history of oil
DESCRIPTION
Quick history of modern petroleum industry ( 1850s to 1973)TRANSCRIPT
HISTORY OF OIL- A QUICK GLANCE
Subhra Ghatak
Three phases in history of petroleum up to OPEC’s shock in 1973
Age of illumination: till Standard Oil
War of worlds: quartermaster
decides the winner
Rise of Middle-East and Arab
oil
Historical mentions
Modern developm
ent
US story: Standard
Oil
Russia and
Europe
WW I: oil goes to
war
Period between the wars: US gets on car
WW II: oil decides
fate
Anglo-Persian
Turkish Petroleum Company
Saudi story
OPEC and the first shock
Oil was known to the east of Roman empire since ancient ages
Hit 3000 BC
Baku 1264 AD
Greece 800 BC
Dated map
It all started here in 1850s
Technology was already developed A kerosene lamp was already
developed Refining technology was
developed, thanks to coal oil
George Bissell from Hanover 1853: Noticed oil seepage in PA 1856: Planned the drilling method 1857: sent “Colonel” Drake to
Titusville
Discovery of oil August 27,1859: oil was found
10 barrel/ day
1871: Titusville Oil Exchange opened
‘Colonel’ Drake
The ensuing rush resulted in extreme volatility
Pithole, PA captures the time A parcel of land: 1865: $
2M 1876: $4.73 Everyone was drilling for
oil In oil creek alone 75
functioning wells Refineries totally
depended on middlemen Volatility was bad for
refiners and consumers Oil business needed a
structure
Jan
-18
61
Jun
-18
61
De
c-1
86
1
De
c-1
86
2
Se
p-1
86
3
De
c-1
86
7
$0
$2
$4
$6
$8
$10
$12
Price/ Barrel
John D. Rockefeller provided the much needed structure to the industry 1870: Standard Oil was incorporated
Name signified quality and consistency
1872: Rockefeller devised “Our Plan” Consolidate ENTIRE refining business
Standard way of “War or peace” Tools: flattery, putting stress, price-cut, creation of barrel-shortage,
propping false independent companies
Rebates and Drawbacks: most infamous of Standard’s practice
1887: Standard entered oil production in Lima, Ohio 1891: Standard gained control of > 25% of US production Possessed control of ~85% of US oil market
A piece of investigative journalism by Ida Tarbell destroyed the giant
1911: Antitrust lawsuit forced Standard to dismantled into seven separate companies Standard of New Jersey: Standard of New York: Standard of California: Standard of Ohio: Standard of Indiana: Continental Oil: Atlantic Oil:
Exxon
Mobil
Chevron
US arm of BP
Amoco
Conoco
Sun
Gusher at Spindletop initiated Texas oil boom
Jan’1901: Spindletop was discovered 75,000 barrels/ day: more
than rest of US production combined
Captain Lucas found the oil The real discovery was
made by Pattilino Higgins Melons of Pittsburg took
management control Shell from UK agreed to
purchase output Gulf Oil was formed: the
first totally integrated oil company From production to marketing
Nobel brothers were the biggest player in Europe
1871: Robert Nobel reached Baku to purchase woods Bought a refinery 1873: Ludwig visits Baku Huge transportation problem: Ludwig
designs world’s first oil tanker-Zoroaster
Highly scientific: first oil company to have permanent geologists
1884: production reached 10.8M barrel Total control of European market Standard tried everything to acquire Stalin started trade union movement
from Baku in 1907
1920: post-revolution sold to Jersey at $7.5M
The next major player in Russia was Rothschild family
1880s: Rothschilds needed market for Russian oil Marcus Samuel, a trader at London was tapped
Received permission to pass oil tankers through Suez Successfully carved market share from Standard ( unexpected roadblock: packaging) Signed agreement to purchase Spindletop oil
1885: Oil was found in Dutch East indies 1890: Royal Dutch company was formed Henry Deterding, the CEO, realized importance of collaborating
with Shell
1901: Standard made an offer of $40M to purchase Shell Shell refused and created a marketing arrangement with Royal
Dutch
Spindletop , the Texas gusher, dried out and British Navy refused Shell’s proposal to convert to oil
1907: Shell merged with Royal Dutch ( 40: 60 ownership)
Royal Dutch Shell emerged as the biggest European powerhouse
WWI: “The allied floated to victory upon a wave of oil”
Sep’1914: Taxis of the Marne First instance of petroleum fuel in battle
Britain identified oil’s importance before war started 1912-1914: Navy switched to oil Purchased share of Anglo-Persian Oil Co
War moved to air Jan’1915: 250 planes 1918: 55,000 planes
Germany did not have own oil British destroyed every refinery in
Rumania just before Germany moved in Blocked Turkish attempt to invade Baku Oct’18: ran out of oil stock; Nov’18:
Surrendered
Period between WWI and WWII saw rapid shift to automobile US people moved from horse to cars
1920: # of Automobiles in US < 100,000 1929: # of Automobiles in US > 300,000
Major oil reserves discovered in Latin America 1921: Mexico became second largest oil producer 1922: Shell engineer George Reynolds discovered oil in
Venezuela 1929: Venezuela replaced Mexico from second spot
Dad Joiner discovered Black Giant in eastern Texas in 1931 Daily production: 340,000 barrels ( more than 3 times that
of Spindletop) Price of oil fell
WWII: Lack of oil was the most important factor suffocating Japan
1940: Advances towards Dutch East Indies
Jul’41: US froze Japanese accounts 80% of petroleum import was from US Till Nov’41 tried to remove embargo
Dec 7, 1941: Pearl Harbor 1942: Japan won Sumatran
oilfields 1943: Oil supply to Japan peaked
1944: US started sinking Japanese tankers (86% ships were sunk) Dry Japan: 4% of 1940 consumption Direct warfare of Japanese Jun’44: Great Mariana turkey shoot Kamikaze warfare Pine root craze of 1945
1930’s: IG Farben led the research in hydrogenation 1939 Germany: 46% of national oil supply and 95% of aviation fuel was
synthetic Located plants near Auschwitz to utilize slave labor
Russian Front: 1942: Initiated operation Blau to get Caucasian oil Faced oil supply issues even before reaching oil field: captured Soviet supply
was diesel Decisive battle at Stalingrad: surviving German troupes had fuel for 20
miles, escape was only 30 miles away
African front : “The battle is fought and decided by quartermasters before shooting begins”-Rommel
West Europe Dec’1944: Battle of Ardennes- caught allied by surprise but additional forces
were stuck for lack of fuel.
“If I do not get the oil of Maikop and Grozny then I must end this war”
Middle-east: Initial years
1901: D’Arcy bought Iran concession British government joined in 1908: Oil discovered by George
Reynolds 1951-53: Nationalization and coup BP
Turkish Petroleum Co: First cartel 1912: Concession for Ottoman empire 1912: Anglo-Persian, Deutsche Bank,
Gulbenkian 1920: Anglo-Persian, Shell, French, US
consortium, Gulbenkian 1927: Stuck Oil 1928: Red Line Agreement 1972: Nationalized by Iraq government
1925: Frank Holmes purchased concession: but negative reports
1935: SoCal, not in red line, bought Saudi concession 1938: discovered huge reserve of oil Formed partnership with Texaco: Casoc ( 1944:
Aramoco) Feb’1943: started lobbying with US govt. to help
Saudi royalty to keep British away 18th Feb: First of many US assistance to royal family ( a year earlier
Roosevelt commented, Saudi is of little importance) Roosevelt traveled to Egypt to meet King Ibn Saud Desperate Jersey and SOCONY lobbied to nullify red line agreement US government declared red line illegal, later bypassed the agreement
There was no taker for world’s richest oilfield
OPEC: Events leading to the first oil shock
1959: Wanda Jablowski arranged an undercover meeting of oil ministers OPEC: a “gentlemen’s agreement” was formed
1973: US oil import rose 3 times that of 1967 after a decade of oversupply Oct-6: Egypt and Syria attacks Israel ( first time Israel is surprised) Oct-8: OPEC asked 100% price rise Oct-12: Nixon receives two letters
1: CEOs of Exxon, Mobil, Texaco, Socal 2: Golda Meir
Oct-13: America sends secret supply to Israel that became open Oct-16: OPEC oil ministers declare 70% price rise ( from $2.9 to
$5.12) Oct-17: OPEC oil ministers declare 5% production cut Oct-19: US announces $2.2B military aid to Israel Oct-20: Saudi stops export to US: first embargo Dec-22: OPEC meets again. Iran’s shah proposes $11.65 as price
(based on an Arthur D. Little case) Price rises by 300% within two months ( Oct’73 to Dec’73)
Appendix
Detail of the investigative piece by Ida Tarbell
Ida Tarbell wanted to do a story on the Trust Her father was an
independent oilman
Mark Twain arranged meeting with HH Rogers Hell hound Rogers: No. 2 at
Standard Benefactor or Mark Twain and
Helen Keller Rogers even arranged a desk
for Ms. Tarbell at Standard office
Nov’1902 first installment was published
1905: ended with a virulent Personal sketch of Rockefeller