Wednesday, March 12, 2014

`The Prize (5) "Crude Diplomacy"

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

US lifted oil rationing within 24° of the formal end of WWII, and Americans were ecstatic.

Oil was too important for governments to allow business to decide and control. Still companies made agreements with one another to manage supply-demand.

Saudi Arabia and its warrior King Abdulaziz. A land of bedouin and pilgrims, of sand and camels. Three times the size of Texas.

Socal (Standard Oil of California) hoped to find more oil in the Persian (aka Arabian) Gulf.

Jack Philby rode with the King on the deserts, and gained the King’s ear when he said there was treasure underneath the desert sands.

The King was running out of money for his growing Kingdom.

The King thought he had sold the Americans just sand for $275,000. But the Americans wasted no time, as their first geologist arrived on a dhow.

On March 4th 1938 Well #7 (in what is now Dhahran) sprung oil.

President FDR and King Abdulaziz struck a relationship. Which stirred the envious Winston Churchill to action, but the British bumbled the Rolls Royce gift to the King.

They didn’t know that the King did not sit in the back and further more the British right-handed steering meant the King had to sit on the left in the front, which was a no-no.

In 1951 Iran nationalized its oil, and the British were out.

Any American who flirted with crossing strict Islamic lines were quickly whisked out and sent back to the US.

Build relationships with the Middle East, Saudi Arabia in particular, meant the West, the US in particular, could conserve its oil.

The Greal Deal of 1947 ▪ Socal (now Chevron) and Texaco, plus Esso and Socony Vacuum, joined the relationship with Saudi Aramco.  By the way, Aramco is short of Arabian American Co.

Iran refused stubbornly to adhere to the new reality of 50-50 split of profit. The Americans were not too unhappy with the British struggle with Iran.

In the post-War world, politics could not stay away from oil, and oil could not rid itself of politics.

In economic terms, things were getting better for oil-producing countries. But nationalism was rising, and this made these countries impenetrable to the West.

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

Ron Villejo, PhD

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