EGEE 120
Oil: International Evolution

The Blood of Victory: WWI

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Reading Assignment

Begin this lesson by reading chapter 8 in The Prize, and then review the online notes that follow. The questions below should help guide your reading and viewing as to the important individuals, issues, or topics.

  • Read Chapter 9, The Blood of Victory: World War I
  • Consider the following questions:
    • What role did oil play in the war?
    • What were the major lessons from World War I?
    • What was the “shell” that hit Germany the hardest?
    • What was Marcus Samuels’ enduring legacy?
    • What was Deterding’s legacy?
    • How did Deterding view the 20th century?
  • Read through the online notes that follow here on this page below. These online notes are intended to summarize enhance, complement, or reinforce what is presented in the text.

Later, towards the end of this lesson, you can watch the related video episodes from the documentary film series based on the text. The documentary is narrated by actor Donald Sutherland.

Major Themes

  • Transformative impacts of internal combustion engine
  • Emergence of technology in waging war
  • Access & control of oil was critical to survival & decisive in World War I
  • Oil prices can rise very quickly - inelastic demand; industry supply has long lead times

The Outbreak of WWI

WWI was expected to last a few weeks; instead it ended up being prolonged. As seen in the last chapter, an unmitigated disaster led to WWI, and when it was all over, many people asked why and for what? The many reasons often ascribed to the war vary from blunder, arrogance, stupidity, rivalry, secular religion of nationalism, and power to the accumulated tensions between Austro-Hungarian, Russian, and Turkish empires and the ambitions of German Reich. While previous wars depended on men & horses, WWI depended on men & machines powered by oil intensifying the extent of damage and destruction. It is interesting that in wars with horses, planning required one horse for every three men and 10 times the food of each man for every horse!

Impact of motorized transportation and innovations in WWI

Gallieni
French general Joseph Gallieni (1849-1916)
Credit: Public Domain

One battle line stretched about 125 miles from Paris to Verdun in early September 1914. Together with another battle line that stretched to the Alps, the two battle lines had about 2 million Germans fighters, and the closest flank was within 40 miles of Paris, then known as the City of Lights. General Joseph Gallieni, who was known as the “comedian” but a genius; ordered all 3,000 Paris taxicabs, the taxi armada, commandeered and paid by the meter and not flat rate to transport French soldiers to the battle front to stop the German advance. The French fought hard & the Germans retreated on September 9 saving the City of Light. Gallieni demonstrated with his decision and action the military value of motorized transport.

The German retreat and the concurrent British assault ended the German offensive and any German plans of a short war. The fighting evolved into trench warfare and a long, senseless, bloody war of attrition. For a period of more than two years, the battle lines hardly moved more than 10 miles in either direction until the British turned to technology to break the stalemate by designing, developing and building a new vehicle funded by Churchill’s Navy under the code name “tank”. With the tanks and motorized transport, suddenly speed & mobility became possible as the tanks moved on traction, impervious to machine guns and barbed wires, and amplified the devastation. Towards the end of the war, the British had 56,000 trucks, 23,000 motorcars and 34,000 motorcycles. The US entered the war in1917 with another 50,000 vehicles to France—all powered by gasoline! Eventually more than 13 million died during World War I, and victory of truck over the locomotive was demonstrated.

British
An early model British Mark I "male" tank, named C-15, near Thiepval, 25 September 1916
Credit: Public Domain

Aviation technology also advanced during the war and provided strategic importance and advantages of the air with bird’s eye view of the battlefield (reconnaissance and observation) and the ability to bomb enemy positions & airplanes. The planes powered by oil as fuel provided another reason to maintain access to petroleum products. The advanced aviation technology yielded fighter planes that had greater lethality and were much faster. The Germans actually took the lead in strategic bombing with the use of Zeppelins & Strategic Bombers. The war constantly pushed innovation for larger numbers, faster, and better planes. In fact, by 1915, all machines that had been in the air at the beginning of the war were obsolete. The war proved Churchill and Fisher right in their conversion of the British fleet to oil as it provided advantages over the German fleet powered by coal--greater range and speed and faster refueling.

left: zeppelin, and right: biplane
LZ7 Zeppelin Passenger ship (left), Fokker biplane, 1916 (right)
Credit: Photo Source

Impact of Anglo-Persian and Marcus Samuel on WWI

The Turks were threatening Abadan refinery after joining and siding with the Germans in autumn of 1914, but the British troops pushed them out & captured Basra. Control of Basra secured the safety of friendly local rulers including the Amir of Kuwait. The British wanted to take Baghdad but were defeated by the Turks. The British finally, however, succeeded in capturing Baghdad in 1917. (The scene would be repeated some years later when American, British and Coalition forces overthrew Sadam Hussein!)

Persian oil production grew more than 10-fold from 1,600 to 18,000 barrels per day between 1912 and 1914 with Anglo-Persian meeting 1/5th of the British Navy oil needs. Greenway was determined to transform Anglo-Persian into an integrated company and purchased British Petroleum, the largest distribution network/company in the UK owned by the Deutsche Bank and taken over by the British at the beginning of the war. About 80% of the fixed assets of Anglo-Persian were in Persia around 1916-17. However with acquisitions such as that of British Petroleum, only half of its fixed assets were in Persia in 1918. Greenway also wanted to turn Anglo-Persian and not Royal Dutch Shell into the oil champion of the British Empire and started the “Shell Menace” again. He questioned Royal Dutch/Shell’s loyalty and Marcus Samuel’s patriotism. This time it did not work, as many in Britain saw Marcus Samuel as a fierce British patriot. One of his two sons and his son-in-law died in the war. Besides, he pulled out a brilliant and daring scheme that turned out to be critical to the British war efforts. He had the toluol (toluene) plant in Rotterdam, Netherlands, used to make TNT explosives disassembled piece by piece, labeled and secretly shipped in the middle of the night in January 1915 before the Germans knew it. The plant was reassembled in Somerset, Britain, within weeks. That plant along with another one built by Shell provided 80% of the TNT of the British military. Shell was very integral to the Allies execution of the war, even acting as the quartermaster general of oil. It was, therefore, not surprising that Greenway overplayed his hand with his unfair and untrue allegations to the point where he even turned many in the British government against Anglo-Persian with his Shell menace.

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Map showing Rotterdam, Netherlands and Somerset, England (left), chemical structure for Toluene (center), and chemical structure for Trinitrotoluene or TNT (right)
Credit:

The German U-boat campaign and the resulting European oil crisis

At the beginning of 1916, two reasons caused the emergence of an oil crisis in Britain: 1). the deadly German submarine (U-boats) warfare to choke shipment of supplies to the British Isles and France and 2). the growing demand of oil on both the home and war fronts. It was the unrestricted submarine campaign against Allied shipping that forced the US to eventually declare war against Germany in 1917. Standard Oil of NJ, for example, lost 6 tankers (including the brand new John D. Archbold) between May and September. Also lost in the submarine campaign was the Murex, the first vessel to sail through the Suez Canal in 1892 as part of Marcus Samuel’s coup. The only solution to the crisis lay with oil shipment from America. The Allies formed the Inter-Allied Petroleum Conference with USA, Britain, France, and Italy as the members. Standard and Royal Dutch/Shell ran it and made it work. The introduction of convoys as an antidote to the German U-boats and the joint management system by Standard Oil and Royal Dutch/Shell helped to solve the Allies' supply problems.

The Inter-Allied Petroleum Conference of the Allies

The Inter-Allied Petroleum Conference also helped to address US domestic energy concerns as American oil had become an essential part of the war strategy; providing 80% of the Allies' wartime petroleum needs. US export of oil, mainly to Europe, was ¼ of total US production. America needed adequate oil supplies for the US military, Allies forces, US war industries and normal civilian use. To ensure adequate supplies, effective distribution, and appropriate allocation, President Wilson appointed Mark Requa as the first Fuel administrator (Secretary of Energy). His job was to create a working relationship between the government and oil industry to accomplish the above goals. The close working relationship that evolved was in marked contrast to the feud between the government and Standard Oil years earlier. In 1917 and 1918, there was increased domestic demand for oil partly due to the cold winter that created a shortage of coal. Inventories and imported oil from Mexico were used to close the gap. In fact, in January 1918, the Fuel Administrator ordered industrial plants east of Mississippi to close for a week to free up oil for Europe. The coal shortage caused sharp increases in the demand and prices of oil and Mark Requa called for voluntary price control from the oil industry. While Standard Oil was agreeable, the independents were not. Demand continued to outpace supply because of the war and the growth in automobiles in America. An appeal for “Gasolineless Sundays” in US was made with exceptions for freight, doctors, police, emergency vehicles, and funeral cars. Likewise, in the UK, pleasure driving was banned.

The supply shortage and high demand resulted in rapid increases in the price of oil. The price changes clearly had no negative effect on the demand as the demand remained strong even with the increasing prices. Thus, the demand for oil had become relatively inelastic, or oil was exhibiting inelastic demand in economic terms.

See image caption
Graph of crude oil prices, 1900-1920. Dollars per barrel on the Y axis, year on the X axis
Credit:

German oil shortage and eventual surrender

Norton-Griffiths
Sir John Norton-Griffiths, 1st Baronet (1871-1930).
Credit: Public Domain

The Allies' blockage succeeded in choking off German oil supplies, leaving Romania as its only source. Romania, that had remained neutral at the beginning of the war, however, declared war against Austria-Hungary in August 1916 after the success of Russia on the eastern front. When the Germans advanced towards the Romanian oil, Britain denied their Prize with Colonel John Norton- Griffiths, “Hell-fire Jack,” systematically destroying the oilfields (derricks were dynamited, wells plugged, pipelines crippled, and storage tanks set on fire). In total, about 70 refineries and 8,000 tons of crude were destroyed, and it took five months for the Germans to get the fields back into production in 1917 at only about 1/3 of its production rate in 1914. The German General Ludendorff, is known to have remarked, “We must attribute our shortages in part to him.” Restoration “made just the difference between shortage & collapse.” But only for a time.

The Germans signed a peace treaty with Revolutionary Russia as a ploy to get the Baku oil. The Turks who were allies of the Germans had however taken up effort and advanced on Baku. The Germans feared success by the Turks would cause destruction of the oil fields and promised to restrain the Turks in exchange for oil. But the locals opposed Lenin and Stalin and were determined not to give even a drop of oil to the Germans. Although the Turks managed to capture some of the producing fields, the British came up from Persia and stopped them in mid-August 1918. The British only stayed for one month, but that was enough to deny the Germans the Baku oil. When the British withdrew, the Turks captured Baku leading the Moslems to engage in the killing of every Armenian they could find including even those on hospital beds! By the time the Turks took control of Baku, it was too late to be of any use to the Germans.

By October 1918, the situation of Germany with respect to oil was desperate as Germany was anticipating a crisis in the coming winter and spring, and within a month a worn down Germany surrendered. The Armistice or Peace treaty was signed at 5 AM on Nov 11, 1918 and went into effect 6 hours later, ending the war. The impact of oil in the war is eloquently summed up by Lord Curzon of Britain, “The Allied cause had floated to victory upon a wave of oil,” and by Senator Bérenger of France, “Oil-the blood of the earth was the blood of victory…..Germany had boasted too much of its superiority in iron and coal, but it had not taken sufficient account of our superiority in oil. ….As oil had been the blood of war, so it would be the blood of the peace.”

Finally, the enduring legacies of Marcus Samuel and Henri Deterding are summarized in the videos.

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Map of military alliances of Europe in 1914