Nick Fountain

That's the whole point of OPEC.

And the tactic OPEC eventually figures out comes from the lesson of the Arab oil embargo.

You can control prices by controlling supply.

So that is what the OPEC countries started doing, all together as a bloc.

Production quotas.

And if this sounds like a cartel to you, colluding to set production quotas in order to control prices, I agree.

Is it a cartel?

Come on.

Ibrahim says they were trying to manage supply, not set the price.

Each member country was selling their oil on the open market.

But regardless, starting in the early 80s, every OPEC member agreed to a quota, a limit to the amount of oil they pumped out of the ground.

Except Saudi Arabia.

Swinging producer, a.k.a.

the swing producer.

And this is really important.

Having a swing producer, one member who's not strictly following quotas, is a way to finesse the smoothing OPEC was trying to do.

Basically, if oil prices rise or drop, a swing producer can quickly ramp up or ramp down production to keep the oil price and market steady.

And Saudi Arabia was the obvious candidate to be the swing producer because they have an ungodly amount of oil.

You can just kind of tap the Saudi desert floor a few times and oil gushes out.

So in 1983, they agreed to smooth oil prices for the OPEC countries by swinging their production, adjusting their output to keep prices steady.