Week 11: The Oil Industry PDF

WEEK 11: THE OIL INDUSTRY THE HISTORY OF OIL AND GASOLINE - THOMSON LECTURE (20 MINS) What is gasoline? - Oil and gasoline two key components of the capitalistic economy - Gasoline is relatively a recent invention (later years of the 1800’s it wasn’t a massive component of the wester...

WEEK 11: THE OIL INDUSTRY THE HISTORY OF OIL AND GASOLINE - THOMSON LECTURE (20 MINS) What is gasoline? - Oil and gasoline two key components of the capitalistic economy - Gasoline is relatively a recent invention (later years of the 1800’s it wasn’t a massive component of the western economies) - In oil producing areas the US, pennsylvania, ohio, southwestern ontario - Oil used for lubrication until the refining process - Initially gasoline was a byproduct of the refining oil into kerosene (flammable, used in lamps and lighting, some engines) demand → high - Couldn’t figure out what to use it for. Was not very stable, difficult to control a reaction when you ignited gasoline - got rid of it (useless) - Prior to the internal combustion engine (everything changes with this), it had limited use - In the USA in the 1800’s it was routinely dumped, often into nearby rivers, and fields, especially in Ohio and Pennsylvania. - (OPEC influence) - First they had to figure out how to stabilize gas in order to make it viable as a source of fuel and energy - As they do so, people begin to experiment with the idea of using gas and an internal combustion engine to move carriages or (cars) Internal Combustion - In Germany, internal combustion cars were developed in the 1870’s and by the mid 1880’s, Karl Benz had begun commercial production. - The necessity to use gasoline created a new market for what had been discarded in the past - Bertha Benz (Karl’s wife) Journey - Karl built the benz factory (wagons, coaches, etc) and developed the first Internal Combustion Engine Vehicle that moved him around the plant - He needed gasoline in order to make the car go, but the only source of gas, was the fuel he brought in himself - Build a network of connections with people with internal combustions engines to add fuel to it Ways to consider gasoline’s impact - Gasoline and oil is very political - One way to look at this influence is to consider individuals who benefited from the increasing importance of gasoline - William Knox D'arcy (late victorian businessman, made a lot of money in africa and the middle east, and saw that PERSIA, Iran, had a lot of gasoline) who developed the oil industry in Persia and elsewhere in the Middle East - Wanted a monopoly of oil in the middle east and got it - Founded what became British Petroleum (given the monopoly power - by the british government, not the middle east - colonial) John D Rockefeller (Manhattan, rockefeller centre named after him)  - The American example - Founded Standard Oil (latter half of the 1800’s in the US) - Had used gasoline as a fuel to heat oil in the refining process - to burn if off rather than dumping it - Oil was a valuable commodity - has a vision that standard oil will control the production of oil from when it leaves the ground until it enters the consumers property when they buy it. - internal combustion gave him a huge New Market - Standard Oil became a virtual monopoly - by the 1890’s standard oil owns more than 90% of the refining capacity in the world. - They massively dominate the oil industry in the US, to the point where the US government and the public wants them broken up - By the 20th century the american courts and legislation force standard oil to break up into smaller components - not a massive a conglomerate - Still not rested away from rockefeller and others - Real Competition will wait into the 20th century because of the power of standard oil Technology; - Gasoline really did change technology in the world - The power of gasoline made internal combustion engines much superior to other types - Henry ford’s model T made the car more widespread (most famous car ever made, he develops the model in the first decade of the 20th century, exploiting the success of the internal combustion engine) - Becomes the best selling car in the world - by a lot. - He revolutionized the way that automobiles would be produced (borrowed ideas from scientific management theory) and introduces the assembly line to the production of cars - before cars were made by craftsman 1 at a time - Assembly line - role of the worker s reduced to speciirc tasks - build more cars, quicker, cheaper prices - more people could by cars - different world in the US and the rest of the world - Need networks of gas stations for fuels - And highways - In agriculture tractors replaced steam engines. Society - Cars need highways (roads) - Cars allow for more suburban spread (rather than walking to work you can drive) - Cars require the expansion of networks of gas stations Changes in the oil business - Increased markets for gasoline mean increased exploration for sources (more people more oil needed) - In canada this means exploration in alberta - In the USA the shift to Texas and Oklahoma (bigger, more fields) - Globally the middle east becomes important (BP) War - Gasoline becomes an essential tool of war - Tanks, ships, planes, and transport all need it  - As a strategic resource it becomes a cause of conflict as well (can’t have opponent to achieve the gas) Politics - US started to pump oil out of iran - payed low royalties to Iranian governments - Famous canadian premier of alberta peter lawrey - you only pump oil out once - Post WW2 - oil countries said we should get this oil and charge more. - American and british roles in the august 1953 coup against iranian premier mohammed mossadeq (charge more royalties) - In 1953 - the CIA and the UK (MI5-6) sympathetic to the Russians - they organized a coup in Iran to replace the popular government with one more amenable to the oil and gas industry. Installation of the shaw. - No proof people said 1980’s American historians were able to file freedom of information requests - and found out it was true - CIA overthrew. - This is one example of the influence of the industry on world events OPEC - The organization of petroleum exporting countries - origins in a small group of countries like IRAN - form a cartel - to control world price and access of the product - The oil embargo (reduced production and raised price of OPEC countries) they launched in 1973 (after the yom kippur war in the ME) caused a recession in the western economies - lasts a decade - PROBLEM - YOU NEED DISCIPLINE - PEOPLE ARE SELFISH - IF ONE PERSON WANTS TO RAISE THE PRICE IT WILL AFFECT EVERYONE - Still exists today - not as much power Environmental Problems - Not just use in cars (pollution) - Production in refineries (dirty business, creates by- products) - Transportation of product (tankers crash, pipelines burst) etc - deadly - Land issues with pipelines - indigenous land issues - property issue - with the pipelines Canada - Imperial Oil - biggest player in the canadian oil industry - branch of rockefeller’s standard oil - bought it out towards the end of the 1800’s and controlled it - industry Oil and gasoline are still crucial to the canadian economy - One of looking at this is to look at companies and individuals Petro Canada - Started as a crown corporation (government owned - extraction and refining) during the economic crisis in the 1970’s (gas way up) - Canada had a lot of oil - so why go up - industry owned by US, dutch, etc - canada should make its own - Pierre trudeau created petro - NEVER MADE MONEY - they spent expanding - In the 1980’s does the government need to own a oil business - not cheaper than the internationals - 50% of petro canada was sold off by the moroney conservative government and the other 50% by the liberal government of jean paul san martin. - Tells us how it is political - Was to be a window on the industry - Eventually privatized