OPEC and the evolution of the petrodollar system

OPEC, founded on September 14, 1960, by Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela, was established to protect the interests of oil-producing nations against international oil companies. While the organization once held significant market power, including during the 1973 oil embargo, its global production market share has declined from over 50% in the 1970s to approximately 33% to 35% in recent years.

The dominance of the petrodollar system, established in 1974 through diplomatic efforts by Henry Kissinger, has faced evolving challenges. While the share of oil traded in US dollars has decreased from nearly 100% in the 1970s to roughly 80% recently, high oil prices continue to support dollar demand.

Geopolitical tensions in the Middle East, particularly between the United States and Iran, influence global energy dynamics. Despite military and political friction, high oil prices serve strategic interests for both nations: stimulating US shale production and providing a financial lifeline for Iran amidst sanctions.