DeGolyer:

1
Center of Gravity
1944
DeGolyer The center of gravity of world oil
production is shifting to the Middle East
2
What to do In the Middle East?

• The US government to acquire direct ownership
• The US government to negotiate an agreement with
  the British
• Let the private companies do the business

3
Yalta
1st option ruled out 2nd option before going to
Yalta, Roosevelt withdrew it
from Senate 3rd option won
4
Growing demand and rising production
1945 26 million cars 1950 40 million cars
Many new discoveries
USA
1948
Net exporter
Net importer
5
March 12, 1947 Truman Doctrine

• New Aramco Socol, Standard Oil of NJ, Texaco,
  Socony
• Gulf Oil Shell in Kuwait
• Iranian contract between Anglo Iranian and
  Standard Oil,
• Socony

6
Europe in crisis Marshall plan
7
Birth of Israel
May 14, 1948
First Arab-Israeli war
8
h
King Ibn Saud
Dilemma of Ibn Saud Birth of Israel US guarantee
on Saudi Arabias independence Soviet threat
9
Advancement in Technology
Post-war petroleum order
Center Middle East Market USA, Western Europe,
Japan Technology huge development Problem Large
surplus of oil How to divide
profit
10
50-50 Deal, December 1950 The producing
countries wanted more money and power
11
Korean War
Iran 40 of Middle Eastern oil Weak shah US
interest Korean war British hatred Nationalization
, May 1951, Mossadegh (Mossy)
12
Expropriation vs. economic warfare, 1952 No oil
export no money, economic trouble Law and order
collapsing Mossadegh turned to Moscow U.S. and
Brithish assisted coup The shah regained
power Oil consortium Jersey, Socony, Texaco,
Standard of California,
Gulf Shell CFP Anglo Iranian Result The USA
is the major player in the Middle East, 1954
13
Suez
Suez represented the post-war petroleum
order 2/3 of Europes oil passed through
Suez 2/3 of traffic in Suez was oil
14
Nasser
1952 a coup removed the king 1954 Colonel Gamal
Abdel Nasser became dictator
Rejection of the West Pan-Arabism greatest
international crime the creation of Israel Got
weapons from the Soviet block
15
Aswan
Whether to build the Aswan dam?
US rejected Revenge expropriation of Suez Canal,
July 26, 1956
Eisenhower did not want war The French and
British wanted military action
16
2nd Arab Israeli War
War plot against Egypt France, UK, Israel
October 29, 1956
Eisenhower was furious
Soviet Union threatened by rocket attacks
Revolution in Hungary
Result Nasser became a hero and leader of Arabs
17
1948
1972
World oil production
8.7 million barrels
42 million barrels
Middle East
1.1 million barrels
18.2 million barrels
U.S. production share
64
22
U.S. reserves share
34
7
18
50-50 is not enough any more
Nasser ascendant Soviets build Aswan
Syria joins Egypt United Arab Republic
Nasser controls oil Suez and pipelines
Producer countries wanted more money and power
19
OPEC
End of 1950s Soviet Union is the second largest
oil producer
Oil companies cut prices
OPECs aim
Building national refineries National integrated
oil companies Stabilize market for themselves,
60-40 share
20
Six Day War
1960s more discoveries in Africa, large oil
surplus
Nassers prestige was declining He wanted to gain
recognition liquidation of Israel Blockade
against Israeli shipping, Military buildup with
Syria, Jordan, Iraq
June 5, 1967 3rd Arab-Israeli war, 6 day
war Occupation of Sinai, Gaza, West Bank, East
Jerusalem
21
Oil embargo against Israels friends
Arab oil decreased by 60 No effect oil is
abundant, cheap Embargo lifted in September
22
Nixon
End of 1960s, early 1970s
Recession in US and British power
Vietnam war Anti-Americanism becomes a great
fashion Nixon-doctrine
1971 collapse of Bretton Woods
Demand in oil was catching up with supply end
of surplus
Huge economic growth fueled by oil
US oil production 11.3 million barrels per day,
the peak More dependency on Middle Eastern oil
23
Qaddafi
Occidental Petroleum discovered oil in Libya in
1966
Qaddafi coup, 1969 Increase in oil price All the
countries increased their profit share
24
Sadat Yom Kippur War
Egypt was in bankrupt after Nasserism ended Sadat
wanted to restore order and make peace with
Israel Israel was conceited after the 1967 success
1973 Yom Kippur war
25
Wategate
The Soviet Union supported Egypt and Syria The
USA supported Israel World War conflict was
imminent Oil exporters increased oil prices
100 Arabs cut oil supply and eventually stopped
exporting to USA
A weak president in the Watergate agony
contributed to the oil crisis
26
Boom times Alska, Mexico discoveries North Sea
the biggest play of all
27
Komeini
Iran too much money corruption, chaos,
political tensions Shah represented modernization
Shiite fundamentalists hated US as the main ally
of the Shah Escalating chaos in the oil
industry By December 1978 no oil exports from
Iran The Shah escaped February 1, Komeini
returned to Tehran
28
Carter
Second Shock
Panic in the world market price went up from 13
to 34
From March 1979, Iranian export started to come
back
Shortage in oil long lines at gas stations
Peace accord Camp David
29
Hostage
hostage
November 4, 1979
USA allowed the Shah for treatment
The West, especially USA seemed very weak
Soviets invaded Afghanistan
Price 45
30
Hussein of Iraq
September 22, 1980 Iraq attacks Iran
Early 80s Two drastic changes Enormous
investment in exploration Decreasing
demand Result oil surplus
June 1982 Lebanon war
Golden age for oil geologists
31
Cheap oil financial crisis in some oil
exporters Mukluk dry hole end of exploration boom
End of pessimism of the 70s Economy is booming,
but not because of oil fuel Oil is not that
dangerous as before
32
Desert Storm
August 2, 1990 Iraqi invasion of Kuwait New oil
shock, supply decreased Loss had been compensated
by December from other sources January 17, 1991
Desert Storm February 28 cease fire