EGEE 120
Oil: International Evolution

The Prize, Chapter 8 Overview


The Prize, Chapter 8 Overview

Chapter 8 is best characterized by the statement “oil is an instrument of national policy, a strategic commodity”. The British Royal Navy pioneered the connection between oil and military advantage. Prior to this period, the Royal Navy was powered by coal, as most other Navy’s were, including Germany’s. But the Royal Navy had the foresight to switch from coal to oil. The advantages were obvious, both logistically as well as tactically. The Navy would be more mobile, maneuverable, and reliable. And it would operate without having to cart around tons and tons of bulky coal. But with this decision came the negative aspect of needing to ensure a reliable supply. For Britain, access to coal was not a problem, they had an incredible amount within their national borders. Oil on the other hand, was for the most part, sourced from elsewhere. Resolving that conflict took some time and persuasion, but eventually the Navy pivoted to oil. With this decision, the support and pressure from the government, and specifically the military, fell on the oil industry to produce.

It was clear that the government was not effective or positioned to manage their own oil operations, they had to look to and actually depend on what the big private companies were doing. But being passive observers was not prudent, and we see the beginnings of these public-private partnerships between government and the private sector.

As mentioned before in prior lessons, similarities between the early days of the oil industry, and the situation today are remarkably similar. And it makes you wonder if we learn anything from history. The concept of needing to be energy independent and reducing dependency on outside sources that one cannot always control was the leading issue of the day. And pressure to control and ensure supply led to the rapid development of these new reserves in Persia, in spite of the logistical challenges.

Another similarity is the conflict between the government’s military spending and social spending. Social unrest in the early 1900s characterized the conflict between sharing limited budgets between the military and the people. But a great global conflict of a scale not seen since the oil industry started to take off in the mid 1800s was just around the corner- a world war was coming. Eleven days after Churchill's bill, on June 28th, 1914, Archduke Franz Ferdinand of Austria was assassinated at Sarajevo. Russia mobilized its forces on July 30th and on August 1st, 1914, Germany declared war on Russia. Churchill flashed the order to the entire British fleet to "Commence hostilities against Germany" starting the First World War!

The Prize

Chapter 8 - The Fateful Plunge

Sections to Read
  • Introduction
  • "The Godfather of Oil"
  • "Made in Germany"
  • Speed!
  • The Shell Menace
  • Aid for Anglo-Persian
  • A Victory for Oil
Questions to Guide Your Reading:
  • How did Britain's Navy compare to the US or Germany?
  • What were some benefits of the oil conversion in the navy?
  • What was seen as a strategic aspect of oilStrategic access to oil?
  • What interests were at play in the political theater?