The-prize-the-epic-quest-for-oil-money-and-power.pdf - International Acclaim for The Prize\u201cMonumental analysis of the history and politics of oil \u2026

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Unformatted text preview: International Acclaim for The Prize“Monumental analysis of the history and politics of oil … Engagingly written and a landmark of research.” —Newsweek “If you want to know what really makes the world go round, Yergin’s colorful history of the petroleum industry is indispensible.” —Time “Deserves to become the standard text on the history of oil.” —Leslie H. Gelb, front page, The New York Times Book Review “There is no doubt about Yergin’s basic thesis: Oil is power, big power … Yergin rightly has a lot to tell us.” —Theodore C. Sorensen, front page, The Washington Post Book World “A compelling history … that clarifies the contemporary world situation.” —Los Angeles Times “Yergin has not written the history of oil but the history of the world from the point of view of oil. And he has written it very well, with an eye for the relevant and often amusing detail. … He marveled at his discoveries and, thanks to his great literary gifts, he is able to make us marvel as well. … Yergin is finally as much a psychologist as he is a geologist and a historian—one who knows that oil is somewhere, deep down, in everybody’s emotions under two other names: wealth and power.” —Robert Mabro, front page, Chicago Tribune Book World “Impressive mastery … Daniel Yergin is as well equipped as anyone to build the bridge between oil and world diplomacy. … He attempts nothing less than a rewriting of world history, to bring oil out of the garage into the cabinet-rooms.” —Anthony Sampson, author of The Seven Sisters, The Spectator “More than a gripping tale of international politics, The Prize chronicles oil’s role in shaping the twentieth century’s ‘Hydrocarbon Society’ of expressways, suburbs—and pollution—as well as ‘Hydrocarbon Man,’ who shows little inclination to give up the conveniences of automobiles, suburban homes and other oil-based essentials of life.” —Atlanta Constitution “Dazzling. … a masterful study of how oil has dominated and shaped world events in the twentieth century.” —Jeremy Campbell, London Evening Standard“The best history of oil ever written. … Yergin’s account [of World War II] is utterly persuasive and … downright gripping. … The Prize … bringsour knowledge of the twentieth century—the Age of Oil—into sharper focus.”—Business Week “This is a book about greed, ambition and the lust for power. It is about the people who have made the oil industry what it is—from Sheikh Yamani and George Bush to Armand Hammer and Saddam Hussein. … Yergin is a wonderful storyteller.” —Stephen Butler, Financial Times of London “Compulsive reading. … Daniel Yergin’s new book must be required reading for everyone from the Prime Minister to the new Desert Rats.” —London Daily Mail “Strongly recommended.” —Conor Cruise O’Brien, Times Literary Supplement “The Prize is the story of how a ‘mere commodity’ has shaped the politics of the twentieth century and profoundly changed the way we lead our lives … a significant book…” —Houston Chronicle “Compelling and comprehensive. … his narrative proceeds like a developing photograph of our times.” —The New Yorker “Fascinating. … The Prize revels in the drama.” —The Economist “Remarkable. … an incredible work … exciting and easy to read. … Compulsory reading for politicians and top officials [and] anyone concerned with an accurate history of this century.” —Peter Walker, former UK Secretary of State for Trade and Industry, The Independent “Captivating. … readers will be well rewarded. … Without oil, it would be impossible to think of America’s place in the world.” —Asahi Shimbun, Tokyo“The Prize manages to be both serious socio-economic history and wonderful entertainment. Yergin … has a real knack for making his characters come alive. … Oil as a force of history has become bigger than nations or individuals.” —Far Eastern Economic Review “It would be impossible to fully understand … the ‘age of oil,’ without reading The Prize by Daniel Yergin. … The Prize is beyond exceptional … it is an entrancing tale of promoters, industrialists, and politicians; it is packed with historical detail but written with richness and intrigue…” —Jeff Sandefer, The National Review “Impeccably researched and fluently written … You can’t read Yergin’s account of the improbable cast of characters who built the modern oil business without marveling at the role of luck and accident in any process of economic creation.” —George Gendron, Inc. Magazine “A magnificent epic story. … The Century of Oil will continue into the next century.” —Nihon Keizai Shimbun, The Japan Economic JournalBooks byDaniel YerginAuthorShattered Peace: Origins of the Cold WarCoauthorThe Commanding Heights: The Battle for the World EconomyEnergy FutureGlobal InsecurityRussia 2010FREE PRESSA Division of Simon & Schuster, Inc.1230 Avenue of the AmericasNew York, New York 10020www.SimonandSchuster.com Copyright © 1991, 1992, 2008 by Daniel YerginEpilogue copyright © 2008 by Daniel YerginTitle logo copyright © 1992 by WGBH Educational Foundation All rights reserved, including the right to reproduce this book or portions thereof in any form whatsoever. For information address Free Press Subsidiary Rights Department, 1230 Avenue of the Americas, New York, NY 10020. This Free Press trade paperback edition December 2008 FREE PRESS and colophon are trademarks of Simon & Schuster, Inc. Designed by Irving Perkins Associates, Inc. Manufactured in the United States of America 1 3 5 7 9 10 8 6 4 2 The Library of Congress has cataloged the Simon & Schuster edition as follows:Yergin, Daniel.The prize: the epic quest for oil, money, and power / Daniel Yergin.p. cm.Includes bibliographical references and index.1. Petroleum industry and trade—Political aspects—History—20th century.2. Petroleum industry and trade—Military aspects— History—20th century.3. World War, 1914–1918—Causes. 4. World War, 1939–1945—Causes.5. World politics— 20th century.I. Title.HD9560.6. Y47 1990338.2′782′0904—dc20 90-47575CIP ISBN-13: 978-1-4391-1012-6eISBN-13: 978-1-4391-3483-2ISBN-10: 1-4391-1012-3 Lyrics on page 536 © 1962 Carolintone Music Company, Inc. Renewed 1990.Used by permission.Poem on pages 688– 689 from The Intellectual Adventure of Ancient Manby H. and H. A. Frankfort, John A. Wilson,and Thorkild Jacobsen, page 142, © 1946The University of Chicago. Used by permission.To Angela, Alexander, and Rebecca Contents List of MapsProloguePART I: THE FOUNDERS Chapter 1: Oil on the Brain: The BeginningChapter 2: “Our Plan”: John D. Rockefeller and the Combination of American OilChapter 3: Competitive CommerceChapter 4: The New CenturyChapter 5: The Dragon SlainChapter 6: The Oil Wars: The Rise of Royal Dutch, the Fall of Imperial RussiaChapter 7: “Beer and Skittles” in PersiaChapter 8: The Fateful PlungePART II: THE GLOBAL STRUGGLE Chapter 9: The Blood of Victory: World War IChapter 10: Opening the Door on the Middle East: The Turkish Petroleum CompanyChapter 11: From Shortage to Surplus: The Age of GasolineChapter 12: “The Fight for New Production”Chapter 13: The FloodChapter 14: “Friends”—and EnemiesChapter 15: The Arabian Concessions: The World That Frank Holmes MadePART III: WAR AND STRATEGY Chapter 16: Japan’s Road to WarChapter 17: Germany’s Formula for WarChapter 18: Japan’s Achilles’ HeelChapter 19: The Allies’ WarPART IV: THE HYDROCARBON AGE Chapter 20: The New Center of GravityChapter 21: The Postwar Petroleum OrderChapter 22: Fifty-Fifty: The New Deal in OilChapter 23: “Old Mossy” and the Struggle for IranChapter 24: The Suez CrisisChapter 25: The ElephantsChapter 26: OPEC and the Surge PotChapter 27: Hydrocarbon ManPART V: THE BATTLE FOR WORLD MASTERY Chapter 28: The Hinge Years: Countries Versus CompaniesChapter 29: The Oil WeaponChapter 30: “Bidding for Our Life”Chapter 31: OPEC’s ImperiumChapter 32: The AdjustmentChapter 33: The Second Shock: The Great PanicChapter 34: “We’re Going Down”Chapter 35: Just Another Commodity?Chapter 36: The Good Sweating: How Low Can It Go?Chapter 37: Crisis in the GulfEpilogueChronologyOil Prices and ProductionNotesBibliographyAcknowledgmentsPhoto CreditsIndex List of Maps The Independents Break Out: The First Long Distance Pipeline, Tidewater, 1879Marcus Samuel’s Coup: The Voyage of the Murex, 1892Opening Up the Middle East: Oil in Persia, 1901The Red Line Agreement, July 1, 1928The Great Migration of the 1920s: Mexico’s Golden Lane to Venezuela’s Lake MaracaiboWar in Europe and North AfricaWar in the PacificThe Great Oil Deals: Middle East Consortia, 1951Alaskan Pipeline and Alternate Routes, Early 1970s Prologue WINSTON CHURCHILL CHANGED his mind almost overnight. Until the summer of 1911, the young Churchill, Home Secretary, was one of the leaders of the “economists,” the members of the British Cabinet critical of the increased military spending that was being promoted by some to keep ahead in the Anglo-German naval race. That competition had become the most rancorous element in the growing antagonism between the two nations. But Churchill argued emphatically that war with Germany was not inevitable, that Germany’s intentions were not necessarily aggressive. The money would be better spent, he insisted, on domestic social programs than on extra battleships. Then on July 1, 1911, Kaiser Wilhelm sent a German naval vessel, the Panther, steaming into the harbor at Agadir, on the Atlantic coast of Morocco. His aim was to check French influence in Africa and carve out a position for Germany. While the Panther was only a gunboat and Agadir was a port city of only secondary importance, the arrival of the ship ignited a severe international crisis. The buildup of the German Army was already causing unease among its European neighbors; now Germany, in its drive for its “place in the sun,” seemed to be directly challenging France and Britain’s global positions. For several weeks, war fear gripped Europe. By the end of July, however, the tension had eased—as Churchill declared, “the bully is climbing down.” But the crisis had transformed Churchill’s outlook. Contrary to his earlier assessment of German intentions, he was now convinced that Germany sought hegemony and would exert its military muscle to gain it. War, he now concluded, was virtually inevitable, only a matter of time. Appointed First Lord of the Admiralty immediately after Agadir, Churchill vowed to do everything he could to prepare Britain militarily for the inescapable day of reckoning. His charge was to ensure that the Royal Navy, the symbol and very embodiment of Britain’s imperial power, was ready to meet the German challenge on the high seas. One of the most important and contentious questions he faced was seemingly technical in nature, but would in fact have vast implications for the twentieth century. The issue was whether to convert the British Navy to oil for its power source, in place of coal, which was the traditional fuel. Many thought that such a conversion was pure folly, for it meant that the Navy could no longer rely on safe, secure Welsh coal, but rather would have to depend on distant and insecure oil supplies from Persia, as Iran was then known. “To commit the Navy irrevocably to oil was indeed ‘to take arms against a sea of troubles,’” said Churchill. But the strategic benefits—greater speed and more efficient use of manpower—were so obvious to him that he did not dally. He decided that Britain would have to base its “naval supremacy upon oil” and, thereupon, committed himself, with all his driving energy and enthusiasm, to achieving that objective. There was no choice—in Churchill’s words, “Mastery itself was the prize of the venture.”1 With that, Churchill, on the eve of World War I, had captured a fundamental truth, and one applicable not only to the conflagration that followed, but to the many decades ahead. For oil has meant mastery through the years since. And that quest for mastery is what this book is about. At the beginning of the 1990s—almost eighty years after Churchill made the commitment to petroleum, after two World Wars and a long Cold War, and in what was supposed to be the beginning of a new, more peaceful era—oil once again became the focus of global conflict. On August 2, 1990, yet another of the century’s dictators, Saddam Hussein of Iraq, invaded the neighboring country of Kuwait. His goal was not only conquest of a sovereign state, but also the capture of its riches. The prize was enormous. If successful, Iraq would have become the world’s leading oil power, and it would have dominated both the Arab world and the Persian Gulf, where the bulk of the planet’s oil reserves is concentrated. Its new strength and wealth and control of oil would have forced the rest of the world to pay court to the ambitions of Saddam Hussein. The result would have been a dramatic shift in the international balance of power. In short, mastery itself was once more the prize. Over the previous several years, it had become almost fashionable to say that oil was no longer “important.” Indeed, in the spring of 1990, just a few months before the Iraqi invasion, the senior officers of America’s Central Command, which would be the linchpin of the U.S. mobilization, found themselves lectured to the effect that oil had lost its strategic significance. But the invasion of Kuwait stripped away the illusion. Oil was still central to security, prosperity, and the very nature of civilization. This remains true in the twenty-first century. Though the modern history of oil begins in the latter half of the nineteenth century, it was the twentieth century that was completely transformed by the advent of petroleum. The role of oil—and anxiety about its supply—is a primary consideration of the Internet and the era of globalization that characterizes the first decades of the twenty-first century. In particular, three great themes underlie the story of oil. The first is the rise and development of capitalism and modern business. Oil is the world’s biggest and most pervasive business, the greatest of the great industries that arose in the last decades of the nineteenth century. Standard Oil, which thoroughly dominated the American petroleum industry by the end of that century, was among the world’s very first and largest multinational enterprises. The expansion of the business thereafter—encompassing everything from wildcat drillers, smooth-talking promoters, and domineering entrepreneurs to highly trained scientists and engineers, great corporate bureaucracies, and state-owned companies—embodies the evolution of business, of corporate strategy, of technological change and market development, and indeed of both national and international economies. Throughout the history of oil, deals have been done and momentous decisions have been made—among men, companies, and nations—sometimes with great calculation and sometimes almost by accident. No other business so starkly and extremely defines the meaning of risk and reward—and the profound impact of chance and fate. As we look forward, it is clear that mastery will certainly come as much from a computer chip as from a barrel of oil. Yet the petroleum industry continues to have enormous impact. Of the top ten companies in the Fortune 500 global ranking in 2008, six are oil companies. Until some alternative source of energy is found in sufficient scale, oil will still have far-reaching effects on the global economy; major price movements can fuel economic growth or, contrarily, drive inflation and help kick-start recessions. Today, oil is the only commodity whose doings and controversies are to be found regularly not only on the business page but also on the front page. And, as in the past, it is a massive generator of wealth—for individuals, companies, and entire nations. In the words of one tycoon, “Oil is almost like money.”2 The second theme is that of oil as a commodity intimately intertwined with national strategies and global politics and power. The battlefields of World War I established the importance of petroleum as an element of national power when the internal combustion machine overtook the horse and the coal-powered locomotive. Petroleum was central to the course and outcome of World War II in both the Far East and Europe. The Japanese attacked Pearl Harbor to protect their flank as they grabbed for the petroleum resources of the East Indies. Among Hitler’s most important strategic objectives in the invasion of the Soviet Union was the capture of the oil fields in the Caucasus. But America’s predominance in oil proved decisive, and by the end of the war German and Japanese fuel tanks were empty. In the Cold War years, the battle for control of oil between international companies and developing countries was a major part of the great drama of decolonization and emergent nationalism. The Suez Crisis of 1956, which truly marked the end of the road for the old European imperial powers, was as much about oil as about anything else. “Oil power” loomed very large in the 1970s, catapulting states heretofore peripheral to international politics into positions of great wealth and influence, and creating a deep crisis of confidence in the industrial nations that had based their economic growth upon oil. Oil was at the heart of the first post–Cold War crisis—Iraq’s 1990 invasion of Kuwait. And oil figured much in the reconfiguration of international relations that came with the dramatic petroleum price increase, 2004–2008, the return of resource politics, and the new importance of China and India in the world market.Yet oil has also proved that it can be fool’s gold. The Shah of Iran was granted his most fervent wish, oil wealth, and it destroyed him. Oil built up Mexico’s economy, only to undermine it. The Soviet Union—the world’s second-largest exporter—squandered its enormous oil earnings in the 1970s and 1980s in a military buildup and a series of useless and, in some cases, disastrous international adventures. And the United States, once the world’s largest producer and still its largest consumer, must import between 55 and 60 percent of its oil supply, weakening its overall strategic position and adding greatly to an already burdensome trade deficit—a precarious position for a great power. With the end of the Cold War, a new world order took shape. Economic competition, regional struggles, and ethnic religious rivalries replaced traditional ideology as the focus of international—and national—conflict, aided and abetted by the proliferation of modern weaponry. A new kind of ideology—religious extremism and jihadism—came to the fore. Yet oil remained the strategic commodity, critical to national strategies and international politics. A third theme in the history of oil illuminates how ours has become a “Hydrocarbon Society” and we, in the language of anthropologists, “Hydrocarbon Man.” In its first decades, the oil business provided an industrializing world with a product called by the made-up name of “kerosene” and known as the “new light,” which pushed back the night and extended the working day. At the end of the nineteenth century, John D. Rockefeller had become the richest man in the United States, mostly from the sale of kerosene. Gasoline was then only an almost useless by-product, which sometimes managed to be sold for as much as two cents a gallon, and, when it could not be sold at all, was run out into rivers at night. But just as the invention of the incandescent light bulb seemed to signal the obsolescence of the oil industry, a new era opened with the development of the internal combustion engine powered by gasoline. The oil industry had a new market, and a new civilization was born. In the twentieth century, oil, supplemented by natural gas, toppled King Coal from his throne as the power source for the industrial world. Oil also became the basis of the great postwar suburbanization movement that transformed both the contemporary landscape and our modern way of life. In the twenty-first century, we are so dependent on oil, and oil is ...
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