1970s Middle Eastern oil had become arabised, localized is a better term for it, but now hopefully you understand, it was team Arab that really took the reins, formed up OPEC, and also did that 1973 oil embargo, right? Fully taking into account we now possess this stuff we control this stuff, and there's economic and political power that goes with that. Remember when it was formed, OPEC was formed in 1960 when the international oil markets were largely dominated by that group of western multinational corporations that we called the Seven Sisters, right? Seven Sisters controlled everything, 1960 OPEC is formed, that's the turn point that I want you to remember. The formation of OPEC represented a collective act of sovereignty by oil-exporting nations and marked a turning point in state control over natural resources. Up to this point, most of the world was kind of market capitalism, businesses new stuff, unless you were communist, okay? Unless you were the USSR and its affiliates, where they were state-run, okay? Most places just said, well yeah, it's probably, it's you know, if you're not communist and the businesses take care of it, OPEC turned that a little bit to in the twentieth century Into almost a new path. It's like, well no, we're not communist, but oil is too important to our country, and we possess a lot of it And so we're taking over this resource it's going to be a state owned and controlled resource. That has actually been a theme that has been duplicated many times since. Russia, while not communist anymore, has gone back to owning and controlling its oil interest of its country and they're not alone. Brazil is probably heading down that path too. So, that's the second big summary point to think about with OPEC and the Middle East. On top of that, in the 1960s OPEC ensured that Western oil companies could never again unilaterally cut prices nor control oil profits anymore. So, thinking about the world from a business standpoint, it went from a Western dominated business model where the Western businesses collected most of the profits and they control the price by the way, the Seven Sisters did, and they could any time they wanted to say the price of oil is $200 a barrel next week. We don't care because we have it all we know it. OPEC said, nope, we're going to take over that role now too. In addition to that, as pointed out in the 1970s, oil became a political tool a political weapon on the world stage, for perhaps the first time, which highlighted and underlined, highlighted, bold, underlined, asterisk a major, major, major global shift I want you to know. The shift was from the rich developed countries, being in charge of their economies and in charge of the world and in charge of everything, the shift to, oh we're heavily reliant on these other countries over here who have that oil that's the lifeblood for our economy. In other words, the rich developed countries came to the realization, we're not really in full control anymore, we are dependent upon that stuff. We're crack addicts and the crack dealer over there, right? And the crack dealer can decide the price and the crack dealer can decide not to sell it to us and we need it so bad, we'll do anything we gotta have that crack. I.e., ergo, in exchange, in lieu, oil. I'm not happy about this many people are not happy about it, even now decades later people like why are we so addicted to this stuff and the U.S. is embroiling and all this stuff overseas in the US and the UK and other countries are into all this stuff that's happening because we're so crack addict reliant on this thing that we no longer control our own, it's over there. In fact, the crack analogy, I'm not using that just to get a laugh, I've always said it's funny about how the world works economically that the less developed countries are usually reliant on the more developed countries to get finished goods, and consumer goods, and all the good stuff, it's only when it comes to oil and drugs is that reversed. Oil and drugs are dominated by other countries outside Team West and Team West is the biggest user of oil and illegal drugs and none of them are made in Team West anymore. Well, somewhat made, but heavily reliant on the developing other world for those two things and OPEC is the major player, now, in the world when it comes to that all-important black crude, crack, that is the lifeblood of this economy and other Western economies on Team West which includes, Japan, Australia, New Zealand, all these places. China's relying on oil now too. So, it's everybody, but Team West in particular and OPEC in this position can turn the spigot on or turn the spigot off anytime it wants to, to achieve economic or political goals or political goals. I would suggest to you to look at current events here in the 20th century in 2015. Do you think Russia's really happy about a really low oil price? OPEC has said well, you know we're gonna We're pumping out tons of oil and the price of oil is getting lower so the natural inclination is to stop all production, stop production, slow it down, so that the prices creep back up and Saudi Arabia said, no, we're gonna keep producing tons of oil. Why do you think that is well? What's the US and Western Europe's opinion of Russia right now? Not very good, and so the United States continues its leverage with its friendship with Saudi Arabia and say, hey, sorry can you keep pumping lots of oil? What does that do? Well, it lowers the price of oil worldwide and that hurts Russia who relies heavily on oil revenues, it actually hurts Iran who relies heavily on oil revenues, it hurts Venezuela who relies heavily on oil revenues. All three of those countries are at odds with Team West in the United States right now. Do you think it's a coincidence? It's never a coincidence. All these things are happening for a reason, but I'm now just blathering on when I should jump to some of these things, so speaking of stifling the spigot, we should shut down this section on OPEC and oil and flow into the next one, but let's do a succinct oil summary first.