We will distinguish between reserves and resources, posted and market price, and discuss the explosive growth in reserves, oil production and consumption from 1950 and their impact on prices. In particular, we will discuss the impact on the posted price and how it led to the formation of OPEC which the oil companies did not take seriously. We will also explore what enabled Mattei and others to be able to break the 50-50 deal as well as the aggressive marketing strategy of the Soviets and its impact. We will also touch on how US domestic politics and fear of Iran falling to the communist Russia determined the national policies and strategies. We will account for why "King" Coal lost to oil and how oil use changed the social lifestyles of American consumers. Also, we will include the response to coal and disruptions in the market on Liquid Natural Gas (LNG) part of the industry.
Continuing with a review of the impact and consequences of the 6 day war between the Arabs and Israel and why the Arab oil embargo did not work. We will finally discuss the waning power of Britain and US in the Middle East, the environmental impact of oil use, and the challenges of oil production in Alaska, North Sea, and Libya. We will conclude the lesson with discussions on the constant split within OPEC and its effects and also distinguish between concessions, participation or joint ownership, and nationalization with respect to ownership.
Major Lesson Themes
- Mounting surplus of oil going into 1960s
- Posted price cuts upset the balance
- Limited OPEC market power
- Elephants in Algeria & Libya
- Mattei’s last flight & new competitors
- Iran vs. Saudi Arabia
- American oil import quotas
Students should be able to do the following after completing Lesson 8:
- explain the growth in production and consumption from 1950 and the impact on prices;
- distinguish between reserves and resources; and posted and market price;
- account for what caused Mattei and others to be able to break the 50-50 deal;
- account for what drove Venezuela to work with the Middle East producers;
- explain why the companies finally cut the posted and not the market price;
- chronicle the events that led to the formation of OPEC;
- explain the Soviet aggressive marketing strategy and its impact;
- state the goals/objectives of OPEC and why the companies did not take OPEC seriously;
- explain why the market price dropped from 1960 to 1969 by 22%;
- account for the reasons for the many new discoveries and oil companies from the 1950s;
- explain why the industry shifted from oligopoly to perfect competition in the 50s and 60s;
- explain how US local politics and fears on Iran shaped national policies and strategies;
- argue why "King" Coal lost to oil and the impact of the change on economic growth and lifestyles of consumers;
- explain why the embargo during the 6-day war failed.
What is due for Lesson 8?
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.
|Activity||Location||Submitting Your Work|
|Read||The Prize: Chapters 25, 26, & 27||No Submission|
|Read||The Quest: Chapters 12 &15||No Submission|
|Read||Online Lesson 8: Post-war Petroleum Order and Crises||No Submission|
|Complete||Lesson 8 Participation Activity||Canvas|
|Take||Lesson 8 Quiz||Canvas|
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.