history-lecture2

8/14/2019 history-lecture2

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DeGolyer:

The center of gravity of world oil production

is shifting to the Middle East

1944

Center of GravityCenter of Gravity


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The US government to acquire direct ownership

The US government to negotiate an agreement with the British

Let the private companies do the business

What to doWhat to do

In the Middle East?In the Middle East?


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1st option: ruled out

2nd option: before going to Yalta, Roosevelt withdrew it

from Senate

3rd option: won

YaltaYalta


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Growing demand andGrowing demand and

rising productionrising production

1945: 26 million cars

1950: 40 million cars

1948

Net exporter Net importer

USA

Many new discoveries


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March 12, 1947March 12, 1947

Truman DoctrineTruman Doctrine

1. New Aramco: Socol, Standard Oil of NJ, Texaco, Socony

2. Gulf Oil Shell in Kuwait

3. Iranian contract between Anglo Iranian and Standard Oil,Socony


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Europe in crisisEurope in crisis

Marshall planMarshall plan


7/32

Birth of IsraelBirth of Israel

May 14, 1948

First Arab-Israeli war


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Dilemma of Ibn Saud:

Birth of Israel

US guarantee on Saudi Arabias independence

Soviet threat

King Ibn SaudKing Ibn Saud

h


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Post-war petroleum order

Center: Middle East

Market: USA, Western Europe, Japan

Technology: huge development

Problem: Large surplus of oil

How to divide profit

Advancement inAdvancement in

TechnologyTechnology


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50-50 Deal, December 1950

The producing countries wanted more money and power


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Iran40 % of Middle Eastern oil

Weak shah

US interest

Korean warBritish hatred

Nationalization, May 1951, Mossadegh (Mossy)

Korean WarKorean War


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Expropriation vs. economic warfare, 1952

No oil export no money, economic trouble

Law and order collapsing

Mossadegh turned to Moscow

U.S. and Brithish assisted coupThe shah regained power

Oil consortium: Jersey, Socony, Texaco, Standard of California,

Gulf; Shell; CFP; Anglo Iranian

Result: The USA is the major player in the Middle East, 1954


13/32

Suez represented the post-war petroleum order:

2/3 of Europes oil passed through Suez

2/3 of traffic in Suez was oil

SuezSuez


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1952: a coup removed the king

1954: Colonel Gamal Abdel Nasser became dictator

Rejection of the West

Pan-Arabism

greatest international crime the creation of Israel

Got weapons from the Soviet block

NasserNasser


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Whether to build the Aswan dam?

US rejected

Revenge: expropriation of Suez Canal, July 26, 1956

Eisenhower did not want war

The French and British wanted military action

AswanAswan


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War plot against Egypt: France, UK, Israel

October 29, 1956

Eisenhower was furious

Soviet Union threatened by rocket attacks

Revolution in Hungary

Result: Nasser became a hero and leader of Arabs

22ndnd

Arab Israeli WarArab Israeli War


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World oil production8.7 million barrels 42 million barrels

Middle East

1.1 million barrels 18.2 million barrels

U.S. production share

64% 22%

U.S. reserves share

34% 7%

1948 1972


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50-50% is not enough any more

Nasser ascendant

Soviets build Aswan

Syria joins Egypt: United Arab Republic

Nasser controls oil: Suez and pipelines

Producer countries wanted more money and power


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End of 1950s: Soviet Union is the second largest oil producer

Oil companies cut prices

Building national refineries

National integrated oil companies

Stabilize market for themselves, 60-40 % share

OPECOPEC

OPECs aim:


20/32

1960s: more discoveries in Africa, large oil surplus

Nassers prestige was declining

He wanted to gain recognition: liquidation of Israel

Blockade against Israeli shipping,Military buildup with Syria, Jordan, Iraq

June 5, 1967: 3rd Arab-Israeli war, 6 day war

Occupation of Sinai, Gaza, West Bank, East Jerusalem

Six Day WarSix Day War


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Oil embargo against Israels friends

Arab oil decreased by 60%No effect oil is abundant, cheap

Embargo lifted in September


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End of 1960s, early 1970s

Recession in US and British power

Vietnam war

Anti-Americanism becomes a great fashion

Nixon-doctrine

Demand in oil was catching up with supply end of surplus

Huge economic growth fueled by oil

US oil production: 11.3 million barrels per day, the peak

More dependency on Middle Eastern oil

NixonNixon

1971: collapse of Bretton Woods


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Occidental Petroleum discovered oil in Libya in 1966

Qaddafi coup, 1969

Increase in oil price

All the countries increased their profit share

QaddafiQaddafi


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Egypt was in bankrupt after Nasserism ended

Sadat wanted to restore order and make peace with Israel

Israel was conceited after the 1967 success

1973 Yom Kippur war

SadatSadat

Yom Kippur War


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The Soviet Union supported Egypt and Syria

The USA supported Israel

World War conflict was imminent

Oil exporters increased oil prices 100%Arabs cut oil supply and eventually stopped exporting to USA

A weak president in the Watergate agony contributed to the

oil crisis

WategateWategate


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Boom times

Alska, Mexico discoveries

North Sea: the biggest play of all


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Iran: too much money corruption, chaos, political tensions

Shah represented modernization

Shiite fundamentalists hated US as the main ally of the Shah

Escalating chaos in the oil industryBy December 1978 no oil exports from Iran

The Shah escaped

February 1, Komeini returned to Tehran

KomeiniKomeini


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Second Shock

Panic in the world market: price went up from $13 to $34

From March 1979, Iranian export started to come back

Shortage in oil: long lines at gas stations

Peace accord: Camp David

CarterCarter


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November 4, 1979 : hostage

USA allowed the Shah for treatment

The West, especially USA seemed very weak

Soviets invaded Afghanistan

Price: $45

HostageHostage


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Hussein ofHussein of

IraqIraq

September 22, 1980: Iraq attacks Iran

Early 80s:

Two drastic changes: Enormous investment in exploration

Decreasing demand

Result: oil surplus

June 1982: Lebanon war

Golden age for oil geologists


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Cheap oil: financial crisis in some oil exportersMukluk dry hole: end of exploration boom

End of pessimism of the 70s

Economy is booming, but not because of oil fuel

Oil is not that dangerous as before


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August 2, 1990: Iraqi invasion of Kuwait

New oil shock, supply decreased

Loss had been compensated by December from other sources

January 17, 1991: Desert Storm

February 28 cease fire

Desert StormDesert Storm

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