The prize the epic quest for oil, money and power

International Acclaim for The Prize “Monumental analysis of the history and politics of oil … Engagingly written and a landmark of research.” —Newsweek “If you want to know what really makes the world go round, Yergin’s colorful history of the petroleum industry is indispensible.” —Time “Deserves to become the standard text on the history of oil.” —Leslie H Gelb, front page, The New York Times Book Review “There is no doubt about Yergin’s basic thesis: Oil is power, big power … Yergin rightly has a lot to tell us.” —Theodore C Sorensen, front page, The Washington Post Book World “A compelling history … that clarifies the contemporary world situation.” —Los Angeles Times “Yergin has not written the history of oil but the history of the world from the point of view of oil And he has written it very well, with an eye for the relevant and often amusing detail … He marveled at his discoveries and, thanks to his great literary gifts, he is able to make us marvel as well … Yergin is finally as much a psychologist as he is a geologist and a historian— one who knows that oil is somewhere, deep down, in everybody’s emotions under two other names: wealth and power.” —Robert Mabro, front page, Chicago Tribune Book World “Impressive mastery … Daniel Yergin is as well equipped as anyone to build the bridge between oil and world diplomacy … He attempts nothing less than a rewriting of world history, to bring oil out of the garage into the cabinet-rooms.” —Anthony Sampson, author of The Seven Sisters, The Spectator “More than a gripping tale of international politics, The Prize chronicles oil’s role in shaping the twentieth century’s ‘Hydrocarbon Society’ of expressways, suburbs—and pollution—as well as ‘Hydrocarbon Man,’ who shows little inclination to give up the conveniences of automobiles, suburban homes and other oil-based essentials of life.” —Atlanta Constitution “Dazzling … a masterful study of how oil has dominated and shaped world events in the twentieth century.” —Jeremy Campbell, London Evening Standard “The best history of oil ever written … Yergin’s account [of World War II] is utterly persuasive and … downright gripping … The Prize … bringsour knowledge of the twentieth century—the Age of Oil—into sharper focus.” —Business Week “This is a book about greed, ambition and the lust for power It is about the people who have made the oil industry what it is—from Sheikh Yamani and George Bush to Armand Hammer and Saddam Hussein … Yergin is a wonderful storyteller.” —Stephen Butler, Financial Times of London “Compulsive reading … Daniel Yergin’s new book must be required reading for everyone from the Prime Minister to the new Desert Rats.” —London Daily Mail “Strongly recommended.” —Conor Cruise O’Brien, Times Literary Supplement “The Prize is the story of how a ‘mere commodity’ has shaped the politics of the twentieth century and profoundly changed the way we lead our lives … a significant book…” —Houston Chronicle “Compelling and comprehensive … his narrative proceeds like a developing photograph of our times.” —The New Yorker “Fascinating … The Prize revels in the drama.” —The Economist “Remarkable … an incredible work … exciting and easy to read … Compulsory reading for politicians and top officials [and] anyone concerned with an accurate history of this century.” —Peter Walker, former UK Secretary of State for Trade and Industry, The Independent “Captivating … readers will be well rewarded … Without oil, it would be impossible to think of America’s place in the world.” —Asahi Shimbun, Tokyo “The Prize manages to be both serious socio-economic history and wonderful entertainment Yergin … has a real knack for making his characters come alive … Oil as a force of history has become bigger than nations or individuals.” —Far Eastern Economic Review “It would be impossible to fully understand … the ‘age of oil,’ without reading The Prize by Daniel Yergin … The Prize is beyond exceptional … it is an entrancing tale of promoters, industrialists, and politicians; it is packed with historical detail but written with richness and intrigue…” —Jeff Sandefer, The National Review “Impeccably researched and fluently written … You can’t read Yergin’s account of the improbable cast of characters who built the modern oil business without marveling at the role of luck and accident in any process of economic creation.” —George Gendron, Inc Magazine “A magnificent epic story … The Century of Oil will continue into the next century.” —Nihon Keizai Shimbun, The Japan Economic Journal Books by Daniel Yergin Author Shattered Peace: Origins of the Cold War Coauthor The Commanding Heights: The Battle for the World Economy Energy Future Global Insecurity Russia 2010 FREE PRESS A Division of Simon & Schuster, Inc 1230 Avenue of the Americas New York, New York 10020 www.SimonandSchuster.com Copyright © 1991, 1992, 2008 by Daniel Yergin Epilogue copyright © 2008 by Daniel Yergin Title logo copyright © 1992 by WGBH Educational Foundation All rights reserved, including the right to reproduce this book or portions thereof in any form whatsoever For information address Free Press Subsidiary Rights Department, 1230 Avenue of the Americas, New York, NY 10020 This Free Press trade paperback edition December 2008 FREE PRESS and colophon are trademarks of Simon & Schuster, Inc Designed by Irving Perkins Associates, Inc Manufactured in the United States of America 10 The Library of Congress has cataloged the Simon & Schuster edition as follows: Yergin, Daniel The prize: the epic quest for oil, money, and power / Daniel Yergin p cm Includes bibliographical references and index Petroleum industry and trade—Political aspects—History—20th century Petroleum industry and trade—Military aspects—History—20th century World War, 1914–1918—Causes World War, 1939–1945—Causes World politics—20th century I Title HD9560.6 Y47 1990 338.2′782′0904—dc20 90-47575 CIP ISBN-13: 978-1-4391-1012-6 eISBN-13: 978-1-4391-3483-2 ISBN-10: 1-4391-1012-3 Lyrics on page 536 © 1962 Carolintone Music Company, Inc Renewed 1990 Used by permission Poem on pages 688–689 from The Intellectual Adventure of Ancient Man by H and H A Frankfort, John A Wilson, and Thorkild Jacobsen, page 142, © 1946 The University of Chicago Used by permission To Angela, Alexander, and Rebecca List of Maps The Independents Break Out: The First Long Distance Pipeline, Tidewater, 1879 Marcus Samuel’s Coup: The Voyage of the Murex, 1892 Opening Up the Middle East: Oil in Persia, 1901 The Red Line Agreement, July 1, 1928 The Great Migration of the 1920s: Mexico’s Golden Lane to Venezuela’s Lake Maracaibo War in Europe and North Africa War in the Pacific The Great Oil Deals: Middle East Consortia, 1951 Alaskan Pipeline and Alternate Routes, Early 1970s Transjordan, 185 see also Jordan Trans-Siberian Railway, 100 Trans World Airlines, 722 Treasury Department, U.S., 302 Treatise on Petroleum, A (Redwood), 123 trench warfare, 154, 164 Trinidad, Tripartite Pact, 296 Triple Entente, 129–30 Tripoli, 155, 322 Tripoli Agreement, 564–65, 567, 568, 574, 581 Troll natural gas field, 725 Truman, Harry S., 407, 409, 518, 638, 684, 754 Ickes fired by, 387–88, 389 Iran and, 439, 442, 446, 447 oil cartel and, 455–57 Truman Administration, 448, 455 Anglo-American Petroleum Agreement killed by, 389 synthetic fuel research policy of, 410 Tapline supported by, 407 Truman Doctrine, 398, 430 trusts, 80–81, 84, 85, 146, 248, 354, 396, 398 Tsushima, Battle of, 114, 298, 308 Tudeh Party (Iran), 403, 433, 449, 451 Tulsa, Okla., 74–75, 112 Tupi, 770 Turkey, 44, 157, 166, 538, 546 Iraqi border dispute with, 184 Soviet Union and, 409 Truman Doctrine and, 398 in World War I, 130, 157, 166 see also Ottoman Empire Turkish National Bank, 169, 171 Turkish Petroleum Company: British and, 169, 171, 174, 175, 180 French and, 173–74, 181 Germans and, 169, 171, 174 Iraqi agreement with, 185 ownership of, 169 post–World War I revival of, 173 Red Line Agreement with, 188, 265, 273, 395–96, 399, 401, 609 Teagle’s negotiations with, 181, 183–89 World War I hiatus of, 172 see also Iraq Petroleum Company turnpikes, 534–35 turpentine, 6, 14 Twain, Mark, 39, 87, 182 Twitchell, Karl, 271, 272–73 U-boats, 161, 355–59, 365, 520 Uncle Tom’s Cabin (Stowe), 34 Union Club, 23 Union Oil (Unocal), 66, 193, 202, 210, 698, 722 United Arab Emirates, 548, 621, 672, 752, 756 United Arab Republic, 490 United Mine Workers, 525 United Nations, 427 Gulf Crisis (1990–91) and, xvi, 754, 757 Iran-Iraq War cease-fire and, 747, 749 partition of Palestine recommended by, 407–8 Resolution 242 of, 588, 589 Suez Crisis and, 474, 536 United States: Arab oil embargo (1967) and, 537–40 Arab oil embargo (1973) and, 588–614 arms-for-hostages deal between Iran and, 746, 747 Britain’s oil imports from, 219 decline of oil hegemony of, 375, 377, 389, 392 end of oil exploration in, 715–16 energy policy of, 641–46, 735 GNP of, 617 “Good Neighbor” Latin America policy of, 258 Gulf Crisis (1990–91) and, xvi-xvii, 753–54, 756–58 immigration to, 21 Japan’s pre-World War II relations with, 293–98, 300–309 kerosene exports to Russia from, 44 as largest oil consumer, xviii, 178, 191–92, 523, 706, 726 as lone remaining superpower, 754 Mesopotamian-Iraqi oil negotiations of, 180–89 Middle East oil and British relations with, 378–79, 381–85 Middle East politics and, 168, 459, 480, 676 in 1986 oil price negotiations, 739–42 October War and, 585–88, 592, 593–94, 608–9, 612–14 oil conservation in, 392, 641–46, 677 oil exports to Europe from, 14, 40–41, 72, 162, 241 oil import quotas of, 494–95, 496–97, 511, 517–22, 528, 530, 540, 549, 571–72, 573 oil imports of, 179, 549, 556, 573, 729, 751, 772 oil reserves of, 391, 482, 647 oil stockpile of, 518, 540, 643, 725 oil trade and political relations between Mexico and, 214–16, 254–62 OPEC strategy of, 624–28 Open Door policy sought by, 179, 181, 185, 291 post–Civil War growth of, 21, 80 Saudi Arabia focus of, 409–10 Saudi Arabia’s diplomatic relations with, 275 as second-largest oil producer, 726 solidification policy of, 378–81, 389, 393 Soviet oil-for-wheat deal with, 625–26 unemployment in, 617 world hegemony of, 513 world oil export trade share of, 46 in World War I, 155, 156, 160, 161, 208, 260 World War II oil policies of, 359–63 in World War II Pacific theater, 333–49 United States Oil Policy, The (Ise), 739–40 Unocal, see Union Oil updated book value, 566 U.S Leather, 77 U.S Steel, 711 Utah, shale oil in, 178, 698 Vacuum Oil, 210, 225–26 Valdez, Alaska, 554, 648 value gap, 708–9 Vance, Cyrus, 627, 678 Vanderbilt, William, 31 Vaseline, 35 Venezuela, 207, 241, 244, 255, 260, 261, 398, 411, 415–19, 427, 452, 539, 756, 770 1948 coup in, 491–92 oil boom of, 216–20 oil concession cancelled by, 630–32 oil production shutdown in, 767–68 as OPEC member, 504, 506, 562, 563 participation ownership and, 566 Ventura County, Calif., 65 Verdun, 152, 161 Victoria, Queen of England, 461 Vienna, 8, 382 Vietnam War, 520, 538, 547, 754, 756 Vincennes, 747 Virgin Islands, 521 Voice of the Arabs, 462, 559 Volcker, Paul, 712 Volkswagens, 312, 322 Voroshilov, Klementi, 114 Wahabi Moslems, 267, 268 Walden, George, 294–95 Waley Cohen, Robert, 110, 111, 133, 176 Wall Street Journal, 540, 714 Walters, P I., 629, 704–5 Walters, Vernon, 441–42 Walton, Paul, 423–25, 426 Wannsee Conference, 327 Ward, Thomas, 265 War Department, U.S., 92 Warner, Charles Dudley, 39 War Production Board, U.S., 359 War Shipping Administration, U.S., 359 Washington Energy Conference, 611–12, 667 Washington Naval Conference, 290 Washington Post, 197, 578, 678, 734, 735, 738 Watch Committee, 582 water drilling, 67, 71, 264, 271 water drive, 234 Watergate scandal, 717, 735 foreign relations and, 591–92, 593, 613–14 government credibility and, 592–93, 600–601, 602, 641, 643, 675, 760 Nixon Administration and, 591–93 Wealth Against Commonwealth (Lloyd), 84–85, 87 weapons of mass destruction (WMD), 766 see also nuclear weapons Webb-Pomereme Act (1918), 248 Wehrmacht (German Army), 314, 319, 320 Weizmann, Chaim, 284 Welles, Sumner, 302, 303, 383, 417 Wellings, F E., 481 Wellington, Arthur Wellesley, Duke of, 414 “We’re Running Out of Oil” (Ickes), 377 West Bank, 537 West Palm Beach, Fla., 23 West Texas Intermediate (WTI), 706, 708, 730, 731 whaling industry, White, Edward, 93 White, Theodore H., 294 Whiting, Ind., 37 “Why the Bankers Suddenly Love Mexico,” 649 Wilcox, Claire, 389 William II, Emperor of Germany, xv, 136 William III, King of Netherlands, 57 Williamson, George, 561–62 Willis, “Tex,” 517 Wilson, Arnold, 127, 130–31, 132 Wilson, Harold, 547, 652 Wilson, Woodrow, 161–62, 172–73, 178, 197, 216, 255 Wilson Administration, 179–80, 194, 198 windfall profits tax, 675 Witte, Count Sergei, 113, 114 World Almanac, 204 World Bank, 448, 464 World Crisis, The (Winston S Churchill), 177, 680 World Trade Center, 766 World War I, 151–67, 290, 291, 322, 370 aftermath of, 151 airplane use in, 155–57 armistice, 167 background and causes of, xv–xvi, 136–37, 147–48, 151 fuel oil shortage in, 160–63 outbreak of, 148, 172 Parisian taxi armada in, 152–54, 173 Rumanian oil industry destroyed in, 163–66, 201, 352 submarine use in, 160, 161 tank use in, 154–55 U.S in, 155, 156, 160, 161, 208, 209, 260 as war of defense, 154, 155 World War II, 289–370 Allies’ final push in, 366–70 atomic bombing of Japan in, 347 Balikpapan refinery destroyed in, 333–36 Battle of the Atlantic in, 355–59 code-breaking in, 298, 301, 304, 306, 309, 323, 338, 339, 356, 358–59 concentration camps in, 328–29 European outbreak of, 251, 260, 294, 295, 316, 350 German buildup and, 311–32 German synthetic fuel industry as Allied target in, 329–31 Germany’s defeat in, 332 Japanese buildup and, 289–310 Japan’s defeat in, 344–49 Middle East oil industry shut down in, 284, 373 Normandy invasion in, 330, 331, 366 North African campaign in, 321, 322–26, 358, 364, 462 oil’s strategic importance to Allies in, 350–70, 377 oil’s strategic importance to Axis in, xvii, 289–349 Pacific theater of, 333–49, 342 Soviet-Japanese fighting in, 346, 347 submarine use in, 339–40, 341, 355–59, 365, 520 tank use in, 320, 321, 331–32 Wright, M A., 510 Wright brothers, 79, 155 Wyoming, 194, 208 Yale University, 3, Yalta Conference, 346, 385 Yamamoto, Isoroku, 298–99, 310, 337–38, 341 Yamani, Ahmed Zaki: Arab oil embargo (1967) and, 537, 539 Arab oil embargo (1973) and, 578, 579–80, 581, 583–84, 588, 589, 593, 607, 609, 610 Aramco concession and, 632–34, 705, 730 background of, 621–24 Faisal I and, 506, 564, 578–80, 589, 622–24, 743–44 firing of, 744 Harvard address of, 741–44 Iran and, 515, 517, 620–21 oil price stability and, 654, 671, 685–88, 695–96, 702–3, 730, 732, 737, 740, 741–42 OPEC and, 563–64, 565–66, 581, 583–84, 587–88, 654, 671, 702, 728–29, 732, 740, 741–42 participation ownership and, 565–66, 567 “Yamani edict,” 672 Yamashita, Taro, 488 Yamato, 345 Yankelovich, Daniel, 600–601 Yates oil field, 206, 711 Yazidis, 185 Yemen, People’s Democratic Republic of (South), 506, 547, 576 Yom Kippur War, see October War Young, Andrew, 662 Young, James, Young Ladies Oil, 70 Ypres, 164 Yugoslavia, 318, 464 Zahedi, Fazlollah, 450, 451 Zapata company, 734–35 Zelten, 510–11 Zhukhov, Yuri, 319 Zijlker, Aeilko Jans, 57–58, 59 About the Author DANIEL YERGIN is a leading authority on energy, international politics, and economics He is chairman of Cambridge Energy Research Associates (CERA) and executive vice president of IHS, the parent company of CERA He also serves as global energy expert for the CNBC business news network Dr Yergin received the Pulitzer Prize for The Prize: The Epic Quest for Oil, Money & Power A number one bestseller, it was also made into an eighthour PBS/BBC series seen by 20 million people in the United States The book has been translated into seventeen languages and also received the Eccles Prize for best book on an economic subject for a general audience Of Dr Yergin’s subsequent book, Commanding Heights: The Battle for the World Economy, the Wall Street Journal said: “No one could ask for a better account of the world’s political and economic destiny since World War II.” It has been translated into thirteen languages Dr Yergin led the team that turned it into a six-hour PBS/BBC documentary—the major PBS television series on globalization The series received three Emmy nominations, a CINE Golden Eagle Award, and the New York Festival’s Gold World Medal for best documentary Dr Yergin’s other books include Shattered Peace, an award-winning history of the origins of the Cold War, (coauthored) Russia 2010 and What It Means for the World and Energy Future: The Report of the Energy Project at the Harvard Business School Dr Yergin received the United States Energy Award for “lifelong achievements in energy and the promotion of international understanding” and chaired the U.S Department of Energy’s Task Force on Strategic Energy Research and Development He is a director of the United States Energy Association and the U.S.-Russian Business Council, a member of the U.S National Petroleum Council, a trustee of the Brookings Institution, and a director of the New America Foundation Dr Yergin received his B.A from Yale University, where he co-founded The New Journal, and his Ph.D from Cambridge University, where he was a Marshall Scholar * Philby was to well out of his work for Socal But being able to pay for the education of his son Kim at Cambridge did not necessarily guarantee the outcome he had hoped for Kim had done miserably, getting thirds—almost flunking—on his final exams Jack Philby wanted his son to go into the Civil Service But two of Kim’s tutors refused to support his application because of the young man’s already obvious communist proclivities Jack Philby was outraged Kim was entitled to his “leanings towards communism” and should not be victimized for “views honestly held,” the father wrote to one of the tutors in 1934 “The only serious question is whether Kim definitely intended to be disloyal to the government while in its service.” He doubted that Jack Philby’s wife was more pragmatic “I hope,” she wrote of their son, “he gets a job to get him off this bloody communism.” * In 1944, Casoc, the California-Arabian Standard Oil Company jointly owned by Standard of California and Texaco, would indeed change its name, but with the order reversed—to the Arabian-American Oil Company, much more commonly known as Aramco * Sometimes Acheson and Eden were mistaken for each other Eden did not know exactly why “Acheson,” he said, “does not look like a typical citizen of the United States.” He thought it might have been because Acheson’s mother was Canadian Once, on a flight from New York to Washington, an American naval officer passed Eden a note: “You are either Dean Acheson or Anthony Eden Whichever you are, will you autograph my book?” ... as follows: Yergin, Daniel The prize: the epic quest for oil, money, and power / Daniel Yergin p cm Includes bibliographical references and index Petroleum industry and trade—Political aspects—History—20th... between, on the one hand, environmental protection and reduction of carbon and, on the other, economic growth, the benefits of Hydrocarbon Society, and energy security These, then, are the three themes... power when the internal combustion machine overtook the horse and the coal-powered locomotive Petroleum was central to the course and outcome of World War II in both the Far East and Europe The