Post-WWII Middle East Oil Industry Changes

• The Middle East is central to the world oil industry, influencing both foreign and domestic politics.
• Oil is a valuable resource that can be used as fuel or exported for foreign exchange.
• For many oil-producing developing countries, oil wealth has led to major power intervention, political corruption, militarization, foreign debt, distorted economies, and interfered with development strategies.
• Oil production's localized nature, technology, and capital intensity isolate if from the rest of the economy.
• Foreign control of oil exploitation made it less necessary to repress local populations.
• Oil money shifted power between state and society, enabling rulers to suppress institutions and checks on their authority.
• Overall, oil has reduced legitimate political participation in the region.
• Oil imperialism was difficult but eased the move from colonialism to national independence.

Industry Structure

• The oil industry includes extraction/production, exploration, development, transportation, refining, and marketing.
• Exploration can still occur with small investments, with equipment often rented and "wildcat" discoveries possible.
• Development and production require large investments in fixed capital.
• Some transport modes like pipelines require large investments, while others like tankers require less.
• Refining is capital intensive.
• Variations in ownership create different types of firms with different structures and interests.
• Vertically integrated firms encompass the entire process.
• Multinationals operate in multiple countries.
• Large vertically integrated multinationals were traditionally known as majors, while other firms were called independents.

The Oil Industry in The Middle East

• Control of land equates to control of oil.
• Mineral rights belong to the state.
• Oil companies negotiate rights to produce oil with governments for payments, rents, and royalties.
• In the US mineral rights go with land ownership, but sellers lack leverage due to concentrated markets.
• Middle Eastern governments have more leverage than US landowners.
• Before World War II, Middle Eastern countries competed for oil company investment.
• The "Red Line Agreement" of 1928 restricted oil exploration and development in the old Ottoman Empire unless all partners consented.
• Countries within the Red Line struggled to increase national income through oil due to companies' reluctance to increase world oil supplies.
• Oil company partnerships and concession patterns limited government leverage.
• Governments faced a single joint venture or partnership operating company.
• Joint ventures exist because of capital intensity and high risk.
• Individual parent companies set up operating companies which allowed multinationals to control worldwide oil supplies and coordinate operations.
• Kuwait's choice of company was limited to a non-British company by the British government.
• Kuwait's contract with KOC gave the company rights for 90 years.
• Attempting to get better terms could lead to legal challenges and intervention from Britain or the US.
• Iran nationalized its oil in 1951.
• BP obtained court orders against companies buying Iranian oil because there was only one parent company.
• The British and American governments destabilized the Mossadeq regime due to nationalization.
• The Shah invited non-British participation in the National Iranian Oil Company (NIOC) after ouster and restoration.
• American and French companies were given 60% of shares, BP was left with 40%.
• The one company-one country concession model made the Middle East the marginal supplier.
• The Iranian crisis solution made control easier due to the reorganized NIOC.
• Joint participation in Middle Eastern enabled oil companies to share information and have leverage against host governments.
• Once supply decided, companies regulated production by increasing or decreasing off take in a few countries.
• The one company-one country pattern did not exist in Libya, thus enabled government to spearhead assault on the oil companies.
• Major companies did not compete over terms to avoid bad example.
• They agreed to avoid other competitions, this was outlined in the "As Is Agreement"
• As Is agreement required regional negotiations but was not followed anywhere.

International Oil Politics Before Revolution

• The international oil cartel curtailed production and competition even during the Depression.
• Exports from Mexico and the Soviet Union declined due to geological reasons, boycott, and policy.
• Reduced supplies eased competition during times of low demand.
• Governments and corporations regulated to protect industries
• Oil policy during the war made majors and governments work toether.

Political Cooperations

• Majors developed statesmanship to help politics and markets.
• Home govs expanded oil companies as surrogates.
• Oil premium due to military needs
• New expansion in world production capacity from explorations.
• Hard to decide who would cut back how much after the war.
• Financial conflicts rose between countries.
• US gained advantage through oil dominance
• Foreign oil was seen as national power
• Countries with inhibitions participated in securing supplies.
• Serpants of eden came about from this.
• Industry made huge profits, so companies are world's richest firms
• Faced with private firms like Occidental and getty
• A group of independents demanded and received Iranian consession.
• French government saw UK as a threat to French autonomy because there were no French majors.
• ENI threatened due to liberal terms
• AOC gave better terms that countries were getting.
• Majors decided to sweeten terms
• Some lost land to sell concessions there
• Venezuela gov threatened to nationalize foreign oil operations.
• Fovorable treatment was available to US firms abroad, bit BP couldn't do it.
• BP lost the loss of 60%, and independents also lost.

More Completions

• Soviet union put pressure as a huge oil exporter
• Last straw was US imposing quota on oil imports
• US domestic industry was very strong due to the post war era
• Access helped incentivise to invest abroad.
• Multinationals did try to up sails during the energy.
• Domestic cited security and risk and demanded real protection.
• Multinationals could see a shift and tried reducing payments.

The formation of OPEC

• The goal was to help estimate oil revenue.
• Not about price fixing but for calculations of how much they would have to pay.
• Company profits high, prices did not fit in, however.
• Countries wanted profit sharing
• The majors saw posted prices as a means to help financial situation.
• Opec was made to try and do concerted action.
• They tried to coordinate oil exporting governments.
• They wanted to secure all industries.
• Political competition caused political division
• United States and United Arab Emirates, formed Organization Petroleum exporting OAPEC.
• Two months of cuts caused high prices
• It was dependent on various economic interests.

OPECS Early Era's

• The purpose was to stabilise prices. restore prices, consult host gov etc
• Helped members make incremental gains.
• Advantage of the company
• Decided against the company completely
• Hardline stance suited the companies which saw
• Continuesd practice ot deall with host gov one at a time
• US didnt want OPEC
• Membership expanded
• "oil weapon" used due to political conflict.
• Weapon dates back to 1948, when Saboteurs blue up company pipeline during the control of Palestine.
• Some used Suez crisis due to procedures to interrupt.
• Other uses not effective.
• Non Arab OPEC did it effectively by expanding the production
• Anti trust waivers
• Dissension amoungst arab government
• All gov did not attack isreal
• All three wanted Joint policies to withstand pressure from other groups and companies.

Important structural Change OAPEC,

• OAPEC Power was dependent on cooperation.
• Chastened to advances interests
• Under De Gualle France moved closer to the gov
• US positions with Vietnam.
• Seen as untrustworthy
• Each companies feared oversupply
• Thought not necessary due to how easy it was
• 1967 the war closed Canal.
• Effective tanker shortag
• No company made initiative to help.
• Increase production from other sources, gov began demanding the same.
• Peak US production
• Us had to use foreign sources

The Libyan Effect

• Revolution replaced anti American king with Qaddafy
• Demand they pay the Libyan GOV or shutdown.
• Occo had other contracts so he could not
• But hammer president tried other sources and was stopped by Exon who didn’t give him the oil
• Nixon protected the Shah from political pressure
• They had an agreement stating it would be for 5 years.
• Government devalued the dollar
• They went to courts after demands didn't get accepted
• Companies unsuccesful at demands over five year plan
• When they had issue who controlled OPEC
• Fell way before revolutio
• It fell the most it got in the system which was so sad
• 1972-73 governments wanted USA not to attack.
• War declared as cut off oil to supporters of Israel.
• Arabs were perceived as negative after those effects.

What this caused.

• Hardships because the war hurt those of Arabs too
• The most import effect was conciliation prices revolution
• One year prior double the average in price.
• Not simple price revision
• Control by multinational
• Didnt cut off the power
• They started doing nationalization
• Iraq and libya did this too.

What The Shift Did

• Multinational cant use the oil as the industry that susidized all the rest now.
• Sell transfer and low profits on the rates.
• Tax rates in lower areas
• The industry had to earn profits in order to keep prices at the time for the year
• Increasing production became a company priority, even though US regulations limited the amount of windfall profits companies could reap and other governments began to charge higher royalties and fees for oil produced in their countries.
• Higher oil prices also depressed demand. because before the second round of huge price increases during the Iranian revolution, consumers were using about the same amount of oil they had used in 1973 before the oil embargo. oil
• Opec wanted for ethnic to express conflict.
• Libya and Iran had differences over pricing.

Disagreements

• Economic interest
• Irab have pop for oil revenue
• Reserves limited.
• Price mcdes had pop an dto much oil.
• Shah was to freeze to attracts allies.

More stuff

• Gov saw an increase in revenues.
• Revolution created a panic
• They could attack at prices
• Im oil they didn't cut on prices
• OPEC had been devasting
• Meetinhs were shouts
• Competition from britain
• Deteriorating market
• Didn't accept scretary so Iraqi did.
• Oil that had was set it and then opec.
• Consumers went to higher suppliers .
• IEA needed to get there act together.
• Had to start using that source.
• All that stock was dumped in the market.

What the Markets Did

• Feared lots of loss
• It wasn't halted much.
• Maintained with lots of sales
• The prices all complained but felt unless forced.
• Loops and control were many.
• The market looked over its shoulders
• Iran made a lot of political pushback
• The combination to pushback.
• Push the saudi arabian to push back
• They helped many
• OPEC had their new plan from here.
• But they didnlt stop and do what needed as such
• After years it was time to make changes
• Economic problems lead for Kawait which was pressins.
• Continued to cause
• Made vulnrrable to retalation.
• Could not drop its claim
• Was conveniet to point kawait
• Not all about just oil
• Wanted a quick infusion.

Second Wave

• Invasion for Saddam
• Was to make a goal and perspective
• Promised destruction to make one feel bad
• Was a bad result

The End

• This made again strategic
• Left world state of incertainty
• Inited for action
• Influenced sides with it
• Increased oil prices and markets
• All shoulders opec members
• The actions were to slow handed and plumetted.
• No one can real acommodatr there actions to injury to to side
• Successor states was set for setting up for new oll rush the world so
• The cost of oil to invest will keep profot down
• The world keep profit down.
• Concerns to also limit the other degree prices that would be in them.
• Blesing in a way for there countried and stuff

Oil and its Cash

• More expensive so had higher profits.
• The flood was no exception
• Acountnres needed to be great to use for their use
• Many was overrated so money had to be mixed.

More stuff

• Some states subsidize some stuff for homes at low rates.
• There are several things that have been mentioned such as
• Some great in order to maintain this for what has been so long
• Great to break traditions
• Instilled some false sence
• Levy morned for what had happened so
• Destructive to what had to do.

How This Happened

• The war lead to isreal and out
• Implodes many things
• Many got overran with tankers bankers and the guys there for that.
• Oil into east enabled countries to have more countries.
• Oil enabled dependcy even more
• Broken tradition image to out siders.
• Strategies
• Subs for military powesr
• Economic security for polich makers
• Had fat years to rep for the bad years
• Oil had a crash that changed some way.
• Results in two highly set stuff and set action.
• Aarab nationalism

Opportunity

• Regional issues there but no oil blessing or sure and safe thing came on the people and such so.
• Not sure on next steps.
• Energy to all like equal effects with this.

Explore shifts in the Middle East oil industry post-WWII. Topics covered include NIOC's reorganization impact on US oil companies; CFP's oil concession pursuit, and French resistance to Algerian independence linked to oil. Also, ENI and AOC's influence, competition, and Venezuela's demands impact on contract negotiations.