Socialist Worker

The oil industry: capitalism and conflict

As the oil companies rake in huge profits while increasing their prices, Simon Basketter and Simon Assaf look at how "black gold", capitalism and conflict are intertwined

Issue No. 2113

Oil drives the global capitalist economy. It is a vital ingredient in everything from transport through to petrochemicals and agriculture. A handful of massive corporations and producer countries control the global oil and gas industry.

They are some of the richest and most powerful forces on the planet.

States have backed the multinationals to the hilt, organisating coups and wars in the pursuit of profit and power.

The discovery of oil in 1859 in the US was a major event in the development of capitalism.

This “black gold” soon transformed the world economy. The industry developed through the increased use of oil lamps and heating but expanded as it stimulated the growth of the automobile and chemical industries.

The early swarm of small companies quickly gave way to giant corporations, above all JD Rockefeller’s Standard Oil.

Rockefeller said, “God gave me my money. Having been endowed with the gift I possess, I believe it is my duty to make money, and still more money, and to use the money I make for the good of my fellow man, according to the dictates of my conscience.”

Cutthroat

Rockefeller was a cutthroat US ­capitalist who built his oil monopoly in the decades after the 1861-5 American Civil War using methods akin to that of the Mafia. He employed private armies to break strikes.

As he once said, “I would rather earn 1 percent off a hundred people’s efforts than 100 percent off my own efforts.” This vicious worldview made him the richest man on earth.

As he quietly bought up smaller oil competitors, Rockefeller entered into secret – and illegal – agreements with railroad magnates who gave discounts as off the books rebates to his growing oil monopoly.

This drove the smaller refiners out of business. By 1879 Standard Oil controlled 90 percent of the US’s oil refining business.

When the US Supreme Court finally forced Rockefeller to disband Standard Oil as a monopoly in 1911, the damage was already done.

The break-up doubled the value of his stock and gave birth to oil conglomerates Exxon and Mobil (now Exxon-Mobil), Arco and Amoco (now part of BP), Pennzoil (now part of Shell) and Chevron.

The major rivals to the US ­companies grew up within the British Empire.

Shell developed out of a merger of British and Dutch companies in 1907. BP started as the British Persian oil company. Both exploited the oilfields and markets of empire.

It got a monopoly of Iranian oil on the back of a £20,000 deal. The carve up culminated with secret agreements between the major companies to ensure their profits.

The US and Britain’s domination of oil was central to their victory over Germany in the First World War.

Vicious

After the war the oil companies continued to be involved in vicious competition while carving up the world’s supplies and markets between them.

They paid minimum sums to local rulers for concessions giving them control of areas thought to contain oil.

The most notorious and long-lasting was the 1928 “as-is” agreement backed by the world’s seven biggest oil companies – Standard Oil, Shell, BP, Gulf, Chevron, Mobil and Texaco. They were dubbed the seven sisters.

Middle Eastern oil was cheaper to extract than the older US supplies. The companies fixed prices at the US rate.

From time to time the companies’ thirst for profit even clashed with the interests of the states they sponsored.

Texaco was caught supplying oil to Nazi Germany during the Second World War.

Shell boss Henri Deterding was a convinced fascist. Adolf Hitler sent a wreath to his funeral in 1939.

But the oil companies were too firmly dependent on the military and economic power of the US and Britain to carry this too far.

After the Second World War they continued to carve up the oil fields between them. Most of the refining and almost all of the distribution of oil is still controlled by the giants.

The companies have merged along the way. But they, and the Western states behind them, continue to dominate the world.

Their desire for profits and control has led to the disaster of imperialist intervention and wars in crucial parts of the world, particularly the Middle East.


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