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

by Daniel Yergin

Rockefeller called “the Great Game”—the struggle to accomplish and build, and the drive to make money, both for its own sake and as a register of achievement. That game, played with new inventions and new techniques of organization, turned an agrarian republic, so recently torn by a bloody civil war, into the world’s greatest industrial power.

Rockefeller devoted himself to strengthening his business—by expanding facilities and striving to maintain and improve quality, and yet always controlling costs. He took the first steps toward integration, the process of bringing supply and distribution functions inside the organization, in order both to insulate the overall operation from the volatility of the market and to improve its competitive position.

Cooperation and combination, he had concluded, were necessary to minimize the risks in the uncertain world of capitalism.

“A friendship founded on business is better than a business founded on friendship.”

“It is not the business of the public to change our private contracts.”

The men around the lunch table at 26 Broadway were an unusually talented group. “These men are smarter than I am a great deal,” William Vanderbilt of the New York Central Railroad told the New York State Legislature. “They are very enterprising and smart men. I never came into contact with any class of men so smart and able as they are in their business.”11

He had resolved from the beginning of his business career to “expose as little surface as possible.” He was analytical and suspicious, and he kept his distance from people.

Such care in small things might seem penurious to some people, yet to him it was the working out of a life principle.”

Great attention was devoted both to the quality of the product and to the neatness and cleanliness of the operations, from refinery to the local distributor. The growth of the marketing system—down to the final consumer—was an imperative of the business.

“He instinctively realized that orderliness would only proceed from a centralized control of large aggregations of plant and capital, with the one aim of an orderly flow of products from the producer to the consumer. That orderly, economical, efficient flow was what we now, many years later, call ‘vertical integration.’ ”

Their rescue came from the French branch of a family that, among the wars and governments and industries it had bankrolled, had also already financed many of Europe’s new railroads. They owned a refinery at Fiume, on the Adriatic, and were interested in acquiring lower-priced Russian crude for it. They loaned the money to complete the railroad that Bunge and Palashkovsky had begun, acquiring in exchange for a package of mortgages on Russian oil facilities. They also arranged guaranteed shipments of Russian oil to Europe at attractive prices. They were the Rothschilds.

“It’s a lovely day for the race.” What race? “The human race,”

such was not the way to run a serious business. Rather, the aim should be to integrate—to control every stage of operations.

Yet Rockefeller recognized someone who grasped the fundamentals of the Oil Regions, a man totally dedicated to the business, who could be aggressive and ruthless, and yet was flexible and adaptable.

when it came to his own business, Rogers was a very tough man, with little sentimentality. It was he, after all, who had once made the classic statement to a commission investigating Standard Oil, “We are not in business for our health, but are out for the dollars.”

“You will go a long way in business if you train yourself to be able to appraise figures almost as rapidly and as shrewdly as a good judge of character can sum up his fellow-men.”

“By generally sniftering round wherever business could be done,” he was later to say, “and without this flair for sniftering, no man starting from the bottom can make money on a large scale—I discovered fresh avenues whereby additional financial grist rolled into the bank’s till.”

Together, Shell and Royal Dutch controlled over half of the Russian and Far Eastern oil exports.

That is the reason why prices have gone up, and not because evilly-disposed gentlemen of the Hebraic persuasion—I mean cosmopolitan gentlemen—have put their heads together in order to try and force prices up.”

“It was,” Churchill replied, the “attack on monopolies and trusts that did it.”

Even as the Germans sought equality, the British Navy was committed to maintaining naval supremacy, and oil offered a vital edge in terms of speed and flexibility. The deal assured the British government a large supply of oil. It provided Anglo-Persian with a much-needed infusion of new capital and a secure market. It spoke directly to the need for survival of Anglo-Persian, and indirectly, to that of the empire. Thus, by the summer of 1914, the British Navy was fully committed to oil and the British government had assumed the role of Anglo-Persian’s majority stockholder. Oil, for the first time, but certainly not the last, had become an instrument of national policy, a strategic commodity second to none.

It was rightly said after the war that the victory of the Allies over Germany was in some ways the victory of the truck over the locomotive.3

All of the belligerent states faced a parallel challenge—to harness the industrial economies that had emerged over the preceding half century to the requirements of modern warfare. In each country, the needs of mobilization expanded the role of the state in the economy and created new alliances between government and private business. The United States and the American oil industry were no exception.

Colonel John Norton-Griffiths,

“As oil had been the blood of war, so it would be the blood of the peace. At this hour, at the beginning of the peace, our civilian populations, our industries, our commerce, our farmers are all calling for more oil, always more oil, for more gasoline, always more gasoline.” Then he broke into English to drive home his point—“More oil, ever more oil!”

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, drawn into the competition by a common perception—that the postwar world would require ever-greater quantities of oil for economic prosperity and national power.

“Talleyrand of oil diplomacy”

Calouste Gulbenkian.

He was sent off to secondary school in Marseilles, to perfect his French, and then to King’s College, London, where he studied mining engineering and wrote a thesis on the technology of the new petroleum industry. He graduated in 1887, at the age of nineteen, with a first-class degree in engineering.

But he did master the arts of

the bazaar—trading and dealing, intrigue, baksheesh, and the acquisition of information that could be put to advantageous use. He also developed his lifelong passion for hard work, his capacity for vision, and his great skills as a negotiator. Whenever he could, he would control a situation. But when he could not, he would follow an old Arab proverb that he liked to quote, “The hand you dare not bite, kiss it.” In those early business years in Constantinople, he also cultivated his patience and perseverance, which some said were his greatest assets. He was not prone to budge. “It would have been easier,” someone later said, “to squeeze granite than Mr. Gulbenkian.”

Gulbenkian possessed one other quality. He was totally and completely untrusting. “I have never k...

Lloyd George and France’s new premier, Alexandre Millerand, hammered out the compromise 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 control. There was only one remaining question: Was there, in fact, any oil in Mesopotamia?

To be sure, there was no shortage of opposition to amalgamation, beginning on political grounds. Public hostility to “oil trusts” was not much less in Britain than in the United States. But the strongest opposition came from the Admiralty, which continued to be antagonistic to Shell. The Navy’s original rationale still remained; the government, as one official commented, “did not go into the Anglo-Persian Company to make money but to form an independent Company for national reasons.” The Admiralty had also become deeply attached to its right to obtain fuel oil from Anglo-Persian at a substantial discount from the going market price, especially as the Navy’s budgets were under constant threat of cutback. And, of course, Anglo-Persian itself vehemently opposed the amalgamation. Charles Greenway had not fought so hard to turn the enterprise into an integrated oil company in order for it to become merely an addendum to the hated Shell.

In Britain, where similar shortfalls were anticipated, Anglo-Persian was doing research on extracting liquid fuels from coal, and the British government had given over two acres in Dorset to the cultivation of Jerusalem artichokes in the hope that this plant could produce alcohol in commercial quantities to be used as automobile fuel.

Large price increases gave powerful support to the expectation of shortage.

Once, in order to settle a particularly acrimonious competitive situation in the Far East, Teagle spent two days shooting grouse with Deterding in Scotland—they were both excellent wing shots—two days playing poker, and then worked out the matter.

He was available, yes, friendly and hearty with reporters, and apparently candid and forthright. But what he said was also carefully controlled and calibrated. Still, it was a striking difference from the old regime.

He had left his wife installed among his art treasures—his “children,” as he called them—in the mansion he had built on avenue d’Iena in Paris. He himself alternated between suites at the Ritz in Paris or, in London, at the Ritz or the Carlton Hotel, attended by a succession of mistresses, at least one of whom at all times, on the basis of “medical advice,” had to be eighteen years or younger in order to rejuvenate his sexual vigor. He could be seen once or twice a day, taking his constitutional in the Bois de Boulogne or in Hyde Park, his limousine trailing behind him. The rest of the time he sought to keep out of sight, devoting himself to his worldwide business interests, keeping in constant contact by a stream of telephone calls and telegrams.

He was a pedofile, no wife, constantly bussy by the standarts of his time. He probably had a low self esteem too for he got so angry when he was called an oil merchant

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He was a masterful trader and a forceful, assertive businessman, with unbridled self-confidence, who would defer to no one, least of all his investors.

“Where he sat, there was the head of the table.” He simply insisted on getting his way.

Autocratic, commanding, and combative, he infused the company with an aggressiveness that made it into the nation’s number-one marketer of gasoline during the 1920s. “Colonel Bob,” as he was called, was among the most respected and admired leaders not only of the oil industry but of all of American business. Who could believe that someone so upstanding would stoop to besmear himself in the slush of Teapot Dome?

John D. Rockefeller, Jr., was a short, shy, serious, and reclusive man. He worshiped his father and had wholeheartedly imbibed his lessons about thrift. As a student at Brown University, the younger Rockefeller had surprised his college classmates by hemming his own dish towels. But, more than anything else, he had been rigorously and repeatedly schooled by his mother in “duty” and “responsibility” and concerned himself with probity. He found his own life’s vocation, independent of his father, in the systematic giving away of a significant part of the family fortune, though much would still, of course, be left over. He also involved himself in a wide variety of civic and social causes, once going so far as to chair an official investigation into prostitution, on behalf of the city of New York.

Doherty quickly also became an oil man. More than a bit eccentric, he was a prolific writer of success epigrams: “Never give orders—give instructions . . . . Make a game out of your work . . . . The greatest dividend in human life is happiness.” His favorite form of relaxation was driving a car through New York City traffic; fresh air was a great enthusiasm, and health an obsession.

The oil industry had confronted chronic imbalances of supply and demand since its very first days in the hills of western Pennsylvania, and it had responded with a drive toward consolidation and integration to assure and regulate supplies, gain access to markets, stabilize prices, and protect and expand profits. Consolidation had meant the acquisition of competitors and complementary companies. Integration meant the yoking together of some or all segments of the industry, upstream and downstream, from exploration and production at the wellhead to refining and retail sales. The great Standard Oil Trust had skillfully managed to integrate in both directions, only to be attacked and dissolved by the Supreme Court. But in the uncertain supply and demand climate of the 1920s, the same old strategies among the once-cozy Standard Oil successor companies, as well as among other companies, reemerged, turning them into vigorous competitors. There was also a new dimension in the competition. Oil companies were becoming marketers, for the first time selling automotive fuel at retail, directly to motorists, at the brand-name stations that were springing up all across the American landscape. Oil wars were not only being fought for supply and markets in foreign lands, but were also erupting in an equally fierce struggle for markets on the main streets of America. And, in its efforts to court consumers, as well as in its inherent propensity toward consolidation and integration, the Americ...

But in the 1920s, they began invading one another’s territories and challenging one another’s businesses. Atlantic Refining entered the established markets of both Standard of New Jersey and of New York—in the words of its 1924 annual report, “as a matter of protection, rather than of desire.”

“Of all the grasping individuals I have ever met,” he wrote to the president of one of Shell’s American subsidiaries, “the American bankers . . . absolutely take the cake.”

“If a man has ever gotten a dirtier deal from an Industry than I have gotten from the Oil Industry, I would certainly like to meet him,” he wrote in 1929. “I often wish to God I had never gone into the oil business and more often I wish that I had never tried to bring about reforms in the oil business.”

The “Pearson touch”—his knack for success on a grand scale—was much admired. But he had few illusions about how it worked. To his daughter, he wrote: “Dame Fortune is very elusive; the only way is to sketch a fortune which you think you can realize and then go for it baldheaded.” To his son, he added, “Do not hesitate for one second to be in opposition to your colleagues or in overriding their decisions. No business can be a permanent success unless its head is an autocrat—of course the more disguised by the silken glove the better.”