DeGolyer: “The center of gravity of world oil production is shifting to the Middle East”

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 Arabia’s 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 Europe’s 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 OPEC’s 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 Nasser’s 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 Israel’s 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 80’s: 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