Over a barrel: fifty years ago, the oil-producing nations joined forces to form OPEC, and the world hasn't been the same since.

• Author: Paul, Laurence M.
• Position: TIMES PAST

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When the oil ministers of four Eastern and one South American country met in Iraq in September 1960 to form the Organization of the Petroleum Exporting Countries, few Americans took notice.

Of course, they had no clue at the time that the creation of an oil cartel, known as OPEC, would prove to be one of the most important economic and political events of the 20th century, with enormous consequences for the United States and the world.

OPEC's ability to control much of the world's oil supply, combined with the ever-rising demand for oil, has played a role, directly or indirectly, in the conflicts in Afghanistan and Iraq; the rise of global terrorism and the 9/11 attacks on the U.S.; the decline of the U.S. auto industry; and even this year's BP oil disaster in the Gulf of Mexico.

"The founding of OPEC was a game changer in terms of how the modern world works," says oil industry expert Phil Verlager.

For a century after petroleum (Latin for "rock oil") became widely used as an energy source, the U.S. and Europe largely controlled its exploration and distribution. The first commercial oil well was dug in western Pennsylvania in 1859 (see Timeline, p. 18), and the great oil fields of Oklahoma, Texas, and California became the most important in the world.

Initially, most oil was refined into kerosene--as a replacement for whale oil--and used in lamps, but then automobiles came along, creating a revolutionary new use for oil. The potential demand for cars, and the gasoline that powers them, became clear in the 1920s when Henry Ford's 1925 Model T spawned a mass market for cars by putting them within reach of America's growing middle class.

After World War II ended in 1945, rising prosperity in America and Europe increased the demand for oil as never before.

Indeed, the U.S. enjoyed an economic boom that changed the way Americans lived. The sprawling suburbs with rows upon rows of single-family homes and two-car garages and thousands of miles of new highways were all built on the premise of an endless supply of cheap gas. Detroit cooperated by pumping out bigger and bigger cars with thirstier and thirstier engines to satisfy the desire for mobility and consumerism that embodied the American Dream.

Less obviously, over the years scientists had coaxed dozens of new substances from oil, so that many products the modern world was coming to depend on included oil or its derivatives as components: paints, insecticides, fabrics, inks, even soap and hair conditioners--and of course, most commonplace of all, virtually anything made of plastic, from toys to phones.

The Seven Sisters

It was in this now oil-dependent world that OPEC's founding countries--Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela--met 50 years ago to try to gain some control over the price of crude oil (oil that's been extracted from the ground but not yet refined into gasoline or other products) and keep more of the revenue for themselves.

Until then, the oil industry had been dominated by seven big companies--four American, three European--some with names that still echo today: Standard Oil, Texaco, Royal Dutch Shell. The "Seven Sisters," as they were known, had been in the oil business a long time and were shrewd operators.

The first oil discovery in the Middle East--which has proved to have Earth's greatest oil riches--was made by the British in Persia (now Iran) in 1908. Saudi Arabia, today the world's top oil producer, was a poor desert kingdom when Standard Oil of California found oil there in 1938.

Many of the oil nations had little money and even less knowledge of the world. Their governments had granted rights to the Seven Sisters to drill for oil in return for payments that could be reduced at the whim of the oil companies.

The oil-producing...