EGEE 120
Oil: International Evolution

Introduction

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Overview

This lesson will cover the impact of different cultures on the industry, and how the industry changed the American culture. You will be introduced to the sudden rise in oil demand in the United States and the proliferation of gasoline stations as a result of the increase in mobility/transportation. The Teapot Dome and associated kickback scandals and their impact on individuals, the industry, and government will be discussed.

The emergence of nationalism in Persia and Mexico and the Mexican expropriation that sent chills through the oil industry will be discussed, including some discussions on the tensions over stability and sovereignty that led in some cases to revolutions and political unrest and how they impacted investments and oil development. This will highlight the challenges that the oil industry has in being a civilian and military commodity.

In addition, we will learn about the discovery of East Texas oil, how overproduction and hot oil led to the fall in crude prices, and the actions taken by the states of Texas and Oklahoma to stabilize the market. We will also discuss how the federal government had to step in and work with the states to regulate production via unitization and pro-rationing. We will then discuss the Achnacarry quail hunt and the "As-Is" agreement to address the overproduction and overcapacity even two years before the East Texas oil..

Major Lesson Themes

  • Real concern about supplies - this is a recurring theme
  • Oil is different from other commodities
  • Rule of Capture & Unitization
  • Beginning of Nationalization of the industry
  • Ownership versus investment
  • The Black Giant and the oil flood in East Texas
  • Impact of overproduction and "hot oil" on prices
  • Insufficient state control and the need for cooperation and coordination with the Feds
  • The irony in the oil industry between 1920 and 1932
  • International oil cartel forms
  • Rising historical nationalism and the modern application
  • Increasing tension between producing countries & oil companies
  • Efforts to expropriate & renegotiate concessions or contracts
  • Americans beat the Brits to Saudi oil
  • Increasing ties between Saudi Arabia & United States
  • Economics & oil
  • Cultural differences can be profound
  • The host countries wanted the companies in just as much as we wanted their oil

Learning Outcomes for Lesson 4

By the end of the lesson, you should be able to:

  • explain the cause(s) of the rapid rise in demand of oil in America;
  • give an account for the Teapot Dome scandal and the associated kickback issues;
  • explain the rule of capture, unitization, and their relationship;
  • list the reasons for the major discoveries in the 1920s after a period of declining productivity;
  • explain what led to the Mexican revolution;
  • distinguish between the oil development situations in Mexico and Venezuela;
  • compare the 1920s Mexico to the 1990s Mexico;
  • explain the meaning behind "Petro-State";
  • explain the Bolshevik Revolution and its impact on the Soviet oil industry and economy;
  • discuss the discovery of the Black Giant and East Texas oil.
  • explain "pro-rationing" and "hot oil" and their impact on prices;
  • account for the factors that helped to stabilize the market to about $1 per barrel;
  • give the assumptions that were central to the regulatory system imposed by the feds;
  • explain the reasons for the Achnacarry Castle meeting & the US domestic market had to be exclusion;
  • account for why from the "As-Is" Agreement and why the agreement fell apart;
  • chronicle the nationalistic events in Persia and Mexico and their eventual outcomes.

What is due for Lesson 4?

This lesson will take us one week to complete. Please refer to the Course Syllabus for specific time frames and due dates. Specific directions for the assignment below can be found within this lesson.

Lesson 4 Checklist
Activity Location Submitting Your Work
Read The Prize: Chapters 11, 12, 13 & 14 - (select sections) No Submission
Read The Quest: Chapter 5 - (select sections) No Submission
Read Online Lesson 4: Middle East Oil Development & the Rise of Automobiles & Gasoline No Submission
Complete Lesson 4 Participation Activity Canvas
Take Lesson 4 Quiz Canvas

Questions?

If you have any questions, please post them to our Questions? discussion forum (not email), located in Canvas. The TA and I will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.