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One June 28, 1914, eleven days after Parliament approved Churchill’s bill, Archduke Franz Ferdinand of Austria was assassinated at Sarajevo. It was not until August 10, 1914, that the Anglo-Persian Oil Convention would receive its Royal Assent. By then, the world had changed. Russia mobilized on July 30. On August 1, Germany declared war on Russia and mobilized its armies. At 11:00 P.M. on August 4, after Germany had ignored a final British ultimatum against violating Belgium’s neutrality, Churchill flashed a message to all of His Majesty’s ships: “COMMENCE HOSTILITIES AGAINST GERMANY.” The
Charles Greenway pursued a clear and determined strategy to transform Anglo-Persian from exclusively a crude producer into an integrated oil company—“to build up,” in his words, “an absolutely self-contained organization” that would sell products to “wherever there may be a profitable outlet for them without the intervention of any third parties.” In the midst of the world war, Greenway was positioning the company for postwar competition. His most important step was the purchase from the British government of one of the largest petroleum distribution networks in the United Kingdom, a company
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General Erich Ludendorff, who was the true mastermind of Germany’s war effort.
Those who challenged Norton-Griffiths or stood in his way were overwhelmed by the sheer force of his personality. If that proved insufficient, he would deliver a powerful kick or pull out his revolver and shout, “I don’t speak your blasted language.
No longer would the competition for new oil lands be primarily restricted to a battle among risk-taking entrepreneurs and aggressive businessmen. The Great War had made abundantly clear that petroleum had become an essential element in the strategy of nations; and the politicians and bureaucrats, though they had hardly been absent before, would now rush headlong into the center of the struggle,
the “Talleyrand of oil diplomacy” and scorned by others—an Armenian millionaire named Calouste Gulbenkian. It was Gulbenkian who had put the entire Turkish Petroleum Company deal together. Upon closer examination, it turned out that he was the silent owner of 30 percent of the Turkish National Bank, which made him a 15 percent owner of the Turkish Petroleum
In early 1918, to counter the powerful appeal of Bolshevism, Woodrow Wilson had come out with his idealistic Fourteen Points and a resounding call for the self-determination of nations and peoples after the war. His own Secretary of State, Robert Lansing, was appalled by the President’s broadside. The call for self-determination, Lansing was sure, would result in many deaths around the world. “A man, who is a leader of public thought, should beware of intemperate or undigested declarations,” he said. “He is responsible for the consequences.
San Remo Agreement: France would get 25 percent of the oil from Mesopotamia, which itself would become a British mandate under the League of Nations. The vehicle for oil development remained the Turkish Petroleum Company; and the French acquired what had been the German share in it, which had been seized by the British during the war. In turn, the French gave up their territorial claim to Mosul. Britain, for its part, made absolutely clear that any private company developing the Mesopotamian oil fields would very definitely be under its
Raymond Poincaré, who became premier in 1922, insisted that this new company be “entirely French” in terms of control. To that end, he turned in 1923 to an industrial magnate, Colonel Ernest Mercier. Mercier was well-qualified for the task. A Polytechnicien and a war hero who had been wounded trying to help protect the Rumanian oil fields from the advancing Germans, he was also a technocrat devoted to modernizing the French economy. He had already put together a modern electric industry in France. Now he would try to do the same for oil. The new company was to be called the Compagnie Française
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Congress passed the Mineral Leasing Act of 1920, which denied access to drilling rights on public lands to foreign interests whose governments denied similar access to Americans. It was aimed, specifically, at the Dutch in the East Indies and the British in Mesopotamia.
In 1917, at the age of thirty-nine, Teagle became president of Standard Oil of New Jersey.
Flush production—“too many straws in a tub”—damaged reservoirs, reducing the ultimate recoverable resource.
By 1930, within three years of opening its first station, Phillips had either built or acquired 6,750 retail outlets in twelve states.
In 1924, Shell came close to buying a production company called Belridge, well-situated on a prolific field of the same name near Bakersfield, California. The price was to be $8 million, but Shell decided it was too high and passed on the deal. Fifty-five years later, in 1979, Shell finally got around to buying Belridge—for $3.6 billion.
During World War I, Mexico became a critical source for the United States, and by 1920, it was meeting 20 percent of domestic American demand. By 1921, Mexico had, with rapidity, achieved an astonishing position: It was the second-largest oil producer in the world, with an annual output of 193 million
In October 1918, the last month of World War I, Cowdray was approached by Calouste Gulbenkian, on behalf of Henri Deterding. Royal Dutch/Shell, said Gulbenkian, would like to purchase a substantial part of the stock in Mexican Eagle and take over its management, and thus “leave Lord Cowdray with a perfect peace of mind.
Some of the oil companies, led by Edward Doheny, succeeded in whipping up strong sentiment in Washington for military intervention to protect “vital” American-owned oil reserves in Mexico. The battle was made even more complicated by the efforts of Mexico to raise revenues to pay off foreign loans on which it had defaulted. Leading American bankers were keen to see Mexico make good on its debts, for which it needed oil revenues. And thus they took Mexico’s side against the American oil companies and strongly opposed the companies’ call for intervention and punitive sanctions.
When Washington looked south toward Mexico, it saw instability, insecurity, banditry, anarchy, a dangerous threat to the flow of a strategic resource, and welshing on contracts. But when Mexico looked toward Washington and American oil companies, it saw foreign exploitation, humiliation, the violation of sovereignty, and the enormous weight, pressure, and power of “Yankee imperialism.
The La Rosa field, which had not appeared particularly promising at first, had been selected and staked out by the local Shell manager, George Reynolds. He was the very same George Reynolds—the “solid British oak”—who had resolutely guided Anglo-Persian’s project in Persia to its first discoveries a decade and a half earlier in the face of enormous obstacles, and then had been let go with nothing except a minuscule bonus. A decade and a half earlier, his persistence had opened up the Middle East to oil production. Now he had done the same for
“We have already several good seats and a very great part of the food on the Russian table,” he lectured Gulbenkian. “Dining is very much better in company with other people who have also got a very big interest in the dinner.”
HIS NAME WAS Columbus Joiner, though afterward he would be known as Dad Joiner, because he was the “daddy” of what happened.
With prices falling far below the cost of production and no cure in sight, fear and demoralization gripped the entire American petroleum industry—as Frederick Godber, a Shell director from London, discovered when he came to the United States in the late spring of 1931.
“There is no doubt about our absolute and complete dependence upon oil,” he said. “We have passed from the stone age, to bronze, to iron, to the industrial age, and now to an age of oil. Without oil, American civilization as we know it could not
In fact, fixing a price could well backfire, by providing a big incentive to overproduction. Price setting, when compared to the regulation of production, also looked to be more difficult, more complex, more public, and surely much more contentious.
Two working assumptions were central to the system. One was that the demand for oil would not be particularly responsive to price movements: That is, oil at ten cents a barrel would not mean a far greater demand than oil at a dollar a barrel. Demand could be taken as a given, and at least in the Depression, many found that a reasonable thing to think. The second assumption was that each state had its “natural” share of the market. If those shares changed dramatically, the overall system could be threatened. That was exactly what occurred in the late 1930s, when significant discoveries in
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Mergers, collaboration, cartels, marketing agreements, and associations were the various instruments for achieving those goals, and they constituted the pattern of international business in the 1920s and, even more so, in the 1930s, with the coming of the Depression.
The agreement explicitly excluded the domestic U.S. market, in order to avoid violating American antitrust
The setting was Mexico, and the focal point of dispute was paragraph 4 of Article 27 of the Mexican Constitution of 1917, the clause that declared that underground resources—the “subsoil,” as it was called—belonged not to those who owned the property above, but to the Mexican state.
Major Frank Holmes.
Socal was not only delighted and immediately receptive, but also retained him as one of its negotiators. Twitchell returned to Saudi Arabia in February 1933 in the company of Lloyd Hamilton, a lawyer for Socal, to initiate their negotiations with Ibn Saud’s minister of finance, Abdullah Suleiman. They were up against a cunning and masterly opponent. Suleiman was the brother of the King’s private secretary. A Nadji by birth—most of the other senior administrators were Syrians, Egyptians and Libyans—he had, as a young man, been an assistant to an Arab merchant in Bombay, where he had learned
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The local pearling trade had been Kuwait’s number-one industry and principal source of foreign earnings. Whether or not he knew the name, Sheikh Ahmad had good reason to be intensely annoyed with a Japanese noodle vendor from Miye prefecture, one Kokichi Mikimoto, who had become obsessed with oysters and pearls and had devoted many difficult years to developing the technique for cultivating pearls artificially. Eventually, Mikimoto’s efforts paid off, and by 1930, large volumes of Japanese cultured pearls were beginning to appear on the world’s jewelry markets, practically destroying the
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Socal and Texaco would pool all their assets “East of Suez,” with each having an equal interest in the new venture. Socal threw in its Bahrain and Saudi oil concessions, as well as a concession in the East Indies. The joint venture also took over Texaco’s widespread marketing system in Africa and Asia. The other companies may have had their Red Line; Socal and Texaco delineated their consolidated area by what they called the “Blue Line.” The California-Texas company, or Caltex, as their joint venture became known, would provide the vitally needed outlet both for Bahrain production and for any
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ON THE NIGHT of September 18, 1931, soldiers of the Japanese Imperial Army, based in the semi-autonomous Chinese province of Manchuria, carried out a bomb attack against the South Manchurian Railway. The actual evidence of the explosion was scant; only about thirty-one inches of track were affected, and damage was so negligible that a speeding express train passed over the spot a few minutes later with no difficulty. But this was by intention, for the Japanese controlled the railroad line; their aim was to keep damage to a minimum—and blame it on the Chinese. The Japanese Army now had the
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Japan bought 550 percent more 86 octane gasoline from the United States in the five months after the July 1940 proclamation than before.
The Naval Chief of Staff, Admiral Nagano, stepped in to the general’s aid. “Japan was like a patient suffering from a serious illness,” he said. “A quick decision had to be made one way or the other.” The Emperor tried to ascertain whether the senior advisers were in favor of diplomacy, first, or war, first. He could not get a clear answer. The next day, when the same question was raised again, the Chiefs of the Army and Navy General Staff remained silent. The Emperor expressed his regret that they had not seen fit to answer. He then drew a piece of paper out of his robe and read a poem by his
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In their attack on Pearl Harbor, two waves of Japanese aircraft succeeded in sinking, capsizing, or severely damaging eight battleships, three light cruisers, three destroyers, and four auxiliary craft. Hundreds of American planes were destroyed or damaged. And 2,335 American servicemen and 68 civilians were killed. All this added up to, perhaps, the most devastating shock in American history. The American aircraft carriers survived only because they happened to be out on missions at sea. The Japanese lost a total of only twenty-nine planes.
In 1913, the German chemist Friedrich Bergius first succeeded in extracting a liquid from coal in a process that became known as hydrogenation. Large amounts of hydrogen were added to coal under high temperatures and high pressure in the presence of a catalyst. The end product was a high-grade liquid fuel.
By September 1, 1939, when Germany invaded Poland, starting the Second World War in Europe, fourteen hydrogenation plants were in full operation, with six more under construction. By 1940, synthetic fuel output had increased drastically—72,000 barrels per day, accounting for 46 percent of total oil supply. But the synthetic fuels were even more significant when viewed in terms of military needs. Hydrogenation, the Bergius process, provided some 95 percent of Germany’s total aviation gasoline. Without those synthetic fuels, the Luftwaffe could not have taken to the air.
He hung a drawing of Rommel in his desert trailer, to help him think how Rommel would think.
The oil men noticed, with some technical curiosity, that when the smoke from the wharves that had been set on fire by gasoline converged with the smoke from those set aflame by kerosene and lubricating oil, the interaction ignited bursts of lightning in an otherwise clear midday sky.
The former was a static war; the latter, a war of motion. (It was Stalin who had offered a toast at a banquet in Churchill’s honor in the darkest days of the war: “This is a war of engines and octanes. I drink to the American auto industry and the American oil industry.”)
on June 6, 1944, D-Day, Allied forces hit the beaches of Normandy,
Three years earlier, in 1940, DeGolyer had made a speech on Middle East oil to a group in Texas. “No such galaxy of fields of the first magnitude over such a wide area has been developed previously in the history of the oil industry,” he said. “I will be rash enough to prophesy that the area we have been considering will be the most important oil producing region in the world within the next score of years.”
In 1940, the area including Iran, Iraq, and the entire Arabian Peninsula produced less than 5 percent of world oil, compared to 63 percent for the United States.
“conservation theory”—that the United States, and particularly the United States government, had to control and develop “extraterritorial” (foreign) oil reserves in order to reduce the drain on domestic supplies, conserve them for the future, and thus guarantee America’s security.
the Madison Case.
The wheelchair went back with Ibn Saud to Riyadh, where thereafter it would remain in the King’s private apartment to be shown off by Ibn Saud as a most valued memento, though it was too small to be used by a man of the King’s large
The artworks he had collected over his lifetime had come to compose the greatest collection ever assembled by a single person in modern times. He called them his “children,” and seemed to care more for them than for his actual son. But his masterpiece, the greatest achievement of his life, was the Iraq Petroleum Company.
An Anglo-Iranian executive (and later a chairman of the company) declared, “We have now succeeded in making the Agreement completely unintelligible to anybody.” But there was an advantage to such complexity, for, as one of Gulbenkian’s lawyers put it, “No one will ever be able to litigate about these documents because no one will be able to understand them.”
what became known as the Iranian Crisis of 1946 was the first major East-West confrontation of the Cold War.
