History Of Oil


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Quick history of modern petroleum industry ( 1850s to 1973)

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History Of Oil

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