The Prize

Daniel Yergin

4 ideas

1. Churchill converts the Royal Navy to oil

   In 1911–1914, as First Lord of the Admiralty, Winston Churchill switched the British fleet from Welsh coal to oil, which gave faster, longer-ranged ships but tied national security to supplies Britain did not possess. To secure that supply the British government bought a controlling stake in the Anglo-Persian Oil Company in 1914, fusing a strategic military decision with state ownership of a foreign oil concession. Churchill's rule for managing the new dependence was 'safety and certainty in oil lie in variety and variety alone.'

2. Oil booms breed their own price collapses

   Petroleum's economics swing between glut and scarcity: high prices draw in drilling and new producing regions, the new supply floods the market, and prices crash. That volatility is why producers keep trying to impose order on the market. Rockefeller did it through refining monopoly, the majors through the 1928 'As-Is' cartel agreement, Texas through state prorationing, and OPEC through production quotas.

3. The obsolescing bargain in resource concessions

   A foreign company holds the most leverage before it commits capital, when the host state needs its expertise and investment. Once the fields are proven and the infrastructure is built, that leverage shifts to the host government. States then use the shift to renegotiate terms, as with the 50-50 profit splits of the late 1940s and early 1950s, or to nationalize outright, as Mexico did in 1938 and Iran tried in 1951.

4. Oil as the hinge of military outcomes

   Read twentieth-century wars as contests over fuel supply, not just armies. Germany's and Japan's WWII strategies were driven by the need to seize oil, with Hitler turning toward the Caucasus and Japan striking toward the Dutch East Indies. Their defeats came partly through fuel starvation of their tanks, aircraft and fleets, while Allied access to American oil sustained mechanized warfare.

Save and mark ideas in the app