Wednesday, March 5, 2014

`The Prize (2) "Empires of Oil"

The Prize: The Epic Quest for Oil, Money, and Power is Daniel Yergin's history of the global oil industry from the 1850s through 1990. The Prize became a bestseller owing to its release date: it was published in October 1990, two months after the invasion of Kuwait ordered by Saddam Hussein and three months before the U.S.-led coalition began the Gulf War to oust Iraqi troops from that country.  It eventually went on to win the Pulitzer Prize. 
The Prize has been called the "definitive" history of the oil industry, even a "bible".
My notes

Oil was transforming the world at the beginning of the 20th century.  

Russia became a powerful competitor to the US.  In Baku, Ludwig Nobel did a lot to build the Russian oil industry.  He was known as the Russian Rockefeller.  Their rapid expansion took on Standard Oil power.

But Standard Oil had great global intelligence, and had cash might to drop prices to win a market and raise it elsewhere, thereby keeping its high profitability.

Standard Oil dominance was soon to be challenged by Royal Dutch (Henry Deterding) and Shell (Marcus Samuel). Samuel longed for social acceptance. 

Alfred Nobel invented dynamite, and later on established the Nobel Prize.

The Samuel brothers helped to industrialize Japan, and they also collected Japanese artifacts.  They knew they had opportunities in oil trading, but was fully aware of Standard Oil power.

The Samuels wanted to ship oil via the Suez Canal, and while there was some hesitation by Canal authorities and while there were blocking efforts by Standard Oil, they succeeded.  Then, it was a matter of time before they commanded the Far East, working aggressively and expediently. 

Marcus Samuel was the entrepreneur sort, who hated organization, process and bureaucracy. 

Henry Deterding was born into Dutch middle class.  Royal Dutch was meant to manage oil discovered in colonies.  His hobby was reading companies’ balance sheets (rf. Warren Buffet), not drinking. 

Local sultans in the East Indies got rich selling land for oil exploration. 

Together with Samuel, Deterding set up a joint marketing campaign based in the UK.  This way, he could draw on Shell’s foothold and networks.

Samuel became Lord Mayor of London, which was his ultimate ambition. 

Samuel struck a contract with a Texan oil producer, but something went awry.

Meanwhile Baku was growing in turmoil à la revolution.  Baku became the center of ethnic insurrection, which burned oil fields.  All hell, let loose.

Shell was seriously compromised.  Samuel was told the only way to survive was to merge it with Royal Dutch.

Standard Oil quickly took a lead in supplying gasoline for cars.  

But with Shell on board, Deterding succeeded in the US where Samuel didn’t. 

The Supreme Court ruled Standard Oil an illegal monopoly, and ordered it to break up ▪ Mobil | Esso | Chevron | Amoco. 

Which was a boon to Royal Dutch Shell, which would’ve had a tough time against Standard Oil.

Anglo-Persian eventually became British Petroleum. 

George Reynolds, an English geologist, stubbornly kept going at exploring oil.  May 26th 1908 was the day he finally struck oil in the Middle East (Persia). 

Deterding (d. 1939) was the greatest oil man, since Rockefeller.  He took on Standard Oil in all corners of the world, following World War One.   

The vision of Deterding and Samuel (d. 1927) shaped the oil industry in the 20th century.  

Thank you for reading, and let me know what you think!

Ron Villejo, PhD

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