The Prize

The Prize: The Epic Quest for Oil, Money, & Power

by Daniel Yergin

Main Points:

• Oil contributed to the rise of capitalism. Whether it was the creation of the first monopoly in Standard Oil that faced antitrust suits in case #398 in May of 1911 or the decision by Calouste Gulbenkian to allow foreign oil majors to participate in the production of oil within the boundaries of the old Ottoman empire at a cost of 5% of their profits, capitalism is front and center in the story of oil. In order to prevent Iran moving into the hands of the Soviets, the United States CIA and Churchill created Operation Ajax to depose Mossadegh Mohammad and replace him with the Shah of Iran. In order to prevent Enrico Mattei from pushing a Soviet Union pipeline into Italy or changing the way profits are divided between oil majors and governments, interested powers facilitated his death. Capitalism and the economic force of open markets helped determine the price of oil, quantity of oil, and the distribution of oil. The world ran out of oil five times: (1) in the 1880's when Rockefeller's successor said he would drink every barrel of oil west of the Mississippi, (2) in 1914 when Woodrow Wilson claimed he would walk to church, (3) 1945 when the Allies were supplied with every last barrel of oil to defeat the Axis power, (4) 1970's when the OPEC nations controlled the supply to raise prices and in (5) 2004 during the most recent peak oil scare. Each time capitalism and market forces helped undo the system.
• Global Politics is shaped by oil. The great shift of power in the 20th century was that from the multinational industrial oil companies to the oil producing nations. Several key events led to this trend. After the Great Oil Deal in 1947 when Aramco expanded its partners with Esso (Exxon), Secony-Vacuum (Mobil), SoCal (Chevron), and Texaco, the oil producing countries of the middle east starting realizing the extent of power of oil majors in dictating price. They were dubbed by Enrico Mattei, Italian oil magnate of ENI, as the "Seven Sisters" -the companies that decide the price of crude behind closed doors. Perez Alfonzo, the creator of OPEC, claimed that oil companies kept overproducing, forcing the price down, thus giving oil producing nations very little. When Muammar Al-Gaddafi took over Libya and made Arman Hammer of Occidental oil sign a deal for 55% of oil profits, it was the first time an oil producing nation dictated the price. From then on, nationalization of oil reserves in Mexico, Venezuela, and Kuwait resulted in the rise of resource nationalism- forcing oil producing companies to look elsewhere for oil.
• A 'Hydrocarbon Society' obsessed with high consumption of energy and oil was the result of the oil politics of the 20th century. The design of highways, the promotion of individual mobility, and the coal to oil transition had created a world in which burning fossil fuels was no longer a conscience choice.

If you are interested in a 8-part documentary on Daniel Yergin's Pulitzer Prize winning novel, watch the PBS series of The Prize!

Listen to a Q&A discussion between Daniel Yergin and the New America Foundation talk about the Prize and the new four themes Yergin focuses on: oil as a financial instrument, globalization, climate change, and technology!