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

by Daniel Yergin

Libya was a very poor country, plagued by droughts and locusts. Its economic prospects could hardly be called promising; in the years after World War II, its leading exports were two: esparto, a type of grass used to make paper for currency bills, and scrap metal scavenged from the rusting tanks and trucks and weaponry that had been left behind by the Axis and Allied Armies. But by the middle 1950s, there was growing suspicion among geologists that the country might produce oil. To encourage exploration and development, the Libyan Petroleum Law of 1955 provided for a host of much smaller concessions, instead of the very large concession areas characteristic of the Persian Gulf countries. “I did not want Libya to begin as Iraq or as Saudi Arabia or as Kuwait,” explained the Libyan petroleum minister who oversaw the law. “I didn’t want my country to be in the hands of one oil company.” Libya would give many of the concessions to independent companies, which did not have oil production and concessions to protect in other countries in the Eastern Hemisphere, and thus would have no reason to hold back from exploring and producing as much, and as rapidly, as they could in Libya. The law offered another incentive. The government’s take would be pegged to the actual market price for its oil, which was lower than the increasingly fictional posted price. This meant that Libyan oil would be more profitable than oil from other countries, which was an excellent reason for any company t...