The Prize: The Epic Quest for Oil, Money, and Power

The Prize (1991; ISBN 0671502484) is Daniel Yergin's 800-page history of the global oil industry from the 1850s through 1990. The Prize benefited from extraordinary timing: published in October 1990, two months after the invasion of Kuwait ordered by Saddam Hussein and three months before the U.S.-led coalition unleashed the Gulf War to oust Iraqi troops from that country, the book's theme of the historical centrality of what its subtitle calls "the epic quest for oil, money, and power" was in tune with the zeitgeist; the book became a number-one bestseller in the United States and won a Pulitzer Prize. The Prize has been called the "definitive" history of the oil industry, even its "bible" (Matthew Yeomans, Oil: Anatomy of an Industry [New York & London: New Press, 2004], ISBN 1565848853, p. 220); some critics, though, consider the book too sympathetic to the perspective of the oil industry, of which the author is, in a way, a part.

Popular success

Now out of print in hardcover, The Prize was published in a paperback edition in December 1992 (according to Barnes and Noble) or January 1993 (according to Amazon.com) (ISBN 0671799320) that remains in print. The Prize is often cited as essential background reading for students of the history of petroleum. Prof. Joseph R. Rudolph Jr. said in Library Journal, for example, that The Prize, "written by one of the foremost U.S. authorities on energy, . . . is a major work in the field, replete with enough insight to satisfy the scholar and sufficient concern with the drama and colorful personalities in the history of oil to capture the interest of the general public. Though lengthy, the book never drags in developing its themes: the relationship of oil to the rise of modern capitalism; the intertwining relations between oil, politics, and international power; and the relationship between oil and society in what Yergin calls today's age of 'Hydrocarbon Man.'"

In 1992 The Prize won a Pulitzer Prize in the category "General Non-Fiction." It has been translated into thirteen languages.

The Prize was the basis for an eight-hour documentary television series co-produced by PBS and BBC in 1992, narrated by Donald Sutherland. The series was said to have been seen by 20 million people in the United States.

The Prize brought considerable celebrity to the author. In early 2005, his speaker's fee exceeded $40,000.

Sources

Seven years in the making, The Prize draws on extensive research carried out by the author and his staff, including Sue Lena Thompsen, Robert Laubacher, and Geoffrey Lumsden. Daniel Yergin has excellent connections with the oil industry, and is the president of Cambridge Energy Research Associates (a private consulting firm providing analysis of oil and other energy markets as well as strategic planning), Global Energy Analyst for NBC and CNBC, member of the board of the United States Energy Association and of the U.S.-Russian Business Council. Yergin's history has 61 pages of notes and a bibliography of 26 pages that lists as sources not only 700 books, articles, and dissertations, 60 government documents, 28 "data sources," more than 34 manuscript collections, fifteen government archives, eight oral histories, and four oil company archives (Amoco, Chevron, Gulf, and Shell International), but also 80 personal interviews with key individuals like James Schlesinger and Armand Hammer. These interviews are often the source of striking anecdotes and make the volume what may be considered in some ways as an "inside" history of the oil industry.

Themes

A fundamental theme of The Prize is the transition of oil from a commercial commodity to a strategic resource central to states engaged in national security planning. The title of the book is taken from a passage from the first volume of Winston Churchill's World Crisis (1923), describing the "great gamble" of the British Admiralty in April 1912 in deciding to convert the British fleet to oil in the absence of an assured supply. The consequence: "If we required it we must carry it by sea in peace and war from distant countries . . . Mastery itself was the prize of the venture." (Churchill, World Crisis, vol. 1 [1923]) 155-56). Yergin recounts this event both in the book's prologue and in Chapter 8, entitled "The Fateful Plunge."

The Prize is divided into five parts whose titles indicate the work's basic themes:

• "The Founders" — John D. Rockefeller, Ludwig Nobel, Marcus Samuel, Henri Deterding, and William Knox D'Arcy.
• "The Global Struggle" — World War I through the great Arabian oil concessions of the 1930s.
• "War and Strategy" — World War II (1931-1945).
• "The Hydrocarbon Age" — the expansion of oil production and consumption from 1945 to 1972.
• "The Battle for World Mastery" — the exertion of "oil power" by exporting companies, "oil shocks".

Detailed synopsis

Prologue

After the Agadir crisis (1911), Churchill converts British fleet to oil, because "Mastery itself was the prize" (11-12). Three themes: (1) "the rise and development of capitalism and modern business" (13); (2) "oil as a commodity intimately intertwined with national stratagems of global politics and power" (13); (3) how ours has become a 'Hydrocarbon Society' and we . . . 'Hydrocarbon Man' (14). Rising scrutiny, criticism, and opposition (15).

Part I: The Founders

Ch. 1: Oil on the Brain: The Beginning

April 16, 1855: Yale's Benjamin Silliman Jr.'s report on "rock oil" for investors led by George Bissel (19-22). Kerosene as illuminating fuel and lubricant (22-24). The Vienna lamp (24-25). Bissel has Edwin Drake drill for oil in Titusville, Pennsylvania; strikes oil on August 27, 1859 (25-29). Boom and bust in the Oil Regions (29-33). The "rule of capture" (32). Pipelines (33). Oil exchanges (33-34).

Ch. 2: "Our Plan": John D. Rockefeller and the Combination of American Oil

John D. Rockefeller (1839-1937) sole owner of Cleveland trading firm, 1865 (35-36). Joined by Henry Flagler (38). Rebates, drawbacks (39). Standard Oil founded, 1870 (40). Conceives of "our plan": to consolidate all oil refining (40). Success in 1870s "Oil War": Standard Oil controls 90% of U.S. refining capacity in 1879 (41-43). Tidewater Pipeline challenge turned back, 1879 (43). Public outrage; legal challenges (43-44). The trust, 1882 (45). Management by committee (45-47). Rockefeller the man (47-50). The oil industry in the 1880s (50-51). Discovery of oil in Ohio c. 1885 leads Rockefeller to acquire oilfields and become an oil "producer" (52-53). Rockefeller ends "the era of the oil exchanges," 1895 (53-54). "Rockefeller created the vertically integrated petroleum company" (54). Rationalizer of industry or predatory Octopus? (54-55).

Ch. 3: Competitive Commerce

Importance of global markets (56-57). Ludwig Nobel becomes "Oil King of Baku" in 1870s (58-60). Rothschilds (Alphonse & Edmond) get into Russian oil in late 1870s, found "Bnito," 1886 (60-61). Standard Oil sets up Anglo-American Oil Company, its first foreign affiliate, 1888 (62). Rothschilds contact Marcus Samuel through Fred Lane, late 1880s (63-65). With 9-year exclusive rights to Bnito kerosene (1891-1900), Samuel organizes oil tankers, secures canal access, and builds local storage capacity throughout Far East, undercutting Standard Oil (65-70). Predecessor of Shell, Tank Syndicate, organized, 1893 (70). Rockefeller & Samuel brothers contrasted (70-71). Efforts to settle the Oil Wars among Standard, the Rothschilds, the Nobels, and the other Russian producers fail, 1892-1895 (71-72). Royal Dutch founded to exploit oil from Sumatra, 1890 (73-75). Other companies' efforts to gain control of Royal Dutch (75-77).

Ch. 4: The New Century

Electric generation and automobile reshape oil markets, 1882-1905 (78-80). Pure Oil becomes small but genuine U.S. competitor to Standard Oil, 1895 (80-81). California fields exploited 1890s-1910, Union Oil (Unocal) dominant there (81-82). Oil found in Texas, 1893 (83). Spindletop gusher (January 10, 1901) sets off Texas oil boom (82-86). Marcus Samuel's Shell contracts for half of Spindletop's production for 20 years, develops fuel oil; more oil in Louisiana and Oklahoma (86-87). Creation of Mellons' Gulf Oil, 1902-1907 (88-92). Pews establish Sun Oil, early 1900s (92). "Buckskin Joe" Cullinan starts Texaco (93-95). Standard Oil's dominance recedes (95).

Ch. 5: The Dragon Slain

Public sees Standard Oil as nefarious (96). Legal attacks by states lead to reorganizations: Standard Oil Interests, 1892; Standard Oil of New Jersey, 1899 (97-98). John D. Archibold takes over leadership of Standard Oil, 1897 (98-100). Muckrakers interested in trust issue (100-01). Ida Tarbell's The History of the Standard Oil Company (1904), first published in 24 issues of McClure's (101-06). Theodore Roosevelt takes up trust issue (106-07). U.S. sues Standard Oil, 1906; Supreme Court orders breakup, May 1911 (108-09). Seven entities (110). Standard of Indiana's William Burton devises thermal cracking, increasing gasoline yields (111-12). Breakup enriches Rockefeller and other shareholders (113).

Ch. 6: The Oil Wars: The Rise of Royal Dutch & the Fall of Imperial Russia

Mark Abrahams finds oil in Borneo for Marcus Samuel, 1897-98 (114-16). Oil's future = source of power (116). Shell formed, 1897 (117). Oil market tumbles, 1900 (117). Oil strike in Perlak saves Royal Dutch, 1899 (118). Royal Dutch (under Henri Deterding), Shell (Marcus Samuel), and Rothschilds combine in Asiatic Petroleum Company, 1902 (119-23). Royal Dutch takes precedence, 1907 (123-27). Sends Abrahams to Oklahoma to establish American presence, 1912 (128). Turmoil and revolution in Russia; Stalin emerges (129-31). Romanian oilfields (132). Rothschilds sell out for shares in Royal Dutch & Shell (132-33). Baku as "prize" in future conflicts (133).

Ch. 7: "Beer and Skittles" in Persia

William Knox D'Arcy wins 60-year oil concession in Persia (134-38). Shia as factor (138-39). Despite Thomas Boverton Redwood's help, British Admiralty loan refused, 1903 (139-40). The Concession Syndicate: British Admiralty brokers rescue of D'Arcy by Burmah Oil (140-42). 1906 revolution in Persia (145) and its 1907 division into Russian and British spheres of influence precede 1908 oil gushers at Masjid-i-Suleiman (142-47). Resulting Anglo-Persian Oil Company goes public in 1909, but exhausts capital by 1912 (148-49).

Ch. 8: The Fateful Plunge

Lord Fisher urges conversion of fleet from Welsh coal to fuel oil, 1904 (150-51). Anglo-German naval race begins, 1897 (152-53). After Agadir, galvanized Churchill becomes First Lord of the Admiralty, 1911 (153-55). April 1912: Churchill's "great gamble": commits to oil with no assured supply: "If we required it we must carry it by sea in peace and war from distant countries . . . Mastery itself was the prize of the venture" (Churchill, World Crisis, vol. 1 [1923]) (155-56). Fisher leads Royal Commission, 1912-13 (156-57). Charles Greenway fashions Anglo-Persian (158-59). June 17, 1914: Parliament votes 254-18 to become majority shareholder in Anglo-Persian: "Oil, for the first time . . . had become an instrument of national policy" (158-63). August 1914: World War I begins (164).

Part II: The Global Struggle

Ch. 9: The Blood of Victory: World War I

Oil and WWI (167-68). Gen. Joseph Gallieni's taxi armada, Sept. 6-7, 1914 (168-70). Tanks and other motorized vehicles decisive in defeating Germany (170-71). Great spur to aviation (171-72). Churchill and Fisher proved "generally right" on converting fleet to oil (172-73). Contested relationship between Anglo-Persian and Shell; Marcus Samuel's British patriotism (173-76). In response to oil dearth brought on by German submarine attacks, U.S. assistance and formation of Inter-Allied Petroleum Conference (176-77). U.S. oil and coal supply squeezed (178-79). Col. "Empire Jack" Norton-Griffiths destroys Romanian oil industry, 1916 (179-82). German attempt to seize Baku frustrated (182). Allied victory attributed to oil (183).

Ch. 10: Opening the Door on the Middle East: The Turkish Petroleum Company

Political power moves from periphery to the center of the struggle for oil, 1918 (184-85). Mesopotamia (185; also 173). Calouste Gulbenkian and the Turkish Petroleum Company (185-88). Sykes-Picot Agreement (188). Wilson's Fourteen Points (188-89). Balfour willing to feign respect for them (189). Disputed Clemenceau-Lloyd George agreement, December 1, 1918 (189). San Remo Agreement: France gets 25% of Mesopotamian oil, gives up Mosul (189-90). Col. Ernest Mercier organizes a French oil company: Compagnie Française des Pétroles (190-91). Controversy over amalgamation of Royal Dutch/Shell and Anglo-Persian (191-92). Churchill brought in to advocate this as a means of "British control over a worldwide oil system," to no avail (192-94). British acquiescence to U.S. thrust into global oil quest, 1921 (194-96). Walter Teagle of Standard Oil of New Jersey, advocate of foreign oil production, leads U.S. consortium seeking entry to Middle East (196-200). Faisal, 3rd son of Hussein of Mecca, installed as king of Iraq, 1921 (200-01). New concession signed, 1925 (201-02). "'Oil friendships are very slippery,' [Calouste Gulbenkian] once said" (202). Gulbenkian, "business architect," resists renegotiation (202-03). Geological expedition in Iraq, 1925 (203). Drilling, 1927 (204). Baba Gurgur Number 1 gusher, October 15, 1927: 95,000b/day (204). "Full contract" signed, 1928: Royal Dutch/Shell, Anglo-Persian, CFP & Near East Development Co. (U.S. consortium) get 23.75% of oil; Gulbenkian, 5%, convertible to cash sale to French at market price (204). Red Line Agreement: in former 1914 Ottoman Empire, Turkish Petroleum Co. operations are cooperative (204-05).

Ch. 11: From Shortage to Surplus: The Age of Gasoline

Eisenhower on cross-country motor caravan, July-Sept. 1919 (207-08). "Automobile revolution," U.S. in lead (208-09). Gasoline retailing (209-11). Teapot Dome scandal, 1922-1931 (211-16). John D. Rockefeller Jr., defender of oil industry's "basic integrity," ousts "Col. Bob" Stewart (216-18). Technology and oil exploration (218-19). New discoveries: Signal Hill, California (219-20). Henry Doherty advocated "unitization" of oilfields (220-22). Federal Oil Conservation Board, 1925 (222-23). Oklahoma's Greater Seminole Field & West Texas's Yates Field; technological progress bolsters supply (223-24). U.S. oil tariff rejected, 1930 (224). Domestic competition increases with Humble Oil, Ohio Oil (Marathon), Phillips Petroleum (224-27). Wave of mergers and near-mergers (227-29)

Ch. 12: The Fight for New Production

Chance of 1901 delay in Laredo leads Sir Weetman Pearson (later Lord Cowdray) to found Mexican Eagle, which struck oil in 1910 (229-31). After Mexican Revolution, sells to Royal Dutch/Shell in 1918 (231-32). Dispute on nationalization and legal rights (232-33). Corrupt dictator, Juan Vicente Gómez, has Americans write Venezuela’s Petroleum law; Maracaibo strike, 1922 (233-36). Standard of New Jersey develops underwater drilling technology (236-37). Soviet Union nationalizes oil; Standard of Jersey buys Nobel interests (237-38). Leonid Krasin negotiates for USSR (238-40). Front Uni (240). Jersey-Shell agreement with Soviets falls through, to Teagle’s relief, 1927 (241-42). Vacuum & Standard of NY (Socony) buy Russian products; Deterding furious (242-43).

Ch. 13: The Flood

“Dad” Joiner’s surprising East Texas gusher, [[October 3, 1930 (244-46). Black Giant the largest U.S. field (246-47). Joiner signs away claims to H.L. Hunt (247-48). Oil glut brings crisis (248-49). Texas Gov. Ross Stirling declares “insurrection,” allows Texas Railroad Commission to issue proration orders (across-the-board cutbacks), Aug. 1931 (249-51). Crisis continues (251-52). Calls for govt. action grow as Roosevelt names Harold Ickes Secretary of the Interior and Oil Administrator (252-54). July 14, 1933: Roosevelt signs executive order to ban “hot oil” under Art. I, Sect. 8 interstate commerce clause (255). September 2, 1933: Ickes declares state production quotas ― prorationing overturns the rule of capture (256; see 32). The question of setting prices (256). Supreme Court overturns federal powers in 1935, but a voluntary system of federally suggested production quotas survives (256-57). Interstate Oil Compact, 1935 (257). Foreign oil tariff imposed, 1932; Venezuela most affected (257-58). Underlying assumptions of the new system: (1) inelasticity of demand for oil; (2) states have a “natural” share of the market (258-59).

Ch. 14: “Friends” ― and Enemies

Achnacarry Agreement|Achna (or “As-Is”) Agreement, 1928, leaves out too many players to succeed in cartelizing production and distribution (260-65). A series of “As-Is” agreements (1930, 1932, 1934) somewhat more effective, but ultimately collapse, 1938-1939 (265-68). Growing political pressures make oil companies’ insulation and protection from government intervention their “most important objective” in the late 1930s (268-69). Shah Reza Pahlavi of Persia forces renegotiation of Anglo-Persian’s oil concession, 1932-1933 (269-71). Article 27 of Mexican Constitution assigns “subsoil” resources to Mexican state (272). Gen. Lázaro Cárdenas, president of Mexico, 1934 (273). Disputes lead to March 18, 1938 Mexican expropriation (274-76). World political situation makes Britain’s response much stronger than U.S. govt.’s (276-77). Settlement of compensation claims in 1941 for $30m leaves U.S. companies feeling betrayed; Mexican Eagle/Shell hold our till 1947 for $130m; Petróleos Mexicanos (Pemex) establishes “a model for the future” (278-79).

Ch. 15: The Arabian Concessions: The World That Frank Holmes Made

Frank Holmes sets up Eastern & General Syndicate after WWI (280). Search for oil in Arabia regarded with skepticism (281). Gulf Oil takes up Kuwait, Socal (Standard Oil of California) takes up Bahrain concessions (282-83). May 31, 1932: oil struck in Bahrain (283). Ibn Saud’s creation of Saudi Arabia, 1902-1932 (283-86). Jack Philby, British renegade, advises Ibn Saud (286-88). Negotiating with Ibn Saud’s minister of finance, Abdullah Suleiman, Socal’s Lloyd Hamilton wins Saudi concession for £60,000 loan up front and a promise of a £100,000 loan on the discovery of oil (289-92). For £35,700 up front, in 1934 Sheik Ahmad of Kuwait signs 75-year concession to Kuwaiti Oil Company (50-50 Gulf [[[Andrew Mellon]] pressing from his position as U.S. ambassador to the United Kingdom] and Anglo-Persian (292-98). Socal forms Casoc (California-Arabian Standard Oil Company) to work in Saudi Arabia (298). With Texaco, Socal forms Caltex as joint venture to produce and market Saudi oil ― an arrangement worked out by Dillon, Reed’s James Forrestal and Paul Nitze (298-300). Oil struck in Kuwait, February 23, 1938 (300). Oil struck in Saudi Arabia, March 1938 (300). Casoc exercises secret preferential rights to further concessions in Saudi Arabia (300-01). Operations suspended during WWII (301). Later careers of Jack Philby and Frank Holmes (301-02).

Part III: War and Strategy

Ch. 16: Japan’s Road to War

Japan occupies Manchuria, 1931 (305). Ultranationalist militarists in power (306). Japan dependent on foreign oil, especially Rising Sun (Japanese affiliate of Royal Dutch/Shell) and Standard-Vacuum (Stanvac, an amalgam of Jersey and Standard of New York’s Far East operations) (307). 1934 Petroleum Industry Law squeezed companies (308). Japan attacks China, 1937; placates companies as U.S. public opinion sides with China (308-10). Stanvac resolved on embargo of Japan if U.S. so decides (310-11). U.S. moves fleet to Pearl Harbor and restricts (but does not stop) oil shipments to Japan, 1940 (311-13). Cordell Hull & Admiral Nomura converse repeatedly (313-14). Admiral Yamamoto sensitive to Japan’s oil predicament (314-16). Japan invades Indochina; U.S. effectively embargoes oil, July 1941 (316-19). P.M. Konoye-Roosevelt summit doesn’t come off (319-20). Japanese resolve on war (320-23). Operation Hawaii’s primary target is East Indian oilfields (325-26). Japanese err in failing to destroy 4,500,000 barrels (720,000 m³) of vulnerable U.S. oil supplies at Pearl Harbor (326-27).

Ch. 17: Germany’s Formula for War

I.G. Farben’s research on synthetic fuels (1913 Bergius process of hydrogenation) leads to an alliance with Standard of Jersey (328-31). Nazified I.G. Farben’s synthetic fuels produce 46% of Germany’s oil in 1940 (332-33). Blitzkrieg and oil scarcity (333-34). Oil and Hitler’s invasion of Russia (334-36). Operation Blau, to seize oil of the Caucasus: ironically, “the Germans ran short of oil in their quest for oil”; “the blitzkrieg phase was over” (336-39). Rommel’s contempt for “the quartermaster’s advice" controverted by failure in North Africa (339-43). Speer’s reorganized German economy depends on synthetic fuels made by slave labor, e.g. at Auschwitz (343-46; 817). Beginning in May 1944, Allied air attacks on synthetic fuel plants and other oil facilities are a “fatal blow” (Gen. Adolph Galland) (346-48). Battle of the Bulge: Col. Jochem Peiper’s panzer unit almost seizes Stavelot fuel supply’s 2.5m gallons of fuel (348-49). No fuel left in war’s last months (349-50).

Ch. 18: Japan’s Achilles’ Heel

Jan. 20, 1942: Shell manager H.C. Jansen destroys Balikpapan (Borneo) oil-refining center (351-54). MacArthur & Nimitz (355). Strategy: safeguard supply lines and block “Japan’s indispensable ‘oil line’” (355). U.S. victories at Midway and Guadalcanal, but Japanese succeed in gaining oil supply (355-57). Submarine warfare decisive against Japanese shipping; synthetic fuel effort fails (357-58). Fuel shortages impact Japanese conduct of war (359-62). Yamato sinking on April 7, 1945 is “the end of the Imperial Navy” (362-63). Final desperate moves: pine root campaign; overtures to Soviets; national suicide (363-66). MacArthur’s motorcade and Tojo’s ambulance (366-67).

Ch. 19: The Allies’ War

Britain rejects synthetic fuel strategy, 1937 (368-69). Deterding’s pro-Nazi positions lead to fears for Royal Dutch/Shell (369-70). In U.K., monopolistic Petroleum Board operates as “Pool” during war (370-71). Ickes chosen to manage U.S. oil, chooses Ralph Davies as deputy (371-72). 1941 German U-boat campaign nearly cuts off British oil supply (373). Crucial Battle of the Atlantic finally defeats U-boats with cryptanalysis, radar, and long-range aircraft, mid-1943 (373-77). Ickes successfully manages U.S. oil as Petroleum Administrator for War (PAW) (377-79). Rationing; distribution (379-81). Innovation as factor in WWII, “a war of motion”: jerrycans, 100-octane gasoline plants (382-84). Shortage of fuel keeps Patton from delivering fatal blow in W. Europe in late August 1944, many think (384-88).

Part IV: The Hydrocarbon Age

Ch. 20: The New Center of Gravity

Everette Lee DeGolyer’s late 1943 mission to Saudi Arabia concludes: “The oil in this region is the greatest single prize in all history” (words of someone named Leavall) (391-93). U.S. policymakers focus on Mideast oil (395-96). 1943-1944: U.S. contemplates owning Mideast oil and pipeline businesses (396-99). Anglo-American tensions in 1943-1944 over Mideast oil (399-402). Anglo-American Petroleum Agreement (1944) fails due to Senate opposition (402-03). February 13, 1945: Roosevelt talks with Ibn Saud for five hours aboard the USS Quincy on the Great Bitter Lake of the Suez Canal (403-05). After FDR’s death, attempts to revive the Anglo-American Petroleum Agreement come to naught (405-08).

Ch. 21: The Postwar Petroleum Order

Rationing ends in U.S.; demand explodes, and in 1948 U.S. becomes a net importer of crude oil & products (409-10). March 12, 1947: Texaco, Socal (Harry Collier), Jersey & Socony create Trans-Arabian Pipeline (Tapline) to build pipeline from Persian Gulf to Mediterranean (410-16). Gulbenkian negotiates Group Agreement of November 1948, reconstituting the Iraq Petroleum Company (416-19). In Kuwait, Gulf signs long-term contract with Shell (419-20). September 1947: Anglo-Iranian signs 20-year contract with Jersey and Socony to sell Iranian crude (420-22). Marshall Plan funds and facilitates Europe’s conversion to Mideast oil dependency (422-25). Israel founded despite Ibn Saud’s opposition (425-26). Tapline complete, 1950 (426-27). Oil critical to domestic comfort, national power, and strategic defense; U.S.-Saudi relationship “a unique new relationship” (427-28). Cheap imported crude kills energy independence projects (428-29). Technological progress: deep drilling, off-shore drilling (429). Natural gas pipelines (429-30).

Ch. 22: Fifty-Fifty: The New Deal in Oil

Ricardo’s concept of “rents” applied to oil; competing claims to them (431-33). Jersey’s Walter Pratt embraces change in Venezuela: with Arthur Proudfit at helm in Venezuela, an agreement “based on the new principle of ‘fifty-fifty’” reached in 1943, then renegotiated after 1945 leftist coup; Venezuela takes some royalties in oil; new coup in 1948 (433-37). In the Neutral Zone between Kuwait and Saudi Arabia, Ralph Davies’s Aminoil and J. Paul Getty’s Pacific Western get 50% of concessions (437-42). Oil struck in March 1953 (442-43). Getty’s deal, which makes him America’s richest man, riles established companies (443-44). With U.S. supporting “foreign tax credit” deduction, companies accept renegotiation of agreement with Saudis based on 50-50 principle (445-48). Varying perspectives on significance of this “revolution” (448-49).

Ch. 23: “Old Mossy” and the Struggle for Iran

Mohammed Reza Pahlavi takes deposed father’s throne in Iran, 1941 (450-51). Iranian hatred of British (451-52). Under pressure, Sir William Fraser’s Anglo-Iranian tries to renegotiate agreement, but Iran under Mossadegh nationalizes oil industry (452-56). Portrait of Mossadegh as sly lunatic (456-58). Plan Y, for British military intervention (458). Dean Acheson sends Averill Harriman to negotiate; British send Richard Stokes; Mossadegh intractable (459-62). British abandon Abadan refinery, October 4, 1951 (462-63). Attempts at settlement unavailing; Mossadegh grows demagogic (463-67). Operation Ajax overthrows Mossadegh, described as a “countercoup,” August 1953 (467-70). U.S. govt. prods American companies to come to the rescue in Iran (470-71). Justice Dept. pursues criminal case with 1949 analysis entitled The International Petroleum Cartel, but Truman and Eisenhower reduced case to civil matter (472-75). Iranian consortium established: “The United States was now the major player in the oil, and the volatile politics, of the Middle East” (475-78)

Ch. 24: The Suez Crisis

Suez Canal (1869) becomes Anglo-French (1875); long a lifeline of empire, in 1948 its strategic significance shifts to being a highway of oil (479-80). Nasser causes “alarm” by buying weapons from Soviets and recognizing Communist China; Dulles cancels proposed Aswan Dam loan (480-82). July 26, 1956: Nasser seizes canal (483). [[Dwight David Eisenhower|Eisenhower’s] anticolonialism (484). French & British inclined to intervene, seeing Nasser as new Hitler (485-87). Standard receives recommendation of half-billion-dollar pipeline across Iraq to Mediterranean (488). Eisenhower warns Saudis that nuclear power may make Mideast oil worthless (488). Oct. 24, 1956: Secret British, French & Israeli war-planning meeting (489). Oct. 29: Israel attacks; Oct. 31: British bomb Egyptians (489). Eisenhower furious (490). British-French airborne assault on Nov. 5, 1956, one day after the USSR suppresses Hungarian uprising; crises risk combining (491). Eisenhower refuses to supply Europe with oil until troops withdraw, end of Nov. (491-93). But Dulles privately reproaches Britain for not ousting Nasser (493). Oil Lift to Europe and “sugarbowl” distribution (493-94). Texas RR Commission holds out for 35-cent price hike (494-95). Energy crisis in Europe averted; Nasser wins; British resume use of Suez Canal (495). Suez Crisis “an epitaph for a state of mind” (495-96). Successful Japanese manufacture of supertankers a response to Suez (496-97). U.S. & Britain heal rift (497-98).

Ch. 25: The Elephants

Elephant = large oilfield (499). Proven oil reserves grow from 62 billion barrels (10 km³) in 1948 to 534b in 1972 (500). Price cuts fuel nationalism (500-01). Enrico Mattei aspires to make ENI (formerly AGIP) into major oil company (501-03). Mattei coined term “Seven Sisters” (503). Mattei signs 1957 25%-75% deal with Shaw, breaking 50-50 principle ― but no oil is found (503-05). Japan obtains offshore concession to their Arabian Oil Co. from Saudi Arabia and Kuwait, also breaking 50-50 (505-07). Standard of Indiana signs 25-75 deal, 1958; finds oil in Darius field south of Kharg Island (507-08). Nasserite propaganda a factor in violent overthrow of Iraq’s Hashemite monarchy (508-09). Venezuela’s Juan Pablo Pérez Alfonso, after exile & study of oil industry, returns to power as Betancourt’s Minister of Mines and Hydrocarbons; he proposes an international cartel modeled on Texas RR Commission (510-13). Abdullah Tariki becomes Saudi oil director, 1955 (513-14). Oil abundance (incl. from Soviet Union) produces discounting, with oil companies absorbing costs; in 1959 British Petroleum cuts countries’ price, producing outrage (514-15). April 1959 Arab Oil Congress: journalist Wanda Jablonski brings together Tariki, Pérez Alfonso, & others to sign “Gentleman’s Agreement,” precursor of OPEC (516-18).

Ch. 26: OPEC and the Surge Pot

Jack Rathbone of Standard of Jersey cuts prices 7% on August 9, 1960 (519-22). September 1960: OPEC founded in Baghdad by 5 countries, source of 80% of world’s exports of crude (522-23). Weak organization (523-25). French BRP (Gabon) and RAP (Algeria) merged to form Elf (525-27). Oil in Nigeria, 1956 (527). Huge discoveries in Libya (527-29). Cutthroat competition results (529-30). [[Enrico Mattei|Mattei}} dies in plane crash, Oct. 27, 1962 (530-31). Explosion of “new internationals” leads to decline in profitability (531-32). Saudi-Iranian tensions (532-35). Pressure for import restrictions from domestic independents (535-37). Despite weakness of “national security” arguments, Eisenhower imposes mandatory quotas, March 10, 1959 (537-38). Despite their byzantine nature, quotas succeed in protecting domestic oil production and in stabilizing price of U.S. crude around $2.90/barrel in the 1960s (538-40).

Ch. 27: Hydrocarbon Man

Global oil consumption increased 5.5 times from 1949 to 1972, fueling economic boom (541-42). Oil’s predominance replaces coal’s in U.S., Europe, and Japan (543-46). Conoco becomes a significant international oil company (547-48). Competition spurs extravagant advertising claims (548-50). Suburbanization and transformation of American consumers’ lives (550-52). N.J. Turnpike, highway lobby, and Interstate Highway system (552-54). Six-Day War; Arab oil embargo fails (554-58). E.F. Schumacher, economist advising British Coal Board from 1950 to 1970, warns against dependence on oil (558-60).

Part V: The Battle for World Mastery

Ch. 28: The Hinge Years: Countries versus Companies

Shah’s celebration of 2500th anniversary of founding of Persian Empire, and relations with Britain (563-64). January 1968: Britain announces end to defense commitments east of Suez; leaves, November 1971 (565-66). 1970: U.S. production peaks, surplus capacity wanes (567-68). Environmental consciousness (568-69). December 26, 1967: Prudhoe Bay strike, largest oilfield in North America; ARCO, Jersey, & BP (569-72). Trans-Alaskan pipeline (572-74). Armand Hammer parlays USSR-made fortune into Occidental Petroleum’s becoming the sixth-largest oil-producing company in the world, thanks to Libya’s Idris field, 1966 (574-77). Qaddafi’s 1969 coup in Libya leads to Occidental’s renegotiation, “decisively” changing the balance of power between producing countries and oil companies (577-80). Oil companies’ efforts to form common front fail; Tehran, then Tripoli, agreements (1971) give OPEC “muscles” (580-83). Concept of “participation” develops as alternative to nationalization (583-85). National Iranian Oil Co. recognized as operator as well as owner (585). Excess production capacity in 1973 only one percent; cheap oil as spur to growth cannot be sustained (585-86). U.S. diplomat James Placke’s ignored 1970 memo (586-87).

Ch. 29: The Oil Weapon

With demand growing and supply tightening, there is talk of an “energy crisis” in the early 1970s; Nixon abolishes quotas in April 1973 (588-90). Pressure for a new basis for agreements and warnings from U.S. experts, but no consensus on need for action (590-92). Egypt’s Sadat resolves on war, late 1972 & early 1973 (592-93). Saudi Arabia’s King Faisal agrees to back Egypt with the “oil weapon” (593-97). Oil importers feel pressure (598-99). October War begins as OPEC delegates arrive in Vienna to negotiate; oil companies refuse demands (599-602). October War brings U.S. airlift to resupply Israel (603-05). Oct. 16, Kuwait City: Arab Gulf OPEC nations raise price 70% (605-06). Oct. 17: Arab oil ministers announce progressive production cuts (606-08). Oct. 19: Nixon aid package for Israel (608). Oct. 20: Arab oil embargo (608-09). Watergate as factor (609-10). Conspiracy theories (610-11). Oct. 25: U.S. nuclear alert to discourage Soviet intervention (611-12). Oct. 26: ceasefire holds (612).

Ch. 30: Bidding for Our Life

Lack of U.S. spare production capacity gives Arab oil embargo bite (613-15). The age of shortage; Schumacher as prophet (615-16). Gas lines (616-17). Nixon appoints William Simon energy czar, resists rationing (617-19). Political pressure on companies; “equal suffering” and “fair share” principles produce “diversion” (619-25). Shah argues for new conceptual basis for oil prices (cost of alternative energy) and wins agreement in Dec. 1973 to $11.65/barrel price (625-26). Political efforts to respond to embargo; Kissinger’s shuttle diplomacy (626-29). February 1974 energy conference in Washington gives birth to the International Energy Agency (629-30). Sadat overcomes Assad’s reluctance and on March 18, 1974 Arab oil ministers agree to lift embargo (631-32).

Ch. 31: OPEC’s Imperium

In the mid-1970s OPEC causes shift in economic & political power (633-34). “OPEC tax” redistributes world income; poorest countries hurt worst (634-36). OPEC an “unruly oligopoly” (Raymond Vernon) at this time, not a cartel (636). Ahmed Zaki Yamani, Saudi oil minister (639-42). Iran wants higher oil price, resisted by Saudi Arabia; U.S. seeks stability; Shah accedes, 1977 (642-46). Demise of oil concessions begins in March 1975 when Kuwait takes over 100% of the Kuwaiti Oil Company (646-48). 1976 nationalization of Venezuela’s oil industry, “moderate and pragmatic” PDVSA created as state holding company owning several operating companies (648-50). 1976 agreement on Saudi takeover of Aramco (651-52). “Production-sharing” contracts replace concessions (652).

Ch. 32: The Adjustment

Industrial nations seek to change “objective conditions”: demand & supply, oil dependency (653-54). Japanese oil conservation (654-55). French nuclear power, coal, and conservation, with advertising restrictions (655-56). Sen. Scoop Jackson’s attack on oil companies’ “obscene profits” (656-58). Calls for “divestiture” (breaking up oil companies) (658). The question of oil company profits (658-59). Nixon keeps price controls on oil (659-60). Alaskan oil pipeline approved; fuel-efficiency standards approved (660-61). Carter chooses James Schlesinger to devise energy planl; National Energy Act; public skeptical (661-64). Boom time for exploration, now redirected to industrialized countries; diversification due to fears of “geological depletion” (664-65). Alaskan pipeline completed, 1977 (665-66). With Tabasco oil & López Portillo’s new economic strategy, Mexico quadruples oil output, 1972-1980 (666-67). North Sea oil for Norway (1969) and Britain (1970) (667-70). Oil price forecasting and the “Iron Law” linking economic growth and oil consumption (670-72).

Ch. 33: The Second Shock: The Great Panic

Iran’s social problems (674-75). Ayatollah Khomeini leads fundamentalist Islamic opposition (675-78). Fall 1978: oil exports reduced (678-79). Vacillation in Washington (679-80). Oil stopped Christmas Day (680-81). Shah leaves Iran, Jan. 16, 1979 (682). Regime collapses, Feb. 1979 (683). Saga of Jeremy Gilbert, “the last Western oil man from the Fields, the great Iranian petroleum complex” (683-84). Panic: factors that drive down price from $13/barrel to $34 (685-87). Japan hit hard due to dependence on Iranian oil (688). New importance of spot markets (the “Rotterdam Market”) (688). Price gouging; “leapfrog” and “scramble” (689). Saudi moderation (689-90). Three Mile Island (691). Gas lines and criticism of Carter (691-96). Anarchy in the world oil market; Schlesinger quits cabinet with speech on “world crisis” (696-98).

Ch. 34: “We’re Going Down”

Iranian hostage crisis (699-701). Saudi unrest; Soviet invasion of Afghanistan (701). Carter Doctrine, Jan. 1980 (701-02). Prices reach new heights (702). OPEC in disarray (703-05). Failure of U.S. hostage rescue mission (705). Background to Iraq-Iran war: Shatt-al-Arab; Saddam Hussein (706-09). Iraq’s initial attack (710-11). After highest price ever, declining demand and restraint bring down prices (711-14).

Ch. 35: Just Another Commodity?

The “greatest boom”; Exxon buys into (1980), then abandons (1982), the Colony Shale Oil Project on the Western Slope (715-16). Collapse in demand, build-up of non-OPEC supply, and “Great Inventory Dump” produce oil glut and falling prices (717-18). OPEC sets production limits, becomes true cartel (718-19). OPEC cuts price from $34/barrel to $29 in Mar. 1983; Saudi Arabia as swing producer, balances market (720-21). Oil industry and companies “deintegrate”; decentralized commodity trading replaces integration as norm (721-24). West Texas Intermediate and the emergence of futures contracts in crude oil (724-26). Era of deregulation leads to aggressive restructuring of industry (726-27). T. Boone Pickens pioneers shareholders’ value-fueled acquisitions (727-30). Great financial crises averted: Mexico, Penn Square/Continental Illinois (730-32). Mukluk (Alaska), a dry hole (733). Getty Oil acquired by Texaco (734). Pickens initiates bidding on Gulf, first major to be purchased, by Chevron, for $13.2b cash in Mar. 1984 (734-40). Restructuring (740-41). Exxon spends $16b on share buyback (741). U.S. interferes with European purchase of Soviet natural gas, early 1980s (742-43). Excess oil capacity up to 20% of free world’s consumption ― oil “indeed just another commodity” (743-44).

Ch. 36: The Good Sweating: How Long Can It Go?

OPEC quota cheating (745-46). British National Oil Co. abolished (746). Saudis, frustrated, devise netbacks; price of oil collapses (747-50), produces Third Oil Shock (750-51). Consumers jubilant (752). George Bush (753-54). On Mideast trip, Bush defends U.S. oil industry, claims falling price threatens national security by making U.S. dependent on imported oil (755-58). Consensus forms for quotas to support $17-19/barrel price (758-61). Saudi oil minister Yamani fired after 24 years, Oct. 1986 (761-63). OPEC quota system (absent Iraq) holds; $15-18/barrel price range (763-64). U.S. reflags 11 Kuwaiti tankers, patrols Persian Gulf (765). Iran-Iraq War ends in stalemate, 1988 (766-67). Venezuelans, Saudis, & Kuwaitis acquire outlets (767). Priority of economics over politics? ― doubtful (768).

Epilogue

Epilogue. Complacency (769-70). Iraq’s invasion of Kuwait (770-73). Soviet oil industry (773-74). Preparations for crisis management (774-75). Oil companies less sovereign, now merely large bureaucracies (775-76). Limits of “oil power” (777). Environmental concerns (777-79). Three alternatives: (1) oil, gas, and coal; (2) nuclear; (3) conservation (780). Ours “the age of oil” (780-81).

Chronology; charts

Chronology. 1853-1990 (782-83).

Oil Prices & Production. 1861-1990 (785-86).

Notes & sources

Notes. 61pp. Oil basics (787-88). Of interest: Allan Nevins, Study in Power standard biographical sources for John D. Rockefeller (789). Mira Wilkins, The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914 (1970). “In 1919, David White, chief geologist of the United States Geological Survey, alarmed at ‘the widening angle between the flattening curve of production and the rising curve of consumption’ in the United States, fixed total recoverable reserves at 6.7 billion barrels [1 km³]” (801). Irvine H. Anderson, The Standard-Vacuum Oil Company and United States East Asian Policy, 1933-1941 (1975) is “a key source on the oil side” (812). Herbert Feis, The Road to Pearl Harbor: The Coming of War Between the United States and Japan (1966) “remains the classic diplomatic history” (812). Ronald H. Spector, Eagle Against the Sun: The American War with Japan (1985) “an excellent source on the Pacific War” (817). Long note on 1942 U.S. “rubber famine” (819-20). P.H. Frankel, Essentials of Petroleum: A Key to Oil Economics (new ed., 1969) “though written in 1946, remains essential to understanding the oil industry” (836). Documents from the U.S. Espionage Den, published by Iran.