EGEE 120
Oil: International Evolution

The Prize, Chapter 15 Overview

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The Prize, Chapter 15 Overview

In chapter 15 we encounter much wheeling and dealing in Arabia. In today’s global oil market, not only is the Middle East a key player, but it is also actually influential enough to direct prices, supplies, and overall market responses. But it wasn’t always like that, and in the early days, people were not even sure this area had potential. But like many of the other areas we have explored, an intrepid entrepreneur pursues a rumor or a seep, and the rest is history.

Finding oil is as much about science as it is about agreements and politics. The Red Line Agreement we read about before ended up causing headaches for some companies, while it allowed others to take advantage. The contrasting story of Gulf and Socal demonstrates how such agreements can keep someone out of a market. Ironically, Gulf pivoted and moved to an area where they could work, and it turned out to be quite the strategic maneuver. In addition to the complexities introduced by agreements, there is the issue of nations having to deal with other powers. The interaction of American and British interests, and how they were perceived in this newly evolving oil market was the early manifestations of the conflicts that we face still today. That being the conflict of Western and Eastern cultures that play out on the battlefield of today’s oil markets.

It is interesting that, as we saw in other parts of the world, discoveries of large oil reserves sometimes soften the contempt one country can feel for another, and a greater effort is made to “close the deal.” We see that in this chapter, in regard to how these new oil-rich countries acted with America and Britain, and with each other. Kuwait is a classic example of this, as well as the old adage, “the enemy of my enemy is my friend.” With economic conditions causing problems, Kuwait needed money, but it was sitting on quite a bit of oil. Playing America and Britain off of each other by way of Gulf and Anglo-Persian proved a useful strategy. Conversely, the two companies teaming up also proved to be strategic and prudent.

Having a great agreement means nothing if the oil is uneconomic to develop or if demand is low. This means you have to improvise or temporarily adapt. The Texaco and Socal part of the story, and the birth of CalTex illustrates this well. But in the 1930s, oil was discovered in Kuwait and Saudi Arabia in commercial quantities, and so began the prominence of this area in the global oil market.

Change was once again coming in the form of another war. And like in World War I, although it wasn’t because of oil that the war started, oil did end up playing a major role.

The Prize, Chapter 15 - The Arabian Concessions: The World the Frank Holmes Made

Sections to Read

  • Introduction
  • Ibn Saud
  • Kuwait
  • The Blue Line Agreement
  • Discovery

Questions to Guide Your Reading:

  • What happened between the Americans and the British in regard Saudi oil?
  • How was the relationship between Saudi Arabia & United States evolving?
  • What was a major influence on agreements and partnerships?
  • What was the “marriage of necessity”?