TRANSCRIPT
excerpt:
HOW BIG OIL CONQUERED THE WORLD
"Oil. From farm to pharmaceutical, diesel truck to dinner plate, pipeline to
plastic product, it is impossible to think of an area of our modern-day lives
that is not affected by the petrochemical industry. The story of oil is the
story of the modern world.
Parts of that story are well-known: Rockefeller and Standard Oil; the internal
combustion engine and the transformation of global transport; the House of
Saud and the oil wars in the Middle East.
Other parts are more obscure: the quest for oil and the outbreak of World
War I; the petrochemical interests behind modern medicine; the Big Oil
money behind the “Green Revolution” and the “Gene Revolution.”
But that story, properly told, begins somewhere unexpected. Not in
Pennsylvania with the first commercial drilling operation and the first oil
boom, but in the rural backwoods of early 19th century New York State. And
it doesn’t start with crude oil or its derivatives, but a different product
altogether: snake oil.
“Dr. Bill Livingston, Celebrated Cancer Specialist” was the very image of the
traveling snake oil salesman. He was neither a doctor nor a cancer
specialist; his real name was not even Livingston. More to the point, the
“Rock Oil” tonic he pawned was a useless mixture of laxative and petroleum
and had no effect whatsoever on the cancer of the poor townsfolk he
conned into buying it.
He lived the life of a vagabond, always on the run from the last group of
people he had fooled, engaged in ever-more-outrageous deceptions to
make sure that the past wouldn’t catch up with him. He abandoned his first
wife and their six children to start a bigamous marriage in Canada at the
same time as he fathered two more children by a third woman. He adopted
the name “Livingston” after he was indicted for raping a girl in Cayuga in
1849.
When he wasn’t running away from them or disappearing for years at a time,
he would teach his children the tricks of his treacherous trade. He once
bragged of his parenting technique: “I cheat my boys every chance I get. I
want to make ’em sharp.”
A towering man of over six feet and with natural good looks that he used to
his advantage, he went by “Big Bill.” Others, less generously, called him
“Devil Bill.” But his real name was William Avery Rockefeller, and it was his
son, John D. Rockefeller, who would go on to found the Standard Oil
monopoly and become the world’s first billionaire.
The world we live in today is the world created in “Devil” Bill’s image. It’s a
world founded on treachery, deceit, and the naïveté of a public that has
never wised up to the parlor tricks that the Rockefellers and their ilk have
been using to shape the world for the past century and a half.
This is the story of the oiligarchy.
PART ONE: BIRTH OF THE OIL-IGARCHY
Titusville, 1857. A most unlikely man alights from a railway car into the midst
of this sleepy Western Pennsylvania town on the shores of Oil Creek:
“Colonel” Edwin Drake. He’s from the Pennsylvania Rock Oil Company, and
he’s here on a mission: to collect oil.
Like “Dr.” Bill, Drake isn’t really a Colonel. The title is bestowed on him by
George Bissell and James Townsend, a lawyer and a banker who started the
Pennsylvania Rock Oil Company after they discovered they could distill the
region’s naturally occurring Seneca oil into lamp oil, or kerosene. Drake is
actually an unemployed railroad conductor who talked himself into a job
after staying at the same hotel as Bissell the year before. Calling him a
Colonel, it is hoped, will help win the respect of the locals.
The locals think he’s crazy anyway. Seneca oil is indeed plentiful, bubbling
out of seeps and collecting in the creek, but other than as a cure-all
medicine or grease for the local sawmill’s machinery, it’s hardly seen as
something valuable. In fact, it can be a downright nuisance, contaminating
brine wells that supply Pittsburgh’s booming salt industry.
Still, Drake has a task to complete: finding a way to collect enough oil to
make the distillation of Seneca oil into lamp oil profitable. He tries everything
he can think of. The Native Americans had historically collected the oil by
damming the creek near a seep and skimming the oil off the top. But Drake
can only collect six to ten gallons of oil a day this way, even when he opens
up extra seeps. He tries digging a shaft, but the groundwater floods in too
quickly.
By the summer of 1859 he’s desperate. Drake’s running out of ideas, Bissell
and Townsend are running out of patience and, most importantly, the
company is running out of funds. He turns to “Uncle” Billy Smith, a
Pittsburgh blacksmith who had experience drilling brine wells with steam-
powered equipment. They get to work drilling down through the shale
bedrock to reach the oil. It’s maddeningly slow work, with the crude
equipment struggling to get through three feet of bedrock a day. By August
27th they’ve drilled down sixty-nine and a half feet, Drake has used the last
of his funds, and Bissell and his partners have decided to close up the
operation. On August 28th, they strike oil.
Narrator: Then on Sunday, August 28th, 1859, oil bubbled up the drive pipe.
Uncle Billy and his son Sam bailed out several buckets of oil. On Monday,
the very day that Colonel Drake received his final payment and an order to
close down the operation, they hitched the walking beam to a water pump
and the oil began to flow. The first oil was to sell for $40 a barrel. Years later
a local newspaper interviewed Uncle Billy about the day they struck oil:
“I commenced drilling and at 4:00 I struck the oil. I says to Mr. Drake, ‘Look
there! What do you think of this?’ He looked down the pipe and said, ‘What’s
that?’ And I said, ‘That is your fortune!'”
Drake’s well proved that by drilling for it, oil could be found in abundance
and produced cheaply. Overnight a whole new industry was born. Before
long in millions of homes, farms and factories around the world, lamps
would be lit with kerosene refined from West Pennsylvania crude.
Daniel Yergin: When the word came out that Drake had struck oil, the cry
went up throughout the narrow valleys of Western Pennsylvania: ‘The crazy
Yankee has struck oil! The crazy Yankee has struck oil!’ And it was the first
great boom. It was like a gold rush.
SOURCE: The Prize (Part 1)
Overnight, the quiet farming backwoods of rural Pennsylvania was
transformed into a bustling oil region, with prospectors leasing up flats,
towns springing up from nowhere, and a forest of percussion rigs covering
the land. The first oil boom had arrived.
Already poised to make the most of this boom was a young up-and-coming
bookkeeper in Cleveland with a head for numbers: John Davison Rockefeller.
He had two ambitions in life: to make $100,000 and to live to 100 years old.
John D. set off to make his fortune in the late 1850s, armed with a $1,000
loan from his father, “Devil” Bill.
David Rockefeller: Grandfather never finished high school and went to
Cleveland having borrowed $1,100 from his father to start a business — paid
9% interest on it, incidentally. And he read about the oil business just
beginning and got interested, and came to realize it was a very volatile
business at the time.
SOURCE: The Prize Part 1
In 1863, seeing the oil boom and sensing the profits to be made in the
fledgling business, Rockefeller formed a partnership with fellow
businessman Maurice B. Clark and Samuel Andrews, a chemist who had
built an oil refinery but knew little about the business of getting his product
to market. In 1865, the shrewd John D. bought out his partners for $72,500
and, with Andrews as partner, launched Rockefeller & Andrews. By 1870,
after five years of strategic partnerships and mergers, Rockefeller had
incorporated Standard Oil.
The story of the rise of Standard Oil is an oft-told one.
Narrator: In a move that would transform the American economy, Rockefeller
set out to replace a world of independent oilmen with a giant company
controlled by him. In 1870, begging bankers for more loans, he formed
Standard Oil of Ohio. The next year, he quietly put what he called “our plan”
— his campaign to dominate the volatile oil industry — into devastating
effect. Rockefeller knew that the refiner with the lowest transportation cost
could bring rivals to their knees. He entered into a secret alliance with the
railroads called the South Improvement Company. In exchange for large,
regular shipments, Rockefeller and his allies secured transport rates far
lower than those of their bewildered competitors.
Ida Tarbell, the daughter of an oil man, later remembered how men like her
father struggled to make sense of events: “An uneasy rumor began running
up and down the Oil Regions,” she wrote. “Freight rates were going up. …
Moreover … all members of the South Improvement Company — a company
unheard of until now — were exempt. … Nobody waited to find out his
neighbor’s opinion. On every lip there was but one word and that was
‘conspiracy.'”
Ron Chernow, Biographer: By 1879, when Rockefeller is 40, he controls 90
percent of the oil refining in the world. Within a few years, he will control 90
percent of the marketing of oil and a third of all of the oil wells. So this very
young man controls what is not only a national but an international
monopoly in a commodity that is about to become the most important
strategic commodity in the world economy.
SOURCE: The Rockefellers
By the 1880s, the American oil industry was the Standard Oil Company. And
Standard Oil was John D. Rockefeller.
But it wasn’t long until a handful of similarly ambitious (and well-connected)
families began to emulate the Standard Oil success story in other parts of
the globe.
One such competitor emerged from the Caucasus in the 1870s, where
Imperial Russia had opened up the vast Caspian Sea oil deposits to private
development. Two families quickly combined forces to take advantage of
the opportunity: the Nobels, led by Ludwig Nobel and including his
dynamite-inventing prize-creating brother Alfred, and the French branch of
the infamous Rothschild banking dynasty, led by Alphonse Rothschild.
In 1891, the Rothschilds contracted with M. Samuel & Co., a Far East
shipping company headquartered in London and run by Marcus Samuel, to
do what had never been done before: ship their Nobel-supplied Caspian oil
through the Suez Canal to East Asian markets. The project was immense; it
involved not only sophisticated engineering to construct the first oil tankers
to be approved by the Suez Canal Company, but the strictest secrecy. If
word of the endeavour was to get back to Rockefeller through his
international intelligence network, it would risk bringing the wrath of
Standard Oil, which could afford to cut rates and squeeze them out of the
market. In the end they succeeded, and the first bulk tanker, the Murex,
sailed through the Suez Canal in 1892 en route to Thailand.
In 1897, M. Samuel & Co. became The Shell Transport and Trading
Company. Realizing that reliance on the Rothschild/Nobel Caspian oil left the
company vulnerable to supply shocks, Shell began to look to the Far East for
other sources of oil. In Borneo they ran up against Royal Dutch Petroleum,
established in The Hague in 1890 with the support of King William III of the
Netherlands to develop oil deposits in the Dutch East Indies. The two
companies, fearing competition from Standard Oil, merged in 1903 into the
Asiatic Petroleum Company, jointly owned with the French Rothschilds, and
in 1907 become Royal Dutch Shell.
Another global competitor to the Standard Oil throne emerged in Iran at the
turn of the 20th century. In 1901, millionaire socialite William Knox D’arcy
negotiated an incredible concession with the king of Persia: exclusive rights
to prospect for oil throughout most of the country for 60 years. After seven
years of fruitless search, D’Arcy and his Glasgow based partner, Burmah Oil,
were ready to abandon the country altogether. In early May of 1908 they
sent a telegram to their geologist telling him to dismiss his staff, dismantle
his equipment and come back home. He defied the order and weeks later
struck oil.
Burmah Oil promptly spun off the Anglo-Persian Oil Company to oversee
production of Persian oil. The British government took 51% majority control
of the company’s shares in 1914 at the behest of Winston Churchill, then
First Lord of the Admiralty, and survives today as BP.
The Rothschilds and Nobels. The Dutch royal family. The Rockefellers.
These early titans of the oil industry and their corporate shells pioneered a
new model for amassing and expanding fortunes hitherto unheard of. They
were the scions of a new oligarchy, one built around oil and its control, from
wellhead to pump.
But it was not just about money. The monopolization of this, the key energy
resource of the 20th century, helped secure the oiligarchs not just wealth
but power over the lives of billions. Billions who came to depend on black
gold for the provision of just about every aspect of their daily lives.
In the late 19th century, however, it was by no means certain that oil would
become the key resource of the 20th century. As cheap illumination from
the newly-commercialized light bulb began to destroy the market for lamp
oil, the oiligarchs were on the verge of losing the value from their monopoly.
But a series of “lucky strikes” was about to catapult their fortunes even
further.
The very next year after the commercial introduction of the light bulb,
another invention came along to save the oil industry: German engineer Karl
Benz patented a reliable, two-stroke internal combustion engine. The engine
ran on gasoline, another petroleum byproduct, and became the basis for the
Benz Motorwagen that, in 1888, became the first commercially available
automobile in history. And with that stroke of luck, the business that
Rockefeller and the other oiligarchs had spent decades consolidating was
saved.
But more luck was needed to ensure the market for this new engine. In the
early days of the automobile era it was by no means certain that gas-
powered cars would come to dominate the market. Working models of
electric vehicles had been around since the 1830s, and the first electric car
was built in 1884. By 1897 there was a fleet of all-electric taxis shuttling
passengers around London. The world land speed record was set by an
electric car in 1898. By the dawn of the 20th century, electric cars
accounted for 28% of the automobiles in the United States. The electrics
had advantages over the internal combustion engine: they required no gear
shifting or hand cranking, and had none of the vibration, smell, or noise
associated with gasoline-powered cars.
Lady Luck intervened again on January 10, 1901, when prospectors struck
oil at Spindletop in East Texas. The gusher blew 100,000 barrels a day and
set off the next great oil boom, providing cheap, plentiful oil to the American
market and driving down gas prices. It wasn’t long before the expensive,
low-range electric engines were abandoned altogether and big, loud, gas-
guzzling engines came to dominate the road, all fueled by the black gold
that Standard Oil, Shell, Gulf, Texaco, Anglo-Persian and the other oil majors
of the time were drilling, refining and selling.
Perhaps John D.’s greatest stroke of luck, however, was not supposed to be
luck at all. Rockefeller had come under increasing scrutiny by a public
outraged by the unprecedented wealth he had amassed through Standard
Oil. Muckraking reporters like Ida Tarbell began digging up the dirt on his
rise to power through railroad conspiracies, secret deals with competitors
and other shady practices. The press pictured him as a colossus with bribed
politicians literally in the palm of his hand; Standard Oil was a menacing
octopus with its tentacles strangling the lifeblood of the nation. Hearings
began, investigations were launched, lawsuits were brought against him.
And then, finally, in 1911 the Supreme Court made a monumental decision.
Narrator: On May 15th, 1911, the Supreme Court of the United States
declared that Standard Oil was a monopoly in restraint of trade and should
be dissolved. Rockefeller heard of the decision while golfing at Kykuit with a
priest from the local Catholic church, Father J.P. Lennon.
Ron Chernow, Biographer: And Rockefeller reacted with amazing aplomb.
He turned to the Catholic priest and said, “Father Lennon, have you some
money?” And the priest was very startled by the question and said, “No.”
And then he said, “Why?” And Rockefeller replied, “Buy Standard Oil.”
Narrator: As Rockefeller foresaw, the individual Standard Oil companies
were worth more than the single corporation. In the next few years, their
shares doubled and tripled in value. By the time the rain of cash was over,
Rockefeller had the greatest personal fortune in history — nearly two
percent of the American economy.
Chernow: And it was really losing the antitrust case that converted John D.
Rockefeller into history’s first billionaire. So that Standard Oil was punished
in the federal antitrust case, but John D. Rockefeller, Sr. most assuredly was
not.
SOURCE: The Rockefellers
To the amazement of the world, Rockefeller’s punishment had in fact been
his reward. Rather than being taken down a peg, the splitting up of the
Standard Oil monopoly had launched him as the world’s only acknowledged
billionaire at a time when the average annual income in America was $520.
Rockefeller’s story was perfectly mirrored by the story of Colonel Edwin
Drake. Having struck oil in Titusville and given rise to a billion-dollar global
industry, Drake had not had the foresight to patent his drilling technique or
even to buy up the land around his own well. He ended up in poverty, relying
on an annuity from the Commonwealth of Pennsylvania to scrape together a
living and dying in 1880.
For the oiligarchy, the lesson of the rise and rise of Rockefeller was obvious:
the more ruthlessly that monopoly was pursued, the tighter that control was
grasped, the greater the lust for power and money, the greater the reward
would be in the end.
From now on, no invention would derail the oil majors from their quest for
total control. No competition would be tolerated. No threat to the oiligarchs
would be allowed to rise.
PART TWO: COMPETITION IS A SIN
When asked how he could justify the treachery and deceit with which he
pursued the creation of the Standard Oil monopoly, John D. Rockefeller is
reputed to have said: “Competition is a sin.” This is the mentality of the
monopolist, and it is this justification, framed as religious conviction, that
drove the oiligarchs to so ruthlessly eliminate anyone who would dare rise
up as a pretender to their throne.
Ironically, it was the competition between the oiligarchs in the early 20th
century that helped give rise to an early external threat to their empire:
alcohol fuel.
As historian Lyle Cummins has noted of the period: “The oil trust battles
between Rockefeller, the Rothschilds, the Nobels and Marcus Samuel’s Shell
kept prices in a state of flux, and engines often had to be adaptable to the
fuel that was available.”
In many areas where oil wasn’t available, the alternative was alcohol. Ethyl
alcohol had been used as a fuel for lamps and engines since the early 19th
century. Although it was generally more expensive, alcohol fuel offered a
stability of supply that was alluring, especially in areas like London or Paris
that did not have predictable access to oil supplies.
Alcohol has a lower heat value, or BTU, than gasoline, but a series of tests
by the US Geological Survey and the US Navy in 1907 and 1908 proved that
the higher compression ratio of alcohol engines could perfectly offset the
lower heat value, thus making alcohol and gasoline engines fuel economy
equivalent.
One early supporter of alcohol fuel was Henry Ford, who designed his
Model T to run on either alcohol or gasoline. Sensing an opportunity for new
markets to boost the independent American farms that he felt were vital to
the nation, Henry Ford told the New York Times:
“The fuel of the future is going to come from fruit like that sumach [sic] out
by the road, or from apples, weeds, sawdust — almost anything. There is
fuel in every bit of vegetable matter that can be fermented.”
Farmers, looking to capitalize on this, lobbied for the repeal of a $2.08 per
gallon alcohol tax that had been imposed to help pay for the Civil War. They
were aided by those who saw fuel alcohol as a way to break the oiligarchs’
monopoly. In support of a bill to repeal the alcohol tax, President Teddy
Roosevelt told the US Congress in 1906:
“The Standard Oil Company has, largely by unfair or unlawful methods,
crushed out home competition. It is highly desirable that an element of
competition should be introduced by the passage of some such law as that
which has already passed the House, putting alcohol used in the arts and
manufactures upon the free list.”
The alcohol tax was repealed in 1906 and for a time corn ethanol at 14 cents
a gallon was cheaper than gasoline at 22 cents a gallon. The promise of
cheap, unpatentable, unmonopolizable fuel production, production open to
anyone with raw vegetable matter and a still, swept the nation.
But cheap, plentiful fuel that can be grown and produced locally and
independently is not what the oiligarchs had in mind.
A 1909 USGS report comparing gas and alcohol engines had noted that a
significant point in alcohol fuel’s favour was that there were fewer
restrictions on alcohol engines. For the oiligarchs, the answer was simple:
find a way to place greater restrictions on alcohol engines. Thankfully for
them, the answer to their problem was already gaining popular support.
In the 19th century, America had a drinking problem. By 1830, the average
American over 15 years old drank seven gallons of pure alcohol per year,
three times higher than today’s average. This led to the first anti-alcohol
movements in the 1830s and 1840s and the formation of the Prohibition
Party in 1869 and the Women’s Christian Temperance Union in the 1870s.
The movement enjoyed widespread and growing support but had few
political successes; Maine flirted with prohibition by outlawing the sale and
manufacture of liquor in 1851, but the ban only lasted five years.
This changed with the formation of the Anti-Saloon League in Standard Oil’s
birth state of Ohio in 1893. The ASL was started by John D. Rockefeller’s
long-time personal friend Howard Hyde Russell and was bankrolled in part
by generous annual donations from Rockefeller himself. The ASL, with
Rockefeller’s backing, quickly became the driving force behind a national
movement to outlaw the production and sale of alcohol.
Rockefeller was a teetotaler himself, not from moral concern but because he
was afraid that “good cheer among friends” would lead to his downfall in
business. Stephen Harkness, one of the silent partner investors in Standard
Oil and a director in the company until his death, had caught Rockefeller’s
eye when he made a fortune buying up whiskey in advance of a new excise
tax that he had been tipped about and selling it at a huge profit after the tax
kicked in.
No, Rockefeller and Standard Oil were not concerned about the moral state
of the nation…except as far as it impacted their bottom line. But when
prohibition did come in 1920, it had an interesting side effect: Although it
didn’t ban the use of ethanol as a fuel directly, it did lead to increasingly
burdensome restrictions requiring producers to add petroleum products to
their ethanol to make it poisonous before it could be sold. Alcohol fuel, now
completely unable to compete with gasoline, was abandoned altogether by
the automobile industry.
Another existential threat to the vast fortunes of the early oiligarchs was to
require an even greater effort at social engineering: public transportation.
By the end of World War I, private car ownership was still a relative rarity;
only one in ten Americans owned a car. Rail was still the transportation of
choice for the vast majority of the public, and city-dwellers in most major
cities relied on electric trolley networks to transport them around town. In
1936, General Motors formed a front company, “National City Lines,” along
with Firestone Tire and Standard Oil of California, to implement a process of
“bustitution”: scrapping streetcars and tearing up railways to replace them
with GM’s own buses running on Standard Oil-supplied diesel. The plan was
remarkably successful.
As historian and researcher F. William Engdahl notes in “Myths, Lies and Oil
Wars“:
“By the end of the 1940s, GM had bought and scrapped over one hundred
municipal electric transit systems in 45 cities and put gas-burning GM
buses on the streets in their place. By 1955 almost 90% of the electric
streetcar lines in the United States had been ripped out or otherwise
eliminated.”
The cartel had been careful to hide their involvement in National City Lines,
but it was revealed to the public in 1946 by an enterprising retired naval
lieutenant commander, Edwin J. Quinby. He wrote a manifesto exposing
what he called “a careful, deliberately planned campaign to swindle you out
of your most important and valuable public utilities — your Electric Railway
System.” He uncovered the oiligarchs’ stock ownership of National City
Lines and its subsidiaries and detailed how they had, step by step, bought
up and destroyed the public transportation lines in Baltimore, Los Angeles,
St. Louis and other major urban centres.
Quinby’s warning caught the attention of federal prosecutors, and in 1947
National City Lines was indicted for conspiring to form a transportation
monopoly and conspiring to monopolize sales of buses and supplies. In
1949, GM, Firestone, Standard Oil of California and their officers and
corporate associates were convicted on the second count of conspiracy.
The punishment for buying up and dismantling America’s public
transportation infrastructure? A $5,000 fine. H. C. Grossman, who had been
the director of Pacific City Lines when it oversaw the scrapping of LA’s $100
million Pacific Electric system, was fined exactly $1.
Unsurprisingly, GM and its associates did not remain in the doghouse for
long. In 1953, President Eisenhower appointed Charles Wilson, then the
President of General Motors, as Secretary of Defense. Wilson, with Francis
DuPont of the Rockefeller-connected DuPont family as Chief Administrator
of Federal Highways, oversaw one of the largest public works projects in
American history: the creation of the interstate highway system. With a war-
era excise tax on train tickets still in place and federally funded highways
and airports providing cheaper alternatives, rail travel declined a startling
84% between 1945 and 1964.
This social engineering paid off well for Standard Oil and its growing list of
petrochemical associates. In the two-and-a-half decades after the outbreak
of World War II, vehicle production in Detroit almost tripled, from 4.5 million
cars a year in 1940 to over 11 million in 1965. As a result, sales of refined
gasoline over the same period rose 300%.
But Rockefeller was not the only oiligarch working to crush all opposition to
his monopoly. Across the pond, the European oiligarchs were working to
protect their own oil investments from upstart competitors.
In 1889, a consortium of German investors led by Siemens’ Deutsche Bank
obtained a concession from the Turkish government for extension of a
railway line connecting Berlin to Basra on the Persian Gulf via Baghdad in
what was then part of the Ottoman Empire. The Berlin-Baghdad Railway
concession was for ninety-nine years and came with mineral rights for
twenty kilometers on either side of the line — an especially lucrative deal
since the rail cut right through the heart of the still untapped Mesopotamian
oil regions south of Mosul along the Tigris River."
continues...
|
|