The Prize by Daniel Yergin

The Book in 3 Sentences

1. The Prize is a detailed history of oil – from about 1870 or so to the present day. It tells the story of the 20th century and makes a lot of politics much more explainable. I was forced to reevalulate several long held positions of mine.

Impressions

A masterful work of scholarship and storytelling.

How I Discovered It

Dwarkesh Patel and his podcast

Who Should Read It?

Anyone looking to understand the recent past

Quotes

The first is the rise and development of capitalism and modern business.

The second theme is that of oil as a commodity intimately intertwined with national strategies and global politics and power.

A third theme in the history of oil illuminates how ours has become a “Hydrocarbon Society” and we, in the language of anthropologists, “Hydrocarbon Man.”

Gasoline was then only an almost useless by-product, which sometimes managed to be sold for as much as two cents a gallon, and, when it could not be sold at all, was run out into rivers at night.

Total world oil consumption grew almost 30 percent between 1990 and 2008—from 67 million to 86 million barrels per day. Over the same time, oil demand in India more than doubled and in China, more than tripled.

George Bissell, who, more than anybody else, was responsible for the creation of the oil industry.

Oil was hardly unfamiliar to mankind. In various parts of the Middle East, a semisolid oozy substance called bitumen seeped to the surface through cracks and fissures, and such seepages had been tapped far back into antiquity—in Mesopotamia, back to 3000 B.C.

Some of these seepages, along with escaping petroleum gases, burned continuously, providing the basis for fire worship in the Middle East.

From the seventh century onward, the Byzantines had made use of oleum incendiarum—Greek fire. It was a mixture of petroleum and lime that, touched with moisture, would catch fire; the recipe was a closely guarded state secret. The Byzantines heaved it on attacking ships, shot it on the tips of arrows, and hurled it in primitive grenades. For centuries, it was considered a more terrible weapon than gunpowder.

Salt “boring,” or drilling, had been developed more than fifteen hundred years earlier in China, with wells going down as deep as three thousand feet. Around 1830, the Chinese method was imported into Europe and copied.

They were convinced of the need and the opportunity. But to whom would they now entrust this lunatic project?6 The “Colonel” Their candidate was one Edwin L. Drake, who was chosen mainly by coincidence. He certainly brought no outstanding or obvious qualifications to the task.

Concerned about the frontier conditions and the need to impress the “backwoodsmen,” the banker sent ahead several letters addressed to “Colonel” E. L. Drake. Thus was “Colonel” Drake invented, though a “colonel” he certainly was not. The stratagem worked. For a warm and hospitable welcome was received by “Colonel” E. L. Drake, when, in December of 1857, he arrived, after an exhausting journey through a sea of mud, on the back of the twice-weekly mail wagon, in the tiny, impoverished village of Titusville, population 125, tucked into the hills of northwestern Pennsylvania. Titusville was a lumber town, whose inhabitants were deeply in debt to the local lumber company’s store. It was generally expected that the village would die when the surrounding hills had all been logged and that the site would then be reclaimed by the wild.

Meanwhile, other wells were drilled in the neighborhood, and more rock oil became available. Supply far outran demand, and the price plummeted. With the advent of drilling, there was no shortage of rock oil. The only shortage now was of whiskey barrels, and they soon cost almost twice as much as the oil inside them.

rock oil emits a dainty light; the brightest and yet the cheapest in the world; a light fit for Kings and Royalists and not unsuitable for Republicans and Democrats.”

Yet all the wells thus far were modest producers and had to be pumped. That changed in April 1861, when drillers struck the first flowing well, which gushed at the astonishing rate of three thousand barrels per day. When the oil from that well shot into the air, something ignited the escaping gases, setting off a great explosion and creating a wall of fire that killed nineteen people and blazed on for three days. Though temporarily lost in the thunderous news of the week before—that the South had fired on Fort Sumter, the opening shots of the Civil War—the explosion announced to the world that ample supplies for the new industry would be available.

In less than two years one memorable well generated $15,000 of profit for every dollar invested.

“The whole place,” said one visitor, “smells like a corps of soldiers when they have the diarrhoea.”

Pithole returned to silence and to the wilderness. A parcel of land in Pithole that sold for $2 million in 1865 was auctioned for $4.37 in 1878.

Even then, at the age of twenty-six, John D. Rockefeller already made a forbidding impression. Tall and thin, he struck others as solitary, taciturn, remote, and ascetic. His unbending quietness—combined with the cold, piercing blue eyes set in an angular face with a sharp chin—made people uneasy and fearful. Somehow, they felt, he could look right through them.

Rockefeller was born in 1839 in rural New York State, and lived almost a full century, until 1937.

The son’s character was already set at a young age—pious, single-minded, persistent, thorough, attentive to detail, with both a gift and a fascination for numbers, especially numbers that involved money. At the age of seven, he launched his first successful venture—selling turkeys.

Mathematics was the young Rockefeller’s best subject in high school. The school stressed mental arithmetic—the ability to do calculations quickly in one’s head—and he excelled at

At the beginning, Rockefeller also established another principle, which he religiously stuck to thereafter—to build up and maintain a strong cash position. Already, before the end of the 1860s, he had built up sufficient financial resources so that his company would not have to depend upon the bankers, financiers, and speculators on whom the railways and other major industries had come to rely. The cash not only insulated the company from the violent busts and depressions that would drive competitors to the wall, but also enabled it to take advantage of such downturns.

His relationship with the remote Rockefeller was to lead Flagler to another adage: “A friendship founded on business is better than a business founded on friendship.”

Many years later, after having made one great fortune with Rockefeller, Flagler set off on a second conquest, the development of the state of Florida. He would build the railways down the east coast of Florida, all the way to the Keys, in order to open up what he called the “American Riviera,” and was to found both Miami and West Palm Beach.

Standard, however, did not stop with rebates. It also used its prowess to win “drawbacks.” A competing shipper might pay a dollar a barrel to send his oil by rail to New York. The railroad would turn around and pay twenty-five cents of that dollar back, not to the shipper, but to the shipper’s rival, Standard Oil! That, of course, gave Standard, which was already paying a lower price on its own oil, an additional enormous financial advantage against its competitors. For what this practice really meant was that its competitors were, unknowingly, subsidizing Standard Oil. Few of its other business practices did as much to rouse public antipathy toward Standard Oil as these drawbacks—when eventually they became known.4

Rockefeller was both strategist and supreme commander, directing his lieutenants to move with stealth and speed and with expert execution. It was no surprise that his brother William categorized relations with other refiners in terms of “war or peace.”

By 1879, the war was virtually over. Standard Oil was triumphant. It controlled 90 percent of America’s refining capacity. It also controlled the pipelines and gathering system of the Oil Regions and dominated transportation. Rockefeller

A Pennsylvania grand jury indicted Rockefeller, Flagler, and several associates for conspiracy to create a monopoly and injure competitors. A vigorous effort was made to extradite Rockefeller to Pennsylvania. He was alarmed enough to exact a promise from the Governor of New York not to approve any extradition order, and the attempt eventually failed.

It was the stockholders of Standard Oil, not Standard Oil itself, who owned shares in the other firms. At that time, corporations themselves could not own stock in other corporations. The shares were held in “trust,” not for the Standard Oil Company of Ohio, but on behalf of the stockholders of that corporation.

The company also used an extraordinary system of corporate intelligence and espionage to keep track of market conditions and competitors. It maintained a card catalog of practically every buyer of oil in the country, showing where virtually every barrel shipped by independent dealers went—and where every grocer, from Maine to California, obtained his kerosene.

From there the entire enterprise was directed, starting with the Executive Committee, its membership being whoever was in town that day.

Later in life, he recited a little rhyme from memory: A wise old owl lived in an oak, The more he saw the less he spoke, The less he spoke, the more he heard, Why aren’t we all like that old bird?

But they warned against poor quality and impure oils, which were responsible for “those terrible explosions.” In the mid-1870s, five to six thousand deaths a year were attributed to such accidents.

Yet it was not a complete monopoly, not even in refining. Somewhere around 15 to 20 percent of oil was sold by competitors, and the directors of Standard were willing to live with that. Control of upwards of 85 percent of the market was sufficient for Standard to maintain the stability it cherished.

To many producers and independent refiners Standard Oil was the Octopus, out to grasp all competitors, “body and soul.” And to those throughout the oil industry who suffered from Rockefeller’s machinations—from the ceaseless commercial pressures and the “good sweatings,” from the duplicity and secret arrangements—he was a bloodless monster, who hypocritically invoked the Lord as he methodically set about destroying people’s livelihoods and even their lives in his pursuit of money and mastery.

Yet, whereas many of the other robber barons amassed their wealth by speculation, stock and financial manipulation, and outright fraud—cheating their stockholders—Rockefeller built his fortune by taking on a youthful, wild, unpredictable, and unreliable industry, and relentlessly transforming it according to his own logic into a highly organized, far-flung business that satisfied the basic hunger for light around the world.

Among the most promising markets for the “new light” was the vast Russian empire, which was beginning to industrialize, and for which artificial light had a special importance. The capital city, St. Petersburg, was so far north that, in the winter, it had barely six hours of daylight.

Baku was the territory of the “eternal pillars of fire” worshiped by the Zoroastrians. Those pillars were, more prosaically, the result of flammable gas, associated with petroleum deposits, escaping from the fissures in porous limestone.

In a very few years, Russian oil was to take on and even surpass American oil, at least for a time; and this Swede, Ludwig Nobel, would become “the Oil King of Baku.”

To make matters worse, severe winter weather precluded the shipment of kerosene on the Caspian between October and March, with the result that many refiners simply shut down for half the year.

Even parts of the empire were inaccessible; in the city of Tiflis (now Tbilisi), it was cheaper to import kerosene from America, 8,000 miles away, than from Baku, 341 miles to the east.

While Ludwig Nobel’s patience and determination did not abate in the face of the never-ending obstacles, physically he was worn out. In 1888 at the age of fifty-seven, the Oil King of Baku died of a heart attack while vacationing on the French Riviera. Some of the European newspapers confused the Nobel brothers and instead reported the death of Alfred. Reading his own premature obituaries, Alfred was distressed to find himself condemned as a munitions maker, the “dynamite king,” a merchant of death who had made a huge fortune by finding new ways to maim and kill. He brooded over these obituaries and their condemnations, and eventually rewrote his will, leaving his money for the establishment of the prizes that would perpetuate his name in a way that would seem to honor the best in human endeavor.

At the time, Marcus and Samuel Samuel were the only British Jews prominent in the trade with the Orient.

Mark was paid five pounds a week and was further rewarded by constant long-range interference, carping, criticism, and insults from his uncles.

Standard Oil’s agents were too late; Samuel’s kerosene was everywhere. Thus, Standard could not cut prices in one market and subsidize them by raising prices elsewhere.

The customers were expected to use old Standard Oil tin cans. But they did not. Throughout the Far East, Standard’s blue oil tins had become a prized mainstay of the local economies, used to construct everything from roofing to birdcages to opium cups, hibachis, tea strainers, and egg beaters. They were not about to give up such a valuable product. The whole scheme was now threatened—not by the machinations of 26 Broadway or by the politics of the Suez Canal, but by the habits and predilections of the peoples of Asia. A local crisis was created in each port, as the kerosene went unsold, and despairing telegrams began to flow into Houndsditch.

But then in 1893, the year after the coup, all—both business and social—seemed for naught. Samuel became seriously ill; his physician diagnosed cancer and gave him no more than six months to live. The prediction was to prove slightly off the mark—by some thirty-four years. Still, the threat of imminent death did motivate Samuel to put his business affairs into a somewhat more orderly form.

Samuel had, however, one serious fault as a businessman. Unlike his rival, Rockefeller, he lacked talent for organization and administration. Where Rockefeller had an instinct for order, Samuel had an addiction to improvisation. For him, organization was an afterthought; he ran everything out of his hat, which made his continuing success all the more astonishing.

The rapid rise of Russian production, the towering position of Standard Oil, the struggle for established and new markets at a time of increasing supplies—all were factors in what became known as the Oil Wars. In the 1890s, there was a continuing struggle involving four rivals—Standard, the Rothschilds, the Nobels, and the other Russian producers. At one moment, they would be battling fiercely for markets, cutting prices, trying to undersell one another; at the next, they would be courting one another, trying to make an arrangement to apportion the world’s markets among themselves; at still the next, they would be exploring mergers and acquisitions.

With great effort, slowed not only by rivalries but by a cholera epidemic that gripped Baku, the Rothschilds, joined by the Nobels, did succeed in getting all the Russian producers to agree to form a common front, as a prelude to a grand negotiation with Standard. But despite its 85 to 90 percent control of American oil, Standard could not deliver the critical missing element, the independent American refiners and producers, to the grand scheme, and the proposed agreement collapsed.

But Samuel rejected it. He wanted to keep the independent identity of his enterprise and his fleet, flying the flag of M. Samuel and Company, and he wanted it all to remain British. For it was British success on British terms on which he was intent, not integration into an American entity.

All sorts of obstacles had to be overcome, including the arrival of almost three hundred marauding pirates from another part of Sumatra,

Its directors and management knew how Standard Oil had operated in America—buying up shares in offending competitors quietly, and then putting them out of action. To forestall such a stratagem, the directors of Royal Dutch created a special class of preference stock, the holders of which controlled the board. To make acquisition even more difficult, admission to this exclusive rank was by invitation only. One of Standard’s agents unhappily reported that Royal Dutch would never merge with the American company. It was not merely a “sentimental barrier” on the part of the Dutch that blocked the way, he said; there was a practical matter, as well. The managers of Royal Dutch greatly enjoyed receiving 15 percent of the company’s profits.

All three of those sources—kerosene, gas and candles—had the same serious problems; they produced soot, dirt, and heat; they consumed oxygen; and there was always the danger of fire. For that last reason, many buildings, including Gore Hall, the library of Harvard College, were not illuminated at all.

For him, invention was not a hobby, it was a business.

Edison immediately applied himself to the question of commercializing his invention, and in the process, created the electric generation industry. He even worked very carefully to price electricity so that it would be highly competitive—at exactly the equivalent of the town gas price of $2.25 per thousand cubic feet. He built a demonstration project in Lower Manhattan, whose territory just happened to include Wall Street. In 1882, standing in the office of his banker, J. P. Morgan, Edison threw a switch, starting the generating plant and opening the door not only on a new industry but on an innovation that would transform the world. Electricity offered superior light, it needed no attention from its user, and it was hardly resistible where available. By 1885, 250,000 light bulbs were in use; by 1902, 18 million.

The natural gas industry had to shift its markets to heating and cooking, while the United States market for kerosene, the staple of the oil industry, leveled out and was increasingly restricted to rural America.

Nevertheless, in the United States, as well as in Europe, the horseless carriage quickly captured the minds of entrepreneurial inventors. One such person was the chief engineer of the Edison Illuminating Company in Detroit, who quit his job so that he could design, manufacture, and sell a gasoline-powered vehicle that he named after himself—the Ford.

Still, there were doubts about the ruggedness and reliability of the car. Those questions were laid to rest, once and for all, by the San Francisco earthquake of 1906. Two hundred private cars were pressed into service for rescue and relief, fueled by fifteen thousand gallons of gasoline donated by Standard Oil. “I was skeptical about the automobile previous to the disaster,” said the acting chief of the San Francisco fire department, who commanded three cars for round-the-clock work, “but now give it my hearty endorsement.”

The growth of the automobile industry was phenomenal. Registrations in the United States rose from 8,000 in 1900 to 902,000 in 1912. In a decade, the automobile went from a novelty to a familiar practicality, changing the face and mores of modern society. And it was all based on oil.

In addition to gasoline, a second major new market for petroleum was developing with the growth in use of fuel oil in the boilers of factories, trains, and ships.

The Los Angeles boom fizzled by the end of the 1860s, severely tarnishing the prospects for California. Professor Silliman’s reputation was hurt even more. Indeed, so great was the humiliation and disgrace that Silliman, heretofore one of the preeminent figures in American science, was forced to resign his professorship of chemistry at Yale.

The dominant producer in California was Union Oil (now Unocal), the only major American corporation outside of Standard Oil to have maintained a continuous independent existence since 1890 as a major integrated oil company.

Though California had by the turn of the century emerged as a major oil province, it was far from the rest of the nation, isolated, and its external markets were in Asia and not east of the Rockies where most of the citizens of the United States happened to live. California might as well have been another country from a business point of view.

Tents, lean-tos, shacks, saloons, gambling houses, whorehouses—all sprang up in Beaumont to serve the various needs of the lusting population. According to one estimate, Beaumont drank half of all the whiskey consumed in Texas in those early months. Fighting was a favorite pastime. There were two or three murders a night, sometimes more. Once sixteen bodies were dredged out of a local river, their throats slit, the victims of a night’s mayhem.

Samuel. He had recently rechristened his rapidly growing company Shell Transport and Trading—again, like the names of his tankers, in honor of his father’s early commerce in seashells.

So, when the news from Spindletop reached London, it immediately set off frantic and comical efforts by Shell, first to find out where Beaumont was—it could not be found in the office atlas at all—and then to make contact with Guffey.

there. A new language was even born on the hill, for it was at Spindletop that a “well borer” first became known as a “driller,” a skilled helper as a “roughneck,” and a semiskilled helper as a “roustabout.” A cash-short “shoe-stringer” would “poor boy” a well by splitting his interest with his crew, the landowner, his supply house, his boardinghouse owner, his favorite saloon keeper and, if need be, his most cherished madam, as

But his uncle Andrew had instilled in him the lesson that such was not the way to run a serious business. Rather, the aim should be to integrate—to control every stage of operations. “The real way to make a business out of petroleum,” said Andrew, was “to develop it from end to end; to get the raw material out of the ground, refine it, manufacture it, distribute it.” Any other way, and one was at the mercy of Standard Oil.

William Mellon engineered a reorganization of Guffey Petroleum and Gulf Refining that resulted in the Gulf Oil Corporation. It was now resolutely a Mellon company.

The syndicate was led by James Hogg, the three-hundred-pound ex-governor and progressive champion of Texas. The former governor was also a tough businessman: “Hogg’s my name,” he once explained, “and hog’s my nature.”

For the capital he needed to develop his leases, Cullinan turned to Lewis H. Lapham, a New Yorker who owned U.S. Leather, the centerpiece of the leather trust, and John W. Gates, a flamboyant Chicago financier known as “Bet-a-Million” Gates because of his willingness to make a wager on anything.

Among those working for Cullinan were Walter B. Sharp, who had drilled Patillo Higgins’s first unsuccessful attempt on Spindletop in 1893 and was now a premier driller, and another expert driller named Howard Hughes, Sr.

But the smaller oil producers, raising the specter of a new oil trust, managed to turn the proposed deal into the hottest issue in the Texas legislature; the chief lobbyists for each side even ended up having a very public fist fight in a hotel lobby in Austin.

But, in terms of overall market shares in oil products in the United States, Standard’s position of overwhelming dominance was receding. Its control of refining capacity declined from over 90 percent in 1880 to only 60 to 65 percent by 1911.

In Kansas, the governor pushed a scheme to build a state-owned oil refinery, which would compete with Standard’s and would be staffed by penitentiary inmates. At

When Rockefeller testified in one of the Ohio suits, he was so unforthcoming that a New York newspaper headlined, “John D. Rockefeller Imitates a Clam.”

1893, he came down with a stress-related disease, alopecia, which not only caused him a good deal of physical distress, but also robbed him of all his hair—which, afterward, he sought to remedy variously with a skullcap or a wig.

Still, Rockefeller began to distance himself, and finally, by 1897, he had—not yet sixty years of age—stepped aside, turning administrative leadership over to one of the other directors, John D. Archbold.

Tarbell devoted herself to career and never married, though later in life she was to become a celebrant of family life and an opponent of women’s suffrage.

After John Archbold, H. H. Rogers was the most senior and powerful director of Standard Oil, as well as a prominent speculator in his own right. He was responsible for Standard’s pipeline and natural gas interests. But Rogers’s own interests did not end with business. In one of the great services to American letters, he had, a decade earlier, taken control of Mark Twain’s tangled and bankrupt finances, put them right, and thereafter managed and invested the famous author’s money so that Twain could, as Rogers instructed him, “stop walking the floors.”

Twain came and went as he pleased from Rogers’s office at 26 Broadway, and sometimes lunched with the “gentlemen upstairs” in their private dining room. One

He asked Twain to find out what kind of history. Twain was also a friend of McClure’s, and he inquired of the publisher. One thing led to another, and Twain ended up arranging for Ida Tarbell to meet Rogers. She now had her connection.

Over the next two years, she met regularly with Rogers. She would be ushered in one door and out another; company policy forbade visitors to encounter one another.

Theodore Roosevelt embodied the progressive movement. The youngest man ever to enter the White House up to that time, he was forever bursting with energy and enthusiasm.

With equal passion, Roosevelt embraced reform causes of all sorts—from the mediation of the Russo-Japanese War to the promotion of simplified spelling. For the former he received the Nobel Peace Prize in 1906. As to the latter, in the same year, he sought to have the Government Printing Office adapt three hundred simplified spellings of familiar words—for instance, “dropt” for “dropped.” The Supreme Court refused to accept such simplifications in legal documents, but Roosevelt steadfastly kept to them in his own private letters.

Roosevelt ordered the hundred thousand dollars returned, and thereupon, in a burst of publicity, promised every American what became his slogan, a “square deal.” Whether the money was ever actually returned was another question. Attorney General Philander Knox told Roosevelt’s successor, William Howard Taft, that, when he had walked into Roosevelt’s office one day in October 1904, he had heard the President dictating a letter directing the return of the money to the Standard Oil Company. “Why, Mr. President, the money has been spent,” Knox said. “They cannot pay it back—they haven’t got it.” “Well,” replied Roosevelt, “the letter will look well on the record, anyhow.”

Over a course of more than two years, 444 witnesses gave testimony, and 1,371 exhibitions were introduced. The full record was to cover 14,495 pages bound in twenty-one volumes. The Chief Justice of the Supreme Court later described the transcript as “inordinately voluminous . . . containing a vast amount of conflicting testimony relating to innumerable, complex, and varied business transactions, extending over a period of nearly forty years.”

How large was the judgment, he asked? “The maximum penalty, I believe—twenty-nine million dollars,” replied Rockefeller. Then, as an afterthought, he added, “Judge Landis will be dead a long time before this fine is paid.” With that single outburst, he resumed his golf, seemingly unperturbed, and went on to play one of the best games of his life. Indeed, Landis’s judgment was eventually overturned.

The company transported more than four-fifths of all oil produced in Pennsylvania, Ohio, and Indiana. It refined more than three-fourths of all United States crude oil; it owned more than half of all tank cars; it marketed more than four-fifths of all domestic kerosene and was responsible for more than four-fifths of all kerosene exported; it sold to the railroads more than nine-tenths of all their lubricating oils. It also sold a vast array of by-products—including 300 million candles of seven hundred different types. It even deployed its own navy—seventy-eight steamers and nineteen sailing vessels. How was all this to be dismembered?

Standard Oil was divided into several separate entities. The largest of them was the former holding company, Standard Oil of New Jersey, with almost half of the total net value; it eventually became Exxon—and never lost its lead. Next largest, with 9 percent of net value, was Standard Oil of New York, which ultimately became Mobil. There was Standard Oil (California), which eventually became Chevron; Standard Oil of Ohio, which became Sohio and then the American arm of BP; Standard Oil of Indiana, which became Amoco; Continental Oil, which became Conoco; and Atlantic, which became part of ARCO and then eventually of Sun. “We

Moreover, cracked gasoline actually had a much better antiknock value than natural gasoline, which meant more power and allowed for higher-compression engines.

would soon be worth more than the whole. Within a year of the dissolution of Standard Oil, the value of the shares of the successor companies had mostly doubled; in the case of Indiana, they tripled. Nobody came out of this better or richer than the man who owned a quarter of all the shares, John D. Rockefeller. After the break-up, because of the increase in the price of the various shares, his personal worth rose to $900 million (equivalent to $9 billion today).

And Marcus Samuel was to become the most vociferous proponent of the conversion of shipping from coal to oil.

That historic development had actually begun in a small way in the 1870s, when ostatki, as the waste residue from kerosene refining was called in Russia, was first successfully used to fuel ships on the Caspian Sea. Pure necessity drove this innovation: Russia had to import coal from England, a very expensive proposition, and wood was scarce in many areas of the empire. Subsequently, the new Trans-Siberian Railway began to use oil fuel, supplied by Samuel’s syndicate through Vladivostok, rather than coal or wood.

Another British oil man, who would from time to time encounter Samuel on horseback, observed with some acuity that Samuel rode his horse much as he rode his vast business, always looking as though he were about to fall off, but never quite doing so.

Much later, his inspirational advice to young men starting out was, “You will go a long way in business if you train yourself to be able to appraise figures almost as rapidly and as shrewdly as a good judge of character can sum up his fellow-men.”

“Simplicity rules everything worth while, and whenever I have been up against a business proposition which, after taking thought, I could not reduce to simplicity, I have realized that it was hopelessly wrong and I have let it alone.”

One of his responsibilities was to interview personally every lunatic who was to be certified insane at the Mansion House, and some were to think he spent more time with the lunatics than he did with the oil men.

Limping along, with collapse in the air, Shell was barely able to pay 5 percent dividends, while Royal Dutch’s were at the rates of 65 percent, 50 percent, and then in 1905, an immensely satisfying 73 percent.

Russia’s industrial economy had gone through stupendous growth under the favorable policies of Count Sergei Witte, the powerful finance minister from 1892 to 1903. Trained as a mathematician, Witte had risen from a position as a lowly railroad administrator to become the master of the Russian economy by sheer ability—a most unusual means of ascent in the Czarist empire.

Witte was truly an exception, a man of great talents in a government populated by people of little ability.

The alumni included a still more important figure, a young Georgian, a former seminarian and son of a shoemaker. His name was Joseph Djugashvili, though he operated in the underground under the name “Koba”—Turkish for “Indomitable.” Only later did he begin to call himself Joseph Stalin.

The Russo-Japanese War began in January 1904 with Japan’s successful surprise attack against the Russian fleet at Port Arthur. Thereafter, the Russian forces lurched from one military disaster to the next, culminating in the burial at sea of the entire Russian fleet at the Battle of Tsushima.

When the news reached Baku, the oil workers again went out on strike. Government officials, fearful of revolution, provided arms to the Moslem Tatars, who rose up to massacre and mutilate Christian Armenians, including the leaders of the oil industry. A legend arose afterward about one of the wealthiest Armenian oil men, one Adamoff. A crack shot, he stationed himself on the balcony of his house, and with the aid of his son, held off a siege for three days, until finally he was killed, the house set fire, and his forty dependents either burned to death or dismembered.

Strikes and open rebellion spread again throughout the empire in September and October of 1905. In the Caucasus, it was race and ethnic conflict, and not socialism, that drove events. Tatars rose up once more in an attack on the oil industry throughout Baku and its environs, intent on killing every Armenian they could find, setting fire to buildings where Armenians had taken refuge, pillaging every piece of property on which they could lay their hands.

The news from Baku had a profound effect on the outside world. Here, for the first time, a violent upheaval had interrupted the flow of oil, threatening to make a vast investment worthless.

In October 1905, the Czar granted, albeit completely against his will and grain, a constitutional government, which included a Parliament, the Duma. Though the revolution was over, the oil region remained in turmoil. The oil workers of Baku elected Bolshevik deputies to the Duma; Nobel’s chief in Batum was murdered in the street. In 1907, strikes swept through Baku, again threatening to become a general strike, while the Czar stupidly undermined the constitution that might ultimately have preserved him and his dynasty. Also in 1907, the Bolsheviks sent Stalin back to Baku, where he directed, organized, and as he said, fomented “unlimited distrust of the oil industrialists” among the workers.

Meanwhile, the Russian government unwisely raised internal transport tariffs to help satisfy the ravenous appetites of its treasury. The result was to increase further the price of Russian oil products on the world market, making them even less competitive. Its price advantage had turned into a disadvantage. Increasingly, Russian oil was a residual, to be bought when other petroleum was not available.

That way, the Rothschilds transformed their uncertain and insecure Russian assets into substantial holdings in a rapidly growing, diversified international company with outstanding prospects.

The acquisition of the Rothschilds’ interests, in turn, gave the Group a globally balanced portfolio of production—53 percent from the East Indies, 17 percent from Rumania, and 29 percent from Russia. Obviously, there was significant risk going into Russia. But the advantages from integrating this additional output into its worldwide system were immediate. As to the risks, time would tell.

And Persia itself—or Iran, as it would be known from 1935 onward— would emerge into a prominence on the world stage that it had not enjoyed since the days of the ancient Persian and Parthian empires.

He was an investor, a speculator, a putter-together of syndicates, not a manager, and he was looking for a new investment. The prospect of petroleum in Persia attracted him, he was again willing to take a chance, and, in so doing, he would become the founder of the oil industry of the Middle East.

The Shah, Muzaffar al-Din, was “merely an elderly child,” in the words of Hardinge, the British minister,

The population was abysmally lacking in technical skills, and indeed, the hostility of the terrain was more than matched by the hostility of the culture toward Western ideas, technology, and presence.

To the Azeris, even the introduction of the lowly wheelbarrow was startling, a major innovation.

The British government would “regard the establishment of a naval base or of a fortified port in the Persian Gulf by any other power as a very grave menace to British interests, and we should certainly resist it with all the means at our disposal.” This declaration, said a delighted Lord Curzon, Viceroy of India, was “our Monroe Doctrine in the Middle East.”

That meant, first of all, building a Navy to rival Britain’s. As the Kaiser himself declared, “Only when we can hold out our mailed fist against his face will the British lion draw back.”

Winston Churchill was the nephew of the Duke of Marlborough and son of the brilliant but erratic Lord Randolph Churchill and his beautiful American wife, Jennie Jerome. He had entered Parliament as a Conservative in 1901, at age twenty-six. Three years later, he bolted from the Tory party over the question of free trade and crossed over to the Liberals. His political conversion did not impede his progress. He

Churchill’s great gamble was to push for conversion to oil before the supply problem had been solved. He eloquently summarized the issue: “To build any large additional number of oil-burning ships meant basing our naval supremacy upon oil. But oil was not found in appreciable quantities in our islands. If we required it we must carry it by sea in peace or war from distant countries. We had, on the other hand, the finest supply of the best steam coal in the world, safe in our mines under our own land. To commit the Navy irrevocably to oil was indeed ‘to take arms against a sea of troubles.’ ”

“They have killed 15 men in experiments with oil engines and we have not killed one! And a d——d fool of an English politician told me the other day that he thinks this creditable to us.”

On August 1, Germany declared war on Russia and mobilized its armies. At 11:00 P.M. on August 4, after Germany had ignored a final British ultimatum against violating Belgium’s neutrality, Churchill flashed a message to all of His Majesty’s ships: “COMMENCE HOSTILITIES AGAINST GERMANY.” The First World War had begun.

Horses were still the basis of planning at the outbreak of the war—one horse for every three soldiers. Moreover, the reliance on horses greatly complicated the problems of supply, for each horse required ten times as much food as each man.

Once night had fallen, each taxi was crammed with soldiers—under the personal watch of General Gallieni, who noted, with a mixture of amusement and understatement, “Well, at least it’s not commonplace.”

Thousands and thousands of troops were rushed to the critical point on the front by Gallieni’s taxicabs.

Yet what was needed was not necessarily wanted. Entrenched opponents in the high command of the British Army did not take the idea seriously and did everything they could to squelch it. Indeed, it might well have died altogether had it not been taken up and championed by Winston Churchill. The First Lord of the Admiralty appreciated military innovation and was outraged at the failure of the Army and the War Office to begin developing such vehicles.

And, in the face of the Army’s resistance, Churchill doled out Navy funds for the continuing research needed to develop the new vehicle. Reflecting the Navy’s temporary sponsorship, the new machine was known as the “land cruiser” or the “landship.” Churchill called it the “caterpillar.” To maintain secrecy, it needed a code name while it was being tested and transported, and various names—among others, the “cistern” and the “reservoir”—were considered. But finally it became known by another of its code names—the “tank.”

When the German High Command declared in October 1918 that victory was no longer possible, the first reason it gave was the introduction of the tank.

It was rightly said after the war that the victory of the Allies over Germany was in some ways the victory of the truck over the locomotive.

By July 1915, every machine that had been in the air at the outbreak of the war, less than a year earlier, had become obsolete.

By the last months of the struggle, the speed of the most advanced aircraft had more than doubled, to over 120 miles per hour,

Yet, despite the central role that the naval rivalry had played in leading the two countries to war, the Grand Fleet and the High Seas Fleet met only once in major engagement—at the Battle of Jutland on May 31, 1916. The outcome of that legendary encounter has been debated ever since. The German fleet was victorious in a tactical sense, succeeding as it did in escaping from a trap. But, strategically, the British won, for they were able to dominate the North Sea for the rest of the war and keep the German fleet penned up in its home bases.

most important step was the purchase from the British government of one of the largest petroleum distribution networks in the United Kingdom, a company called British Petroleum.

Now, with its acquisition of British Petroleum, Anglo-Persian acquired not only a major marketing system, but also what would subsequently prove a most useful name.

In the middle of the night at the end of January 1915, the plant in Rotterdam was disassembled, part by part, each piece numbered and camouflaged, and then carried to the docks and loaded onto a Dutch freighter,

Still, the effects of the submarine attacks were large and quickly felt. Tonnage lost in the first half of 1917 was twice that lost in the comparable period in 1916. Between May and September, Standard Oil of New Jersey lost six tankers, including the brand new John D. Archbold.

In 1914, the United States had produced 266 million barrels—65 percent of total world output. By 1917, output had risen to 335 million barrels—67 percent of world output. Exports accounted for a quarter of total U.S. production, with the bulk going to Europe. Now that access to Russian oil had been closed off by war and revolution, the New World had become the oil granary for the Old; altogether, the United States was to satisfy 80 percent of the Allies’ wartime requirement for petroleum.

In January 1918, the Fuel Administration ordered almost all industrial plants east of the Mississippi to close for a week in order to free fuel for hundreds of ships filled with war materials for Europe that were immobilized in East Coast harbors for want of coal. Thereafter, the factories were ordered to remain closed on Mondays to conserve coal. “Bedlam broke loose,” observed Colonel Edward House, Woodrow Wilson’s political confidant. “I have never seen such a storm of protest.”

The number of cars in use had almost doubled between 1916 and 1918.

Those who challenged Norton-Griffiths or stood in his way were overwhelmed by the sheer force of his personality. If that proved insufficient, he would deliver a powerful kick or pull out his revolver and shout, “I don’t speak your blasted language.”

They began to seek access to Baku petroleum in March 1918 with the Treaty of Brest-Litovsk, which ended hostilities between Germany and revolutionary Russia. However, the Turks, the ally of Germany and Austria, had already begun to advance toward Baku. Fearing that success by their ally would lead to the wanton destruction of the oil fields, the Germans promised the Bolsheviks that they would try to restrain the Turks in exchange for oil. “Of course, we agreed,” said Lenin. Joseph Stalin, who by then had emerged as one of the leading Bolsheviks, telegraphed the Bolshevik Baku Commune, which controlled the city, ordering it to comply with this “request.” But the local Bolsheviks were in no mood to go along. “Neither in victory nor in defeat will we give the German plunderers one drop of oil produced by our labor,” they replied.

Sir Maurice Hankey, the extremely powerful secretary of the War Cabinet, wrote to Foreign Secretary Arthur Balfour that, “oil in the next war will occupy the place of coal in the present war, or at least a parallel place to coal. The only big potential supply that we can get under British control is the Persian and Mesopotamian supply.” Therefore, Hankey said, “control over these oil supplies becomes a first-class British war aim.”

But the newly born “public diplomacy” had to be considered. In early 1918, to counter the powerful appeal of Bolshevism, Woodrow Wilson had come out with his idealistic Fourteen Points and a resounding call for the self-determination of nations and peoples after the war. His own Secretary of State, Robert Lansing, was appalled by the President’s broadside. The call for self-determination, Lansing was sure, would result in many deaths around the world. “A man, who is a leader of public thought, should beware of intemperate or undigested declarations,” he said. “He is responsible for the consequences.”

“I do not care under what system we keep the oil,” he said, “but I am quite clear it is all important for us that this oil should be available.” To help make sure this would happen, British forces, already elsewhere in Mesopotamia, captured Mosul after the armistice was signed with Turkey.

As the chairman of Burmah remarked, “We couldn’t very well haggle or bargain” with Churchill. Burmah’s officers worried about how to pay the money, since if the recipient of such a large fee was not disclosed on the books, the auditors would not approve. Finally it was decided to set up a secret account.

But before anything further could be done, there was an outside intervention. Baldwin called a snap general election at the end of 1923, and Churchill, the job not yet done, resigned his commission, returned the initial fee, and charged back into his natural and beloved fray, politics.

the Undersecretary of the Treasury wrote to Charles Greenway, chairman of Anglo-Persian, “have no intention of departing from the policy of retaining these shares.” The minister responsible for the Treasury was the new Chancellor of the Exchequer, none other than the newest convert to Conservatism, Winston Churchill.

The leaders of engineering and scientific geology shared the fear. The director of the United States Bureau of Mines predicted in 1919 that “within the next two to five years the oil fields of this country will reach their maximum production, and from that time on we will face an ever-increasing decline.”

American eyes fastened on the Middle East, particularly Mesopotamia, under British mandate. But the door was manifestly not open there. When two Standard Oil of New York geologists slipped into the territory, the British civil commissioner handed them over to the chief of police of Baghdad.

But his career as a king was not yet over. The British needed a monarch for Iraq, another new state, this one to be formed out of three former provinces of the Turkish empire.

Churchill, then the head of the Colonial Office, wanted was an Arab government, with a constitutional monarch, that would be “supported” by Britain under League of Nations mandate. It would be cheaper. So Churchill chose the out-of-work Faisal as his candidate. Summoned from exile, he was crowned King of Iraq in Baghdad in August 1921. Faisal’s brother Abdullah—originally destined for the Iraqi throne—was instead installed as king “of the vacant lot which the British christened the Amirate of Transjordan.”

The minority Sunni Arabs held political power, while the Shia Arabs were by far the most numerous. To complicate things further, the Jews were the largest single group among inhabitants of Baghdad, followed by Arabs and Turks.

The first three days, the convoy managed five and two thirds miles an hour—“not quite so good,” said Eisenhower, “as even the slowest troop train.”

Having left Washington on July 7, the caravan did not arrive in San Francisco until September 6, where the drivers were greeted with a parade, followed by a speech by the Governor of California, who compared them to the “Immortal Forty-Niners.” Eisenhower was looking ahead. “The old convoy,” he recalled “had started me thinking about good, two lane highways.”

By 1929, 78 percent of the world’s autos were in America.

In that year, there were five people for each motor vehicle in the United States, compared to 30 people per vehicle in England and 33 in France, 102 people per vehicle in Germany, 702 in Japan, and 6,130 people per vehicle in the Soviet Union.

The transformation of America into an automotive culture was accompanied by a truly momentous development: the emergence and proliferation of a temple dedicated to the new fuel and the new way of life—the drive-in gasoline station. Before

In the infancy of the auto age, some retailers experimented with gasoline wagons that delivered fuel from house to house. That idea never really caught on, partly because of the frequency with which the wagons tended to explode.

The number of drive-in gasoline stations, specifically, had grown from perhaps 12,000 in 1921 to about 143,000 in 1929.

The stations were everywhere—big city street corners, main streets in small towns, country crossroads. East of the Rockies, such facilities were called “filling stations”; west of the Rockies, they were known as “service stations.” And

Competition forced the oil companies to develop trademarks to assure national brand identification. They became the icons of a secular religion, providing drivers with a feeling of familiarity, confidence, and security—and of belonging—as they rolled along the ever-lengthening ribbons of roads that crossed and crisscrossed America.

Gas stations were also the source for what one expert described as “uniquely American contributions to the development and growth of cartography”—the oil company road map.

By 1920, Shell of California was providing free uniforms to attendants and paying for up to three launderings a week. It prohibited the attendants from reading magazines and newspapers while on duty, and its manual forbade the accepting of tips: “Air and water service is a gratuity which you are expected to render the public, showing no distinction as to whether the individual is a Shell customer or not.” By 1927, the “service station salesmen,” as they were called, were expected to ask the customer, “Can I check the tires for you?” They were also forbidden to allow “personal opinions and prejudices” to get in the way of service: “Salesmen should be careful in their attendance upon Oriental and Latin classes of customers and refrain from using broken English in conversation with them.”

Teapot Dome in Wyoming, named for the shape of a geological structure, was one of three oil fields (the other two were in California) that had been set aside as “naval oil reserves” by the Taft and Wilson Administrations as one result of the pre–World War I debate about converting the U.S. Navy from coal to oil. The

When Warren G. Harding, chosen as the Republican candidate because among other reasons he “looked like a President,” won the White House in 1920, he sought, like any good politician, to appeal to both sides in the resource debate, celebrating “that harmony of relationship between conservation and development.” But,

“It would have been possible to pick a worse man for Secretary of the Interior,” the conservationist added, “but not altogether easy.”

“This isn’t the first time that this rumor has come to me,” he said, “but if Albert Fall isn’t an honest man, I’m not fit to be President of the United States.” Both propositions were soon tested to their limit.

Sinclair was sentenced to prison for six and a half months for contempt both of court and of the Senate. On his way to jail, he stopped to attend a board meeting of the Sinclair Consolidated Oil Corporation, where the other directors formally tendered him “a public vote of confidence.” Doheny was judged innocent and never went to jail, leading one Senator to complain, “You can’t convict a million dollars in the United States.”

The “rule of capture” had continued to govern the industry’s operations since its early days in western Pennsylvania, and it had repeatedly been sanctioned by the courts, based upon the English common law regarding migratory wild beasts and game. To some property owners who complained to one court that their oil was being drawn off by their neighbors, the justices had scant solace to offer: “Only go and do likewise.” Because of the rule, every operator everywhere in the United States put down his wells and produced as rapidly as he could, draining not only the oil under his own property but also that under his neighbor’s property, before his neighbor drained his own.

In turn, he declared that an “oil man is a barbarian with a suit on.”

Thus, though the demand for gasoline increased, the demand for crude oil did not grow at the same rate, adding to the rising surplus.

To his son, he added, “Do not hesitate for one second to be in opposition to your colleagues or in overriding their decisions. No business can be a permanent success unless its head is an autocrat—of course the more disguised by the silken glove the better.”

But Pearson also owed his position in Mexico to Díaz’s cold political calculation. “Poor Mexico,” the dictator was supposed to have once remarked, “so far from God and so close to the United States.”

Mexico quickly became a major force in the world oil market. The quality of its crudes was such that they were mainly refined into fuel oil, which competed directly with coal for industrial, railway, and shipping markets. By 1913, Mexican oil was even being used on Russian railroads.

Until 1884, resources in the country beneath the ground, in the “subsoil,” had belonged first to the crown and then to the nation. The regime of Porfirio Díaz had altered that legal tradition, giving over ownership of subsoil resources to the farmers and ranchers and the other surface landowners, who, in turn, welcomed foreign capital, which eventually controlled 90 percent of all oil properties. One of the major objectives of the revolution had been the restoration of the principle of national ownership of those resources.

The oil companies, for their part, felt increasingly vulnerable and endangered, which led to reduced investment and a rapid retreat in terms of activity and personnel. The effects quickly registered on output, which plummeted, and Mexico soon ceased being a world oil power.

wealth. His poor country needed revenues if it was to develop economically, and if he was to become rich. The two objectives blended as one. Revenues meant foreign capital. Oil was Gómez’s opportunity; but he shrewdly recognized that, in order to lure foreign investors, he would have to guarantee a stable political and fiscal environment.

As late as 1929, Shell protected the cabins of its tractors with several layers of a special cloth, dense enough to stop Indian arrows.

The La Rosa strike confirmed that Venezuela could be a world-class producer. The discovery inaugurated a great oil frenzy. Over a hundred groups, mostly American, but some British, were soon active in the country. They extended from the largest companies down to independent oil men like William F. Buckley, who obtained a concession to build an oil port.

Development proceeded at breakneck speed. In 1921, Venezuela produced just 1.4 million barrels. By 1929, it was producing 137 million barrels, thus making it second only to the United States in total output.

Jersey and the Nobels started intense negotiations—despite the strong possibility that the Nobels were trying to sell properties they might no longer own. That risk became more real in April 1920, when the Bolsheviks recaptured Baku and promptly nationalized the oil fields. The British engineers who worked in Baku were thrown into prison, while some of the “Nobelites” were to be put on trial as spies. Yet, so attractive was the deal if the Bolsheviks failed, and so strong the conviction that they would, that Jersey and the Nobels continued their discussions. In July 1920, less than three months after the nationalization, the deal was consummated. Standard Oil bought controlling rights to half of the Nobel oil interests in Russia at what was definitely a bargain basement price—$6.5 million down, with a commitment of up to another $7.5 million. In exchange, Standard gained control over at least one-third of Russian oil output, 40 percent of refining, and 60 percent of the internal Russian market. But, notwithstanding what the Western oil men wanted to believe, the risk was very high indeed—and all too evident. What if the new Bolshevik regime did, after all, survive? Having already nationalized the oil fields, it might operate them itself or put them on the international auction block.

The Soviet oil industry, virtually dormant from 1920 to 1923, thereafter revived quickly, helped by imports of large amounts of Western technology, and the USSR soon reentered the world market as an exporter.

Privately, Teagle was bitter about how the whole matter had been handled. It was the classic business problem of not enough time, of the day never being long enough for long-term thinking.

“I am so glad that nothing came of these Soviet deals,” he wrote to Teagle. “I feel that everybody will regret at some time that he had anything to do with these robbers, whose only aim is the destruction of all civilization and the re-establishment of brute force.”

Vacuum’s president observed that American businessmen and farmers were busily selling cotton and other products to Russia. “Is it more unrighteous,” he asked, “to buy from Russia than to sell to it?” That would be a long-persisting question.

The Jersey board decided to adopt a neutral stance—neither to seek a contract with the Soviets nor to participate in a boycott. Riedemann summed up the matter in the autumn of 1927. “Personally,” he said, “I have buried Russia.” If so, it would prove to be a lively corpse, as growing volumes of Soviet oil entered a sated world market.

He had a silky-smooth complexion, quite unusual for a man his age, which he attributed to eating carrots.

In sheer audacity, few could have matched the General Lee Development Company. Two promoters discovered a certain Robert A. Lee, a descendant of General Robert E. Lee, and prevailed upon him to tell investors around the country, “I would rather lead you and a thousand others to financial independence than to have won Fredericksburg or Chancellorsville.”

Doc Lloyd had provided Dad Joiner with a description of the geology of the East Texas region. To say it was misleading would be an understatement; it was totally incorrect, fabricated. Lloyd was what was called a “trendologist”; he drew up a map of the major oil fields of the United States, showing trend lines from all of them intersecting in East Texas. But Doc Lloyd did one memorable thing; he told Joiner exactly where to drill, when almost everybody thought the idea was completely ridiculous.

A crewman became so excited that he pulled a pistol from his pocket and started firing into the oil spray in the sky. Three men quickly jumped him and wrestled the gun away. One spark could have ignited the volatile escaping gas, causing the well to explode, killing everybody on the spot.

Later, he achieved notoriety as a patron of right wing causes, a promoter of health foods, and an inveterate enemy of white flour and white sugar.

At the beginning of August 1931, while Federal judges were considering the constitutionality of Oklahoma’s prorationing laws, the governor, “Alfalfa Bill” Murray, proclaimed a state of emergency, declared martial law, and ordered the state militia to take control of the major oil fields.

Their holiday entourage included secretaries, typists, and advisers, who were housed in a specially secured cottage seven miles away.

For, by 1928, a Soviet company, Russian Oil Products, was the fourth-largest importer into the United Kingdom.

They were acting under an American law called the Webb-Pomerene Act of 1918, which allowed U.S. companies to do abroad what the antitrust laws did not permit them to do at home—come together in a combination—so long as the combination’s activities took place exclusively outside the United States.

That same year, an observer of the oil industry, noting the intensification of political and economic nationalism in Europe, summed it all up very simply: Operations in the oil business in Europe, he said, “are 90 percent political and 10 percent oil.” The same seemed to be true in the rest of the world.

“It has often been said,” observed a visitor, “that the Shah’s greatest achievement is his victory over the Mullahs.”

At the age of eighteen, having already worked as a tax collector, a printer’s devil, and a jailkeeper, he enlisted in the Mexican Revolution. Recognized for his valor, his self-contained modesty, and his leadership, he was a general by the age of twenty-five and became a protégé of Plutarco Calles, the jefe máximo, the “maximum chief” of the revolution.

Washington could already see the unsettling effects from the British-led embargo and the efforts to close off traditional markets to Mexico. Nazi Germany became Mexico’s number-one petroleum customer (and at discount prices or on barter terms), with Fascist Italy next. Japan became a major customer as well. Japanese companies were also exploring for oil in Mexico and were discussing the construction of a pipeline from the oil fields across the country to the Pacific.

All of this meant that, in a military crisis, production in the Latin American countries would be essential to Britain, not only “because of their size of production, but because they are favourably placed from a sea transport point of view.”

But inescapably, nationalism had to make some concessions to economic reality. In the aftermath of the expropriation, not only was the promised wage hike indefinitely postponed, wages were, in fact, cut.

And his later amassing of immense wealth was no less remarkable for a ruler who, in his early days, could carry his entire national treasury in the saddlebags of a camel.

The Saudi dynasty had been established by Muhammad bin Saud, the emir of the town of Dariya in the Nejd, the plateau in central Arabia, in the early 1700s. There he took up the cause of a spiritual leader, Muhammad bin Abdul Wahab, who espoused a stern puritanical version of Islam that would become the religious mortar for the dynasty and its state. The Saudi family, allied with the Wahabis, began the rapid program of conquest that within half a century carried them to domination of much of the Arabian Peninsula.

For his part, Abdul Rahman had two goals: to reestablish the Saudi dynasty as master of Arabia, and to make universal the Wahabi branch of Sunni Islam. His son, Ibn Saud, would be the instrument to both ends.

To commemorate the consolidation, the name of the realm was changed in 1932 from the “Kingdom of the Hejaz and Nejd and Its Dependencies” to the name by which it is known today— Saudi Arabia.

The companion was an Englishman, a former official in the Indian Civil Service, who had set himself up as a merchant in Jidda and had, just a few months earlier, converted to Islam under the tutelage of Ibn Saud. The King had personally given him his Islamic name, Abdullah. But his real name was Harry St. John Bridger Philby, known as Jack to his English friends, and now, perhaps, remembered best as the eccentric father of one of the most notorious double agents of the twentieth century, Harold “Kim” Philby, who became the head of anti-Soviet counterespionage in British intelligence, while actively spying for the Soviets. He might well have taken lessons from his father on how to play multiple roles. Indeed, many years later, on reading Kim Philby’s own account of his years as a double agent, the retired court interpreter for Ibn Saud could only marvel that Kim was “a true replica of his father.”

All cars traveling that route should carry at least five passengers as “only five persons could get cars out of sand.”

Suleiman was certainly the most important man in the kingdom outside the royal family. He carried an enormous workload that was based upon an accounting system for public finances that he had invented and that only he could understand.

He needed money urgently—among other things, in order to pay the Cambridge University fees for his son, Kim. For his services, Socal agreed to give Jack Philby one thousand dollars a month for six months, plus bonuses both upon the signing of a concession contract and on the discovery of oil. Thus, Kim Philby was able, after all, to pursue his studies at Cambridge, where he took the first steps on the way to becoming a Soviet spy.

Care had been taken that all the coins bore the likeness of a male English monarch, and not Queen Victoria, which, it was feared, would have devalued them in the male-dominated society of Saudi Arabia.

The Great Depression had more generally crippled the economies of Kuwait and the other sheikhdoms. So bad had conditions become that slaveowners along the Arab coast were selling off their African slaves at a loss, to avoid the maintenance costs.

He attributed the “wonderful victory,” at least in good part, to an individual he decided was the most popular man in England, the American ambassador Andrew Mellon—the former U.S. Treasury Secretary and scion of the family that controlled Gulf Oil.

Every item that the geologists, engineers, and construction workers needed—be it equipment or food—had to be brought in over a supply line that stretched back to the port of San Pedro, near Los Angeles.

The Japanese Army now had the desired pretext to launch an attack on Chinese forces, which it proceeded to do without delay. The Manchurian Affair had begun, marking the entry into an era of Japanese history they were to call, when it was all over, the Valley of Darkness.

But the strength of the opposition was brought home a few months later, when a youth, enraged at Japan’s cooperation with the United States and Britain, shot Hamaguchi at a railway station in Tokyo. He never fully recovered, and died in 1931. With him perished the spirit of cooperation, and instead, a new cult of ultranationalism—bolstered by “government by assassination”—took hold.

The fishing fleet, which was one of the main sources of Japan’s food, was ordered to give up oil and instead to depend exclusively upon wind power!

That night in The Hague, Walden and Elliott began working out what to do when the Japanese invasion came. The two men wasted little time in implementing their new plans. As a first step, all German, Dutch, and Japanese employees in the Indies who were of doubtful loyalty were dismissed. Plans were prepared for the destruction of Stanvac’s refinery and oil wells—but rather openly, as a deterrent to the Japanese.

Fearful that a beleaguered Britain would withdraw its own forces from the Far East, Washington made a fateful decision; it transferred the American fleet from its base in Southern California to Pearl Harbor on the island of Oahu in Hawaii. Since the fleet was, at the time, already on maneuvers near Hawaii, the move was accomplished with a minimum of fanfare. One purpose was to stiffen British resolve. The other was to serve as a deterrent to Tokyo.

The British now wanted to find a way to halt the flow of oil. They feared that if Japan did build large stockpiles, it would become relatively immune to any economic sanctions. Still, Roosevelt and Hull resisted cutting the flow.

To be sure, Hull had a startling advantage during all these talks. Thanks to the code-breaking operation known as “Magic,” the United States and Britain had cracked “Purple,” the top-secret Japanese diplomatic code. Thus, Hull was able to read, before the meetings with Nomura, Tokyo’s instructions to the ambassador and, afterward, Nomura’s reports. Hull played his part adroitly, never giving any hint of knowing more than he was supposed to know.

He believed that the Japanese were a chosen people and that they had a special mission in Asia. He would do his duty. “It’s out of the question!” he exclaimed. “To fight the United States is like fighting the whole world. But it has been decided. So I will do my best. Doubtless I will die.”

Yet, early in 1941, despite the secrecy, U.S. Ambassador Grew heard from Peru’s minister to Tokyo about a rumor that Japan was planning an attack on Pearl Harbor. Grew reported it to Washington, where it was immediately discounted. American officials simply could not believe—then or in the months following—that such an audacious assault was even possible. Moreover, officials in the Navy and State departments were astonished that an ambassador of Grew’s caliber could take seriously such an obviously ridiculous story.

With some support from the Navy, Prince Konoye, the Prime Minister, raised the possibility of a summit meeting with Roosevelt. Perhaps he could appeal directly to the American President. Konoye was even willing to try to jettison the Axis alliance with Hitler in order to reach an understanding with the Americans.

So, for the time being, Roosevelt, with his talent for ambiguity, neither agreed to nor rejected such a meeting.

With winter almost at hand in Tokyo, the Japanese authorities retaliated by cutting off all supplies of heating oil to the American and British embassies.

A Japanese diplomat arrived in Washington the third week of November to present the list of demands. To Secretary of State Hull, it read like an ultimatum. There was another arrival of Japanese origin in Washington that week: an intercepted “Magic” message of November 22, informing Nomura that American agreement to Tokyo’s latest proposals had to be received by November 29 at the very latest, for “reasons beyond your ability to guess.” For, “after that, things are automatically going to happen.”

Most of the American officials seemed to have forgotten—or never knew—that Japan’s great victory in the Russo-Japanese War had begun with a surprise attack on the Russian fleet at Port Arthur.

But in those tense months leading up to the attack, the clear signals were lost in the “noise”—the maze of complex, confusing, contradictory, competing, and ambiguous pieces of information. After all, there were also many indications that the Japanese were about to attack the Soviet Union.

Yamamoto himself might well have taken one more chance, but he was thousands of miles away, monitoring events from his flagship, off Japan. The commander of the Hawaiian task force, Chuichi Nagumo, was a far more cautious man; indeed, he had actually opposed the entire operation. Now, despite the entreaties of his emboldened officers and much to their chagrin, he did not want to send planes back to Hawaii, for a third wave, to attack the repair facilities and the oil tanks at Pearl. His luck had been so enormous that he did not want to take more risks. And that, along with the sparing of its aircraft carriers, was America’s only piece of good fortune on that day of devastation.

It was a strategic error with momentous reverberations. Every barrel of oil in Hawaii had been transported from the mainland. If the Japanese planes had knocked out the Pacific Fleet’s fuel reserves and the tanks in which they were stored at Pearl Harbor, they would have immobilized every ship of the American Pacific Fleet, and not just those they actually destroyed. New petroleum supplies would only have been available from California, thousands of miles away. “All of the oil for the Fleet was in surface tanks at the time of Pearl Harbor,” Admiral Chester Nimitz, who became Commander in Chief of the Pacific Fleet, was later to say. “We had about 41/2 million barrels of oil out there and all of it was vulnerable to .50 caliber bullets. Had the Japanese destroyed the oil,” he added, “it would have prolonged the war another two years.”

Mussolini well knew that a shut-off of petroleum supplies would paralyze the Italian military. While his armies advanced, throwing poison gas against the hapless Ethiopians, he resorted to every form of bluff and bluster to intimidate the League.

The question of foreign supplies and sanctions was very much on Hitler’s mind. For he was on the eve of a critical move. The next month, March 1936, he boldly remilitarized the Rhineland, on the border with France, in violation of treaty agreements. It was the first time that he flexed his muscles on the international front, taking what afterward he was to call his gravest risk—the forty-eight hours that were “the most nerve-racking in my life.” He waited to be challenged, but the Western powers did nothing to stop him. The gamble had paid off. The pattern was to be repeated.

The anti-Nazi chairman of the managing board, Carl Bosch, the man who had made the deal with Standard Oil, was pushed aside, while most of the other members of the managing board who did not already belong to the Nazi party fell all over each other in their rush to sign up.

The campaign in the West actually improved Germany’s oil position, for German troops captured oil stocks considerably in excess of the fuel they had expended in the invasions.

From the very start, the capture of Baku and the other Caucasian oil fields was central to Hitler’s concept of his Russian campaign. “In the economic field,” one historian has written, “Hitler’s obsession was oil.”

If the oil of the Caucasus—along with the “black earth,” the farmlands of the Ukraine—could be brought into the German empire, then Hitler’s New Order would have within its borders the resources to make it invulnerable.

To support his plans, Hitler propounded his own bizarre calculations: that the number of German casualties in a war with Russia would be no greater than the number of workers tied up in the synthetic fuel industry. So there was no reason not to go ahead.

Warnings of the impending invasion came from many sources—Americans, British, other governments, his own spies—but Stalin resolutely refused to believe them. Scarcely hours before the invasion, a dedicated German communist defected from a German Army unit and slipped over to the Soviets with word of what was about to happen. Stalin suspected a trick and ordered the man shot.

Just after 3:00 A.M. the German Army, three million men strong, with 600,000 motor vehicles and 625,000 horses, struck along a wide front. The German onslaught caught the Soviet Union completely off guard and put Stalin into a nervous collapse that lasted several days.

The numbers were beyond comprehension; six to eight million Soviet soldiers were killed or captured in the first year of war, and still new men were thrown into battle.

The only thing standing in the way of Germany’s exploitation of Russian oil was the requirement to capture it.

The Germans had captured Russian oil supplies as they had done with French supplies, but this time to no avail, for Russian tanks ran on diesel, which was useless to the German panzer units, which ran on gasoline. Panzer divisions were sometimes at a standstill for several days at a time in the Caucasus, while they waited for fresh supplies. Trucks carrying oil could not catch up because they too had run short of fuel. Finally, in desperation, the Germans took to transporting oil supplies on the backs of camels.

He also had a considerable talent for improvisation, and not only in terms of tactics. Early in his campaign, Rommel ordered a number of “dummy tanks” built at workshops in Tripoli, which were then mounted on Volkswagens in order to frighten the British into thinking his armored divisions were much larger than in fact they were.

On the other side of the line, panic was building in Cairo. The British were burning their documents, Allied personnel were being squeezed into cattle trains for a hasty evacuation, and Cairo merchants were hurriedly replacing the photographs of Churchill and Roosevelt in their shop windows with those of Hitler and Mussolini.

Montgomery would afterward be criticized for being too cautious. But, as one German general would later say, “he is the only Field-Marshal in this war who won all his battles.”

The legend had fallen, and in March 1943 Rommel, now regarded by Hitler as defeatist, was removed from command of the Afrika Korps. By

Three days later, a group of army officers tried to assassinate Hitler, but failed. Rommel was suspected both of involvement in the conspiracy and of plotting a separate surrender in the West to the Allies.

In Rommel’s papers, collected after his death, he left a hard-earned epitaph for the role of supply, and in particular of oil, in the age of mobile warfare. “The battle is fought and decided by the Quartermasters before the shooting begins,” he wrote, looking back on El Alamein.

Speer drove the slack out of the German economy. The two and a half years after his initial appointment would see a more than threefold increase in the production of aircraft, weapons, and ammunition, and a nearly sixfold increase in tanks. And these remarkable production records were being set at the same time that Allied forces were carrying out an extensive if not particularly successful strategic bombing campaign against a variety of German targets, such as the aviation industry and railway depots and ball-bearings factories. German industrial production was still rising; indeed it registered its highest level of the entire war in June 1944.

By 1944, according to one estimate, a third of the total work force in the German synthetic fuels industry, throughout the Reich, was slave labor. I.

Just before Allied invaders forced Italy out of the war, the German military had seized its oil stocks, adding substantially to its own reserves.

Jet fighters, a new German innovation that would have given the Luftwaffe a significant advantage, were being introduced into operational squadrons in the autumn of 1944. But there was no fuel to train the pilots, or indeed even to get the planes into the air.

Only when Russian soldiers were almost directly above his underground bunker, on the doorstep of the now-ruined Chancellery that Speer had designed for him, did Hitler commit suicide. He left orders that his body be doused in gasoline and burned so that it would not fall into the hands of the hated Slavs. There was enough gasoline at hand to carry out that final order.

Occasionally, they could still spot the red glow from Balikpapan high in the sky. They had done their work well; four decades of industrial creation had been destroyed in less than a day.

Premier Tojo bragged that Hong Kong had fallen in eighteen days, Manila in twenty-six, and Singapore in seventy. A “victory fever” gripped the country; the stunning military successes spawned such a runaway stock market boom in the first part of 1942 that the government had to intervene to dampen it down.

The contrast between the Army’s and Navy’s top commanders was enormous. General Douglas MacArthur, although a strategist of great shrewdness, was also egoistic, bombastic, and imperious. At one meeting during the war, after three hours of listening to MacArthur, Franklin Roosevelt told an aide, “Give me an aspirin . . . . In fact, give me another aspirin to take in the morning. In all my life nobody has ever talked to me the way MacArthur did.” For his part, Admiral Chester Nimitz was a soft-spoken, unassuming team player, who, when waiting word on the outcome of a battle, would practice on his pistol range or toss horseshoes right outside his office. “It simply was not in him to make sweeping statements or to give colorful interviews,” noted one correspondent.

Or, as one history of Japanese military operations put it, “The shortage of liquid fuel was Japan’s Achilles’ heel.”

The specific weakness was the vulnerability of Japanese shipping to submarines.

But only in late 1943 did the Japanese begin to give serious attention to the protection of shipping against submarines, including the establishment of convoys. Their efforts were inadequate and incomplete. “When we requested air cover,” one convoy commander said ruefully, “only American planes showed up.”

Of Japan’s total wartime steel merchant shipping, some 86 percent was sunk during the conflict and another 9 percent so seriously damaged as to be out of action by the time the war ended. Less than 2 percent of American naval personnel—the submariners—were responsible for 55 percent of the total loss.

And as the shortage worsened in 1945, navigation training was eliminated altogether; pilots were simply to follow their leaders to targets. Few were expected to return.

The Japanese had methodically calculated that, whereas eight bombers and sixteen fighters were required to sink an American aircraft carrier or battleship, the same effect could be achieved by one to three suicide planes. Not only was the pilot sure to cause more damage if he crashed his plane, not only would his commitment and willingness to die unnerve an enemy who could not comprehend the mentality of such an act, but—since he was not going to return—his fuel requirement was cut in half.

The American leaders knew that Japan’s fighting capability was crumbling, but they saw no sign that its fighting spirit was fading.

Yet so appalling were Japan’s circumstances and so great the shock of the atomic bombs, made worse by the new Soviet threat, that those seeking to end the war finally prevailed over the intense opposition from the military.

The cost of what Tojo and his collaborators had launched was enormous. The Pacific War in its entirety claimed upwards of 20 million lives, including about two-and-a-half million Japanese. Now, in 1945, Tojo’s own life hung in the balance, not because his self-inflicted wound was inevitably fatal, which it was not, but because of the difficulty, first, in locating a suitable doctor, and then in finding an ambulance that had any gasoline in its tank. So widespread was the fuel shortage that it proved easier to find an American doctor than an ambulance with gasoline. But finally a vehicle with sufficient fuel was located, and it arrived at Tojo’s house two hours after he had shot himself. Tojo was carried off to the hospital and nursed back to health. The next year he went on trial as a war criminal, was found guilty, and was in due course executed.

A few months after the war began, before France had been overrun by the Germans, the British and French governments, seeking to replicate what had been carried out in World War I, had jointly offered to pay Rumania $60 million to destroy its oil fields, and thus prevent the Germans from taking the output. But the two sides could never agree on a price, the deal was never struck, and Rumanian oil went, as feared, to the Germans. The destruction was left to be done by Allied bombers, much later in the war.

As Roosevelt was later to explain, “Old Dr. New Deal” had to call in his partner “Dr. Win-the-War.” And what Dr. New Deal had found unpalatable and unhealthy about Big Oil—its size and scale, its integrated operations, its self-reliance, its ability to mobilize capital and technology—was exactly what Dr. Win-the-War would prescribe as the urgent medicine for wartime mobilization.

The Germans also gained two other very significant advantages. They changed their code procedures, so that the British lost the ability to read the U-boat signals; and at the same time, they broke the ciphers that governed the movement of the Anglo-American convoys. The resulting destruction of Allied shipping was appalling. Once again looming before the Allies was one of their greatest fears: the choking off of the absolutely essential oil supplies to Britain from the Western Hemisphere.

In addition, Admiral Doenitz introduced Milchkuhs (“milk cows”), large underwater supply ships that could deliver diesel fuel as well as fresh food to the U-boats.

In May 1943 alone, 30 percent of the U-boats at sea were lost.

After all, about half the total tonnage shipped from the United States during the war was oil.

The Quartermaster Corps calculated that when an American soldier went overseas to fight, to support him in his job he required sixty-seven pounds of supplies and equipment, of which half was petroleum products.

He knew the importance of creating a legend about himself—be it the two revolvers, one pearl-handled, that Patton wore on his hips, or the nickname “Old Blood-and-Guts” that he had bestowed on himself in his unsuccessful bid in the 1930s to become Commandant of Cadets at West Point.

By 1941, Ibn Saud was once more confronting a stark financial crisis. The King had to face the harsh reality. As he explained to an American in 1942, “The Arabs have the religion, but the Allies have the money.”

His group was also to include one hundred live sheep, but after some negotiation, the number was reduced to just seven in light of the sixty days’ worth of provisions, including frozen meat, on board the American ship. Ibn Saud spurned the offer of the commodore’s cabin and slept instead on deck, in an improvised tent made of canvas, stretched over the forecastle, and furnished with Oriental carpets and one of the King’s own chairs.

Then, in February 1946, the Anglo-American Petroleum Agreement ran into a new problem. Its chief sponsor, Harold Ickes, got into a bitter scrap with Harry Truman over the President’s proposed appointment of Edwin Pauley, a California oil man, as Undersecretary of the Navy. Ickes, as had been his wont under Roosevelt, submitted his resignation. And a long good-bye it was—more than six pages typed, single-spaced. “It was the kind of letter sent by a man who is sure that he can have his way if he threatens to quit,” Truman later said. But Ickes had made a mistake; Truman was not Roosevelt. He accepted Ickes’s resignation tersely and with alacrity and delight. Ickes requested six weeks to wind up the many things that only he personally could attend to; Truman gave him two days to clean out his desk.

Ibn Saud was now in his mid-sixties, blind in one eye, and failing in health. His personal force and drive had created and held together the kingdom. But what would happen when that force was gone? He had sired upwards of forty-five sons, of whom thirty-seven were thought to be living, but would that be a factor for stability or for conflict and disorder?

At war’s end, their IPC shares reverted to both CFP and Gulbenkian. But then in late 1946, Jersey and Socony took up the concept of “supervening illegality” with what could only be called extreme enthusiasm. In their view, the whole IPC agreement was no longer in effect.

Shortly after the war, Stalin interrogated his petroleum minister, Nikolai Baibakov (who subsequently was to be in charge of the Soviet economy for two decades—until 1985, when Mikhail Gorbachev replaced him). Mispronouncing

In England, the River Thames froze at Windsor. Throughout Britain, coal was in such short supply that power stations had to be shut down, and electricity to industry was either reduced greatly or cut off entirely. Unemployment abruptly increased six times over, and British industrial production was virtually halted for three weeks—something German bombing had never been able to accomplish.

But the emergence of a Jewish state, along with the American recognition that followed, threatened more than transit rights for the pipeline. Ibn Saud was as outspoken and adamant against Zionism and Israel as any Arab leader. He said that Jews had been the enemies of Arabs since the seventh century. American support of a Jewish state, he told Truman, would be a death blow to American interests in the Arab world, and should a Jewish state come into existence, the Arabs “will lay siege to it until it dies of famine.”

In 1948, Britain, at wit’s end, gave up its mandate and withdrew its Army and administration, plunging Palestine into anarchy. On May 14, 1948, the Jewish National Council proclaimed the state of Israel. It was recognized almost instantly by the Soviet Union, followed quickly by the United States. The Arab League launched a full-scale attack. The first Arab-Israeli war had begun.

Ibn Saud could certainly have canceled the concession, but at considerable risk. For Aramco was the sole source of his rapidly rising wealth, and the broader relationship with the United States provided the basic guarantee of Saudi Arabia’s territorial integrity and independence. Ever suspicious of the British, the King feared that London might be sponsoring a new coalition to champion the Hashemites, as it had done after World War I, enabling the Hashemites—whom Ibn Saud had driven from Mecca only two decades earlier—to recapture the western part of his country.

Ibn Saud found he could distinguish between Aramco, a purely commercial enterprise owned by four private companies, and the policy of the U.S. government elsewhere in the region. When other Arab countries declared that Saudi Arabia should cancel the concession to retaliate against the United States and prove its allegiance to the Arab cause, Ibn Saud replied that oil royalties helped to make Saudi Arabia “a stronger and more powerful nation, better to assist her neighboring Arab states in resisting Jewish pretensions.”

construction proceeded on Tapline. It was finished in September 1950. Two more months were required to fill the line, and in November, the oil began to arrive at Sidon in Lebanon, the terminus on the Mediterranean, where it was picked up by tankers for the last leg of the journey to Europe. Tapline’s 1,040 miles would replace 7,200 miles of sea journey from the Persian Gulf through the Suez Canal. Its annual throughput was the equivalent of sixty tankers in continuous operation from the Persian Gulf, via the Suez Canal, to the Mediterranean. The oil it carried would fuel the recovery of Europe.

A new Federal agency, the National Security Resources Board, made a similar argument in a major policy review in 1948; importing large amounts of Middle Eastern oil would allow a million barrels per day of Western Hemisphere production to be shut in, in effect creating a military stockpile in the ground—“the ideal storage place for petroleum.”

As far back as the mid-1890s, operators were drilling off piers near Santa Barbara, but the wells produced no more than one or two barrels per day.

“Practical men, who believe themselves to be quite exempt from any intellectual influences,” John Maynard Keynes once said, “are usually the slaves of some defunct economist.” When it came to oil, the “practical men” included not only the businessmen that Keynes had in mind, but also kings, presidents, prime ministers, and dictators—as well as their ministers of oil and finance. Ibn Saud and the other leaders of the time, as well as the various potentates since, were under the thrall of David Ricardo, a fantastically successful stockbroker in late-eighteenth-century and early-nineteenth-century England. (Among other things, he made a killing on Wellington’s defeat of Napoleon at Waterloo.) By origin a Jew, Ricardo became a Quaker, then a learned member of the House of Commons, and was one of the founding fathers of modern economics. He and Thomas Malthus, his friend and intellectual rival, constituted between themselves the successor generation to Adam Smith.

He was also convinced that implacable resistance would probably be not only expensive, but also futile. Better to help create the new order, in Pratt’s view, than be a victim of it.

The Neutral Zone was the two thousand or so square miles of barren desert that had been carved out by the British in 1922 in the course of drawing a border between Kuwait and Saudi Arabia. In order to accommodate the Bedouins, who wandered back and forth between Kuwait and Saudi Arabia and for whom nationality was a hazy concept, it was agreed that the two countries would share sovereignty over the area. If every system has within it the seeds of its own destruction, then it was in the Neutral Zone—and in the way its oil rights were parceled out—that the erosion began that would eventually lead to the end of the postwar petroleum order.

The welder’s cowboy hat had provided reason enough to strike up a conversation, and the welder soon found himself a guest in Dasman Palace in Kuwait City, where he garnered lasting gratitude in the water-starved principality by adjusting the palace’s plumbing so that water use was cut 90 percent.

By age fifty-five, he had had his second facelift and was dyeing his hair a funny kind of reddish-brown, all of which gave him a rather wizened, embalmed look.

By the end of the 1950s, Getty was the seventh-largest marketeer of gasoline in the United States. Fortune magazine announced in 1957 that he was America’s richest man and its sole billionaire.

The Saudis did their research; they had even, unbeknownst to Aramco, retained their own adviser on American tax law, and to their delight, they learned about a most interesting and intriguing provision in American tax laws that would leave Aramco whole. It was called the “foreign tax credit.”

Reza Shah had thereafter brought order to the fractious country, begun modernizing it at a pell-mell rate, and had subjugated the powerful mullahs, whom both father and son regarded as dangerous and deadly enemies from the Middle Ages.

Alarmed by rapid German advances in Russia and North Africa, the Allies feared a pincer that would converge in Iran. They deposed Reza Shah, who had shown friendliness and sympathy toward the Nazis, and replaced him with his son, only twenty-one at the time.

Only one thing really united the country—hatred of foreigners and, in particular, the British. Never had so much malevolence been attributed to a so rapidly declining power. The English were regarded as almost supernatural devils, controlling and manipulating the entire nation.

Prime Minister Razmara did not know what to do. Finally, in a speech to Parliament in March 1951, he came out against nationalization. Four days later, as he was about to enter Tehran’s central mosque, he was assassinated by a young carpenter, who had been entrusted by Islamic terrorists with the “sacred mission” of killing the “British stooge.”

Mohammed Mossadegh would completely dominate the drama of the next two years. He would slyly outwit every-one—foreign oil companies, the American and British governments, the Shah, his own domestic rivals. He himself was a man of evident contradictions. Cosmopolitan, educated as a lawyer in France and Switzerland, he was fiercely nationalistic, antiforeigner, and obsessed by his opposition to the British. The son of a high bureaucrat and a great-grandson of a Shah from the preceding dynasty, Mossadegh was an aristocrat with extensive landholdings, including a 150-family village that belonged to him personally. Yet he took on the mantle of reform, republicanism and rabble rousing, appealing to and mobilizing the urban masses.

British suspicions were further stirred when a junketing young Congressman, Representative John F. Kennedy, son of the former American ambassador to London, stopped in Tehran and suggested to the British ambassador that, if no settlement emerged, “it would be a good thing for American concerns to step into the breach.”

On September 25, 1951, Mossadegh gave the last remaining British employees at Abadan exactly one week to clear out. A few days later, Ayatollah Kashani declared a special national holiday—“a day of hatred against the British Government.”

Field control of what was called “Operation Ajax” was vested in the CIA’s Kermit Roosevelt, grandson of Theodore Roosevelt.

Operation Ajax created “a situation and an atmosphere in Tehran that forced the people to choose between an established institution, the monarchy, and the unknown future offered by Mossadeq.”

The other irascible old man who played a major role in the Iranian crisis did not fare nearly as well. Mohammed Mossadegh was put on trial by the reinstated Shah, delivered impassioned speeches in his own defense, and spent three years in prison. He lived out the rest of his days under house arrest on his estate, continuing his experiments with homeopathic medicines, much as he had done, three decades earlier, when the Shah’s father put him under house arrest.

Ferdinand de Lesseps, a Frenchman ever after celebrated as “the Great Engineer.” In fact, he was no engineer at all, though he was a man of other considerable accomplishments—as a diplomat, entrepreneur, and promoter. And his talents did not end there. At the age of sixty-four, he married a woman of twenty, and then, forthwith, proceeded to father twelve children.

The Americans believed that the relics of colonialism were an enormous handicap for the West in its struggle with communism and the Soviet Union.

But the coup de grace came when Senate Republicans told Dulles that foreign aid could be approved for only one of the two “neutralist” leaders slated for assistance: Tito of Yugoslavia, or Nasser of Egypt. But not both. Dulles chose Tito. Eisenhower confirmed the decision. The British were in accord. On July 19, 1956, Dulles canceled the proposed Aswan Dam loan, taking Nasser and the World Bank by surprise.

In an appalling blunder, the British and French never really factored the calendar of the American Presidential election into their calculations.

That same month, with the Suez crisis still brewing, Robert Anderson, a wealthy Texas oil man who was much admired by Eisenhower, made a secret trip to Saudi Arabia as the President’s personal emissary. The objective was to get the Saudis to apply pressure on Nasser to compromise. In Riyadh, Anderson warned King Saud and Prince Faisal, the Foreign Minister, that the United States had made great technical advances that would lead to sources of energy much cheaper and more efficient than oil, potentially rendering Saudi and all Middle Eastern petroleum reserves worthless. The United States might feel constrained to make this technology available to the Europeans if the canal were to be a tool of blackmail. And what might this substitute be, asked King Saud. “Nuclear energy,” replied Anderson. Neither King Saud nor Prince Faisal, who had done some reading on nuclear power, seemed impressed, nor did they show any worry about the ability of Saudi oil to compete in world energy markets. They dismissed Anderson’s warning.

Some later said that such a condition could, literally, slowly poison the mind. To make matters worse, Eden thereafter was on drugs for his stomach pain, as well as on stimulants (apparently amphetamines) to counter the effects of the painkillers. The interaction and side effects of these various medications were not then well known. Eden struck others as very agitated. The dosage of both sets of drugs had to be increased considerably after Nasser’s seizure of the canal. In early October, Eden collapsed and was rushed to a hospital with a 106 degree fever. Though he was back in command for much of October, he continued to show signs of ill health and was put on a regimen of ever-heavier medication.

IN THE PARLANCE of the oil industry, a giant oil field is called an “elephant.”

Proven world oil reserves in the noncommunist world increased from 62 billion barrels in 1948 to 534 billion barrels in 1972, almost a ninefold rise.

Out of every ten barrels added to free world oil reserves between 1948 and 1972, more than seven were found in the Middle East.

Many years later, one of his aides would recall, “Anybody who worked with him would go into the fire for him, although you couldn’t really explain why.”

(In 1954, Anglo-Iranian, taking up the name of the subsidiary it had acquired in World War I, had rechristened itself British Petroleum).

And now a notable technological innovation, the cheap transistor radio, was carrying his rousing voice to the poor masses throughout the Arab world, making him a hero everywhere.

Syria joined Egypt to form the United Arab Republic, seemingly the first step in the realization of his dream of pan-Arabism. The apparent merger, ominously, brought together the two countries which—with the Suez Canal in Egypt and the Saudi and Iraqi pipelines passing through Syria—dominated the transit routes for Middle Eastern petroleum.

Crowds surged through the streets, holding aloft huge photographs of Nasser, along with live squirming dogs, which represented the Iraqi Royal Family. King Faisal II himself was beheaded by troops that stormed the palace. The Crown Prince was shot, and his hands and feet were hacked off and carried on spikes through the city. His mutilated body, along with those of a number of other officials, was dragged through the streets, and then hung from a balcony at the Ministry of Defense.

He wrote articles for exile newspapers and took up woodworking, but more than anything else, he devoted himself to the study of the oil industry.

Venezuela was a relatively high-cost producer, at about eighty cents a barrel, according to one estimate, compared to twenty cents among the Persian Gulf producers. So Venezuela would inevitably be at a disadvantage in an out-and-out production race. It would lose market share. Venezuela, thus, had a very good reason to seek to persuade the Middle Eastern producers to raise their taxes on the companies and thus the cost of their oil.

He came with a proposal to create a Western Hemisphere oil system, but one that would be run by the governments, not the oil companies. Under it, Venezuela would, as a nation, be given a quota—a guaranteed share of the U.S. market. No longer would it be the prerogative of the companies to decide from which producing country to bring in petroleum. What Pérez Alfonzo was asking was not so bizarre; after all, he could point out, it was exactly the way the American sugar quota system worked— each country had its share. But, then, oil was not sugar.

With so much attention and energy focused on this power struggle, and in the absence of a single dominating personality, Tariki was able to shape policy with considerable autonomy in an absolutely critical area, the one that happened to generate the kingdom’s entire wealth.

Between 1955 and 1960, Soviet oil output actually doubled, and by the end of the 1950s, the Soviet Union had displaced Venezuela as the second-largest oil producer in the world, after the United States.

Indeed, a political competition soon developed between Saudi Arabia and Egypt, which culminated in their proxy war in Yemen.

Those wanting to make an overseas call to the United States had to fly to Rome to do it.

Progress by the geologists in the field was impeded by obstacles they had never encountered before: an estimated three million land mines left over from World War II. Geologists and oil field workers were not infrequently injured or killed by undetected mines. The companies formed mine detection and clearance squads, and in due course, some of the Germans who had laid the mines for General Rommel were recruited to remove them.

Between 1960 and 1969, the market price for oil fell by 36 cents a barrel, a drop of 22 percent. Correcting for inflation, the fall was even steeper—a 40 percent decline.

The companies even switched from a Western to an Iranian calendar in order to push more production into that particular year.

Between 1948 and 1972, consumption tripled in the United States, from 5.8 to 16.4 million barrels per day—unprecedented except when measured against what was happening elsewhere. In the same years, demand for oil in Western Europe increased fifteen times over, from 970,000 to 14.1 million barrels per day. In Japan, the change was nothing less than spectacular; consumption increased 137 times over, from 32,000 to 4.4 million barrels per day.

To any manufacturer worried about the continuity of his production line, to a utility manager anxious about his ability to meet electricity requirements in the dead of winter, Lewis’s fiery rhetoric and the militancy of his United Mine Workers constituted a powerful invitation to find a substitute for coal. That

Part of the reason for oil’s victory over coal was environmental, especially in Britain. London had long suffered from “Killer Fogs” as the result of pollution from coal burning, particularly the open fires in houses. So thick were those fogs that confused motorists literally could not find their way home to their own streets and instead would drive their cars onto lawns blocks away from their own houses. Whenever the fogs descended, London’s hospitals would fill with people suffering from acute respiratory ailments. In response, “smokeless zones” were established where the burning of coal for home heating was banned, and in 1957 Parliament passed the Clean Air Act, which favored oil.

The bands of public transportation, primarily rail, which had bound Americans to the relatively high-density central city, snapped in the face of the automotive onslaught, and a great wave of suburbanization spread across the land.

As William Levitt explained, “No man who owns his own house and lot can be a Communist. He has too much to do.”

Altogether, between 1950 and 1976, the number of Americans living in central cities grew by 10 million, the number in suburbs by 85 million. By 1976, more Americans lived in suburbs than in either central cities or rural areas.

The first all-enclosed, climate-controlled mall made its appearance near Minneapolis in 1956.

America had become a drive-in society. In Orange County, California, it was possible to attend religious services sitting in your car at the “world’s largest drive-in church.”

There were no environmental impact studies in those days, no anti-development litigation, only the sense that in America you could get important things done quickly, and the whole job, from the first planning to the last toll booth, was accomplished in less than two years.

Even in their living rooms, oil became part of the lives of Americans. Upwards of 60 million of them were entertained each week by a situation comedy called The Beverly Hillbillies, which became an instantaneous hit when it took to the airwaves in 1962 and was the number-one-rated show for a couple of years.

BP found the job of reorganizing transportation so complex that it gave up using computers—it could not write the programs quickly enough—and went back to pencil and paper.

As for those trucks and tractors on the banks of the Yukon River, the oil companies spent millions of dollars keeping their engines tuned up and just plain warm, waiting for the day.

Yet Alaska and the North Sea had another common bond: Though their reserves were in very difficult places, physically, they were not in unstable places, politically.

When it came to deal-making, there have been few in the entire twentieth century to rival Armand Hammer.

His father, Dr. Julius Hammer, was not only a practicing physician and drug manufacturer, but also a partisan of the left; he had met Lenin in Europe in 1907 and was one of the founders of the American Communist party. Armand did not share his father’s socialist tendencies; he was interested in making money and doing deals—in short, a capitalist.

Hammer renewed his contacts with the Soviet Union under Nikita Khrushchev and ended up as a go-between for five Soviet General Secretaries and seven U.S. Presidents. His access to the Kremlin was unique. He was virtually the only person who could tell Mikhail Gorbachev firsthand about Lenin, who had died a decade before Gorbachev’s birth. As late as 1990, at age ninety-two, Hammer was still the active chairman of Occidental, and loyal stockholders continued to sing his praises.

On the night of August 31–September 1, 1969, a senior Libyan military officer, finding himself unexpectedly awakened in his own bedroom by a junior officer, told the insistent young man that he was too early; the coup was scheduled for a few days later. Alas, for the senior officer, this was a different coup.

A group of radical young officers, led by the charismatic Muammar al-Qaddafi, beat all the others to the punch, including their military superiors, who had scheduled their own coup for just three or four days later.

Thereafter, a bit reassured, he switched back, on each morning’s commute from Paris, to his own more familiar Gulfstream II, with its cork-lined bedroom. He would arrive back in Paris at 2:00 A.M., and would be off again by 6:00 A.M. Throughout his life, he had had a remarkable capacity to nap under all kinds of conditions, and he put that ability to very good use on the flights.

King Faisal of Saudi Arabia was not among them. He hated Israel and Zionism as much as any Arab leader. He was sure there was a Zionist-communist plot to take over the Middle East; he told both Gamal Abdel Nasser and Richard Nixon that the Israelis were the real paymasters for radical Palestinian terrorists. Yet

Saudi Arabia had, at last, graduated to the position once held by Texas; the desert kingdom was now the swing producer for the entire world.

Sadat’s gamble paid off, and the enormity of the surprise of the Arab attack would be for the Israelis what Pearl Harbor had been thirty-two years earlier for Americans. Afterward, the Israelis would ask themselves how they could have been caught so completely off guard. The signals were all so clear. But those signals were not so easily extracted from the noise of contradictory information mixed with deliberate deception, especially when complacency and overconfidence had taken hold.

Nixon also assured Saqqaf and the other foreign ministers that, despite his Jewish origins, Kissinger “was not subject to domestic, that is to say Jewish, pressures.” He went on to add, “I can see that you are concerned about the fact that Henry Kissinger is a Jewish-American. A Jewish-American can be a good American, and Kissinger is a good American. He will work with you.” Kissinger was writhing with embarrassment and anger as the President made his gratuitous remark, but Saqqaf was nonplussed. “We are all Semites together,” Saqqaf deftly replied.

Throughout the clash of arms in the Middle East and the weeks of crisis over oil, one key actor was otherwise preoccupied. Richard Nixon was thoroughly entangled in the series of events that escalated from what he called a “third-rate burglary” into the unprecedented series of Watergate scandals, at the center of which was the President himself. The United States had seen nothing remotely like it since Teapot Dome.

In the weeks that followed, though Nixon would temporarily depart his own personal crisis and weave in and then out again of the world crisis, effective control over American policy was lodged in the hands of Henry Kissinger, who, in addition to being Special Assistant for National Security, had also just been appointed Secretary of State.

A half dozen of the most senior American national security officials were summoned to a hurriedly called late-night emergency meeting in the White House Situation Room. Nixon himself was not awakened for the meeting on the advice of Alexander Haig, who told Kissinger that the President was “too distraught” to join them.

Telling the Cabinet about Simon’s new post, Nixon likened it to Albert Speer’s position as armaments overlord in the Third Reich. Had Speer not been given the power to override the German bureaucracy, Nixon explained, Germany would have been defeated far earlier. Simon was somewhat discomfited by the comparison.

Watergate, Yankelovich added, “has bred a widespread feeling of gloom about the state of the nation,” and, as a direct result, public confidence that “things are going well in the country” had plummeted from 62 percent in May 1973 to a mere 27 percent in late November 1973.

It was difficult to get a political decision on anything on an inter-agency basis. There was no real decision-making apparatus in Washington—other than Henry Kissinger.”

At this point, Heath lost his temper. “You know perfectly well that I can’t put it in writing,” he boomed. After all, he was the great champion of British entry into the European Community and of cooperation with the Europeans. “Then I won’t do it,” Drake replied with absolute firmness.

The posted price had been raised from $1.80 in 1970 to $2.18 in 1971 to $2.90 in mid-1973 to $5.12 in October 1973— and now to $11.65. Thus,

His haughty stance, in the midst of shortages and huge price increases, would cost him dearly only a few years later, when he desperately needed friends.

To be sure, there were significant variations among countries in Europe. The French and the British were the most keen to distance themselves from the United States and to court the producers; the Germans, less so; and the Dutch, by contrast, resolute in their commitment to traditional alliances. Some of the Europeans emphasized that they had large and immediate interests to protect. “You only rely on the Arabs for about a tenth of your consumption,” French President Georges Pompidou bluntly told Kissinger. “We are entirely dependent upon them.”

Watergate, however, was an ever-present reality, and Nixon’s behavior on the trip struck some as stark. Sitting with the Israeli Cabinet in Tel Aviv, he suddenly announced that he knew the best way to deal with terrorists. He sprang to his feet and, with an imaginary submachine gun in his hand, pretended to gun down the entire Cabinet, Chicago style, making a “brrrrr” sound as he did so. The Israelis were perplexed and a little concerned. In Damascus, Nixon told Syria’s Assad that the Israelis should be pushed back until they fell off the cliff, and to underscore the point, he made strange, chopping gestures. Thereafter, in subsequent meetings with other Americans, Assad would insist on recalling Nixon’s exposition.

Why, the Saudis asked, were the Americans so obsessed with the Shah? In August 1975, the U.S. ambassador to Riyadh reported to Washington that Zaki Yamani had said that “the talk of eternal friendship between Iran and the United States was nauseating to him and other Saudis. They knew the Shah was a megalomaniac, that he was highly unstable mentally, and that if we didn’t recognize this there must be something wrong with our powers of observation.” Yamani sounded a warning. “If the Shah departs from the stage, we could also have a violent, anti-American regime in Teheran.”

While Yamani was widely known as “Sheikh,” the title was in his case an honorific, assumed by prominent commoners, which he was.

he also tried always to think long term, as befitted the representative of a country with a small population and one-third of the world’s oil resources.

The Western world, he believed, was afflicted by the curse of short-term thinking, the inevitable result of democracy. By nature, Yamani was also cautious and calculating. “I can’t bear gambling,” he said in 1975, when he was at his apogee. “Yes, I hate it. It rots the soul. I’ve never been a gambler. Never.” In oil politics, he insisted, he never gambled. “It’s always a calculated risk. Oh, I calculate my risks well. And when I take them, it means I’ve taken all necessary precautions to reduce them to the minimum possible. Almost to zero.”

as the Kuwaiti knelt before the King, the nephew stepped forward and fired several bullets into Faisal’s head, killing him almost instantaneously. Afterward, some said that the murder was the revenge for the nephew’s brother, who had been slain a decade earlier in the course of leading a fundamentalist attack on a television station to protest the first broadcast of a woman’s voice in the kingdom.

Then in December of that year, the international terrorist known as “Carlos,” a fanatic Marxist from Venezuela, led five other terrorists in an attack on a ministerial meeting in the OPEC Building on Karl Lueger Ring in Vienna. Three people were killed in the first few minutes. The terrorists took the oil ministers and their aides hostage, and eventually embarked on a harrowing air journey, flying first to Algiers, then to Tripoli, and then back to Algiers, threatening all the way to kill the ministers.

Internationally, however, the consistent central objective of U.S. policy was to build stability back into the price and let inflation wear it down.

Ultimately, the deal fell through. But the Soviet officials did have a fabulous time at Disney World.

by the mid-1970s, Iran was responsible for fully half of total American arms sales abroad.

But inflation was increasing at a more rapid rate, and as had been anticipated, eroding the real price. By 1978, the oil price, when adjusted for inflation, was about 10 percent below what it had been in 1974, immediately after the embargo. In short, by restricting the increases to those two relatively small ones, the real oil price was in fact lowered somewhat. Oil was no longer cheap by any means, but neither had the price, as many feared it would, gone through the roof.

It was trade following the flag—the enormous credibility and respect enjoyed by the United States. The American passport was truly a laissez-passer—a safeguard. Then that began to fade. I could feel it everywhere. It was the ebbing of American power—the Romans retreating from Hadrian’s Wall. I tell you, I could feel it everywhere.”

Now, it seemed, expensive and insecure oil was going to constrain, stunt, or even eradicate economic growth. Who knew what the social and political consequences would be? Yet the risks loomed large, for one of the great lessons of the miserable decades between the two world wars was how central was economic growth to the vitality of democratic institutions. The

With a governmental system much more impervious than other Western countries to such outside interveners as environmentalists, France within a few years would outstrip all the others in its commitment to nuclear power.

electricity generation would, by the early 1980s, become one of the major markets in the West lost to oil,

The various programs gave rise to much wasted motion, endless Congressional hearings, and so much work for attorneys as to comprise one of the great “lawyer’s relief” programs of the century.

In Schlesinger’s mind, the number-one priority was to find a way to let domestic oil, which was under price controls, rise to world market prices so that consumers could react to correct price signals. The current system blended the price-controlled domestic oil and the higher-priced imported oil into the final price that consumers paid, which really meant that the United States was subsidizing imported oil. Thus, the Carter program promulgated a procedure to end price controls on domestically produced oil through a “crude oil equalization tax.” There was some irony here, as it had been the Republican Administration of Richard Nixon that had originally imposed price controls in August 1971, and it was now a Democratic Administration that was trying to lift them.

So bitter was the argument that Schlesinger was moved to observe during the Senate-House conference meetings on natural gas, “I understand now what Hell is. Hell is endless and eternal sessions of the natural gas conference.”

In any event, exploration in most of the OPEC countries was fore-closed because of nationalization, and there was a rather strong presupposition that, if a company had success in other developing countries, the fruits would be seized before they could be ingested, leaving only small pieces and bits for the company.

To make matters worse, the population was growing faster than the economy—one out of every two Mexicans was under the age of fifteen—and 40 percent of the workforce was either unemployed or underemployed. In the months before López Portillo actually took over, conditions were so bad that there were even rumors of a possible military coup.

The end result was often a strong tendency toward consensus, even if the consensus completely changed its tune every couple of years.

So, at a New Year’s Eve banquet, he rose to offer a memorable toast. “Iran, because of the great leadership of the Shah, is an island of stability in one of the more troubled areas of the world,” he said. “This is a great tribute to you, Your Majesty, and to your leadership, and to the respect and the admiration and the love which your people give you.” On that strong and hopeful note, the President and the Shah welcomed the momentous New Year of 1978.

exasperation was increasing with Khomeini’s own harsh attacks on the Shah’s government, which were being circulated clandestinely in cassettes throughout Iran.

A middle manager or a civil servant in Tehran spent up to 70 percent of his salary on rent.

His denunciations from exile in Iraq were cast in the rhetoric of blood and vengeance; he seemed to be driven by an unadulterated anger of extraordinary intensity, and he himself became the rallying point for the growing discontent.

American intelligence on Iran was constrained. As the United States became more dependent on the Shah, there was less willingness to risk his ire by trying to find out what was happening among the opposition that he despised. In Washington, there were surprisingly few people with the requisite analytic skills on Iran.

The fact of the matter was that the Shah did have cancer, specifically a form of leukemia, which French doctors had first diagnosed in 1974. But the seriousness of the illness was kept for several years from both the Shah and his wife.

Denied refuge in Kuwait, Khomeini went to France and established himself and his entourage in a suburb of Paris.

he installed a military government. This was his last chance, but he put a weak general in charge. The general immediately suffered a heart attack and never asserted authority.

The cacophony from the United States certainly confused the Shah and his senior officials, undermined their calculations, and drastically weakened their resolve. And no one in Washington knew how sick the Shah was.

the expatriates assumed that their exit was only temporary, a matter of weeks or months at the most, until order was restored. Thus, they were strictly limited to only two suitcases. They left their houses intact, with pretty much everything in place, for their return. They faced a quandary similar to that of the oil men who had been forced by Mossadegh to leave Abadan in 1951—what to do with their dogs, which they could not bring with them. Since they did not know how long they would be gone, they did what their predecessors had done: took their dogs out back of their houses and either shot them or clubbed them to death.

Then he boarded his plane and left Tehran for the last time, carrying with his luggage a casket of Iranian soil.

But on February 1, Khomeini arrived back in Tehran in a chartered Air France 747. Seats on the plane had been sold to Western reporters to finance the flight, while Khomeini himself spent the trip resting on a carpet on the floor of the first-class cabin.

A group of nurses took to gathering outside his window to chant “Death to Americans.”

Religious fundamentalism wed to feverish nationalism had caught the Western world by surprise. Though it was still incomprehensible and unfathomable, one of its driving forces was obvious: a rejection of the West and of the modern world. That recognition led to an icy, pervasive fear.

A particular barrel of oil could take ninety days to travel from a wellhead in the Gulf through the refining and marketing system into underground storage at a gasoline station.

In sum, the panic buying to build inventories more than doubled the actual shortage and further fueled the panic. That was the mechanism that drove the price from thirteen to thirty-four dollars a barrel.

Some sixty-three Americans—the skeleton staff that had remained at the embassy after the personnel had been scaled down from the fourteen hundred officials of the Shah’s time—were taken hostage by a large, rowdy, violent band of zealots who were thereafter known to the world as “students.”

Remarkably, it was only at the end of September 1979, more than eight months after he was forced to leave Iran, that senior American officials first learned that the Shah was seriously ill, and only on October 18 did they discover that it was cancer.

Thus was provided the impetus, and pretext, for the invasion of the embassy. Perhaps it was only intended, originally, as a sit-in, but it soon turned into an occupation and a mass kidnaping, as well as a bizarre circus, complete with vendors in front of the embassy selling revolutionary tape cassettes, shoes, sweatshirts, hats, and boiled sugar beets. The occupiers even took to answering the embassy phone, “Nest of spies.”

Ironically, with its late-night programs on the hostage crisis, ABC finally found a way to compete successfully against Johnny Carson and the Tonight Show

After the hostages were taken, the dying Shah and his entourage would quickly and apologetically leave the United States, spending their final hours before departure in pathetic isolation in a psychiatric ward, complete with barred windows, on an American Air Force base. They went next to Panama and then back to Egypt, where the wasted Shah finally died in July of 1980, a year and a half after his flight from Tehran. No one really cared.

The Saudis also feared that their own position would be damaged in another way: that the price increases would destroy consumers’ confidence in oil and, thus, stimulate long-lasting competition to OPEC oil, as well as large-scale development of alternative fuels. That would be particularly threatening to a country with huge oil reserves, the life of which would extend far into the twenty-first century.

OPEC met again in Algiers in June 1980. The Saudis, now joined by the Kuwaitis, tried yet again to put an end to the bazaar in the oil market and to stabilize prices—and again to no avail. The average oil price was thirty-two dollars per barrel, almost three times what it had been a year and a half earlier.

Hostility between Iraq and Iran was long-standing; some would find the present struggle merely a latter-day manifestation of the conflicts that went back almost five thousand years, to the very beginning of recorded civilization in the Fertile Crescent, when the soldiers from Mesopotamia, in what is now in modern Iraq, and Elam, in what is now in modern Iran, had habitually slaughtered one another.

Khomeini himself was filled with a hatred of the Iraqi regime and a burning desire for revenge for his treatment at its hands. His ire was focused on the President, Saddam Hussein. Certainly, Hussein had proved himself a champion conspirator in the considerable history of Ba’thist conspiracies.

And the influence of Khayr Allah Talfah himself continued to be felt. In 1981, the government printing house distributed a pamphlet by Talfah. Its title gave some idea of the thrust of his political thought: Three Whom God Should Not Have Invented: Persians, Jews, and Flies

Once asked to list his enemies, Khomeini replied: “First, the Shah, then the American Satan, then Saddam Hussein and his infidel Ba’th Party.” Khomeini and his circle saw the secular, socialist Ba’thists as implacable enemies of their own creed and attacked Ba’thism as “the racist ideology of Arabism.” As if all that was not bad enough, Khomeini had even worse to say; he denounced Hussein as a “dwarf Pharaoh.”

Iraq could strike hard at Iran, topple Khomeini, put an end to the Shiite revolutionary threat to Iraq, and assert sovereignty over the Shatt-al-Arab waterway, protecting Iraq’s oil position.

Children were even used to clear minefields for the far more valuable and much rarer tanks, and thousands of them died.

Their gain was OPEC’s loss, and the demand for OPEC oil fell. As a result, OPEC’s output in 1981 was 27 percent lower than the 1979 output, and in fact was the lowest it had been since 1970.

Coal staged a massive comeback in electricity generation and industry. Nuclear power also made a rapid entry into electricity generation. In Japan, liquefied natural gas increased its share in the energy economy and in electricity generation. All this meant, around the world, that oil was being ejected from some of its most important markets and was rapidly losing ground. Its share of the market for total energy in the industrial countries declined from 53 percent in 1978 to 43 percent by 1985.

Altogether, by 1985, the United States was 25 percent more energy efficient and 32 percent more oil efficient than it had been in 1973.

Those three trends—the collapse in demand, the relentless buildup of non-OPEC supply, and the Great Inventory Dump—reduced the call on OPEC by something like 13 million barrels per day, a fall of 43 percent from the levels of 1979! The

In 1983, competition continued to mount rapidly in the oil market. The British sector of the North Sea alone, which had not even started producing until 1975, was now producing more than Algeria, Libya, and Nigeria combined, and still more North Sea oil would be coming on stream.

As was said, sometimes with approval and sometimes with horror, oil was becoming “just another commodity.”

the absolute volume of Maine potatoes produced each year was also dropping. As a result, the Maine potato futures contract was running into trouble. In 1976, and again in 1979, scandals hit the potato contract, including the mortifying failure of delivered stocks of potatoes to pass inspection in New York City. The exchange, under pressure, abruptly terminated trading in Maine potatoes and was itself threatened with extinction.

A senior executive of one of the majors dismissed oil futures “as a way for dentists to lose money.”

Deregulation of an industry removes protection and increases competitive pressure and, thus, typically results in consolidations, spinoffs, takeovers, and a variety of other corporate changes. Oil, completely deregulated in the United States by 1981, was no exception.

On one level, his campaign, for that was what it was, represented the revenge of the independent oil man on the hated majors.

His father was a landman, who acquired leases from farmers and packaged and sold them to oil companies.

The high point of earnings for Saudi Arabia was $119 billion in 1981. By 1984, its revenues had fallen to $36 billion, and they would fall further, to $26 billion, in 1985.

On graduating from Yale in 1948, Bush had passed up the obvious jobs on Wall Street for someone of his background; after all, his father had been a partner in Brown Brothers, Harriman, before becoming Senator from Connecticut. Then, having failed to be called back after a job interview with Procter and Gamble, he packed up his red 1947 Studebaker and set off for Texas, first Odessa, then its neighbor Midland, which would soon be calling itself the “oil capital of West Texas.” He began at the bottom, as a trainee charged with painting pumping equipment, and then graduated to itinerant salesman, driving from rig to rig, inquiring of the customer what size drill bit he needed and what kind of rock he was drilling through, and then asking for the order.

Bush was an Easterner, with what some would have called a patrician background, but he was not entirely atypical. There was a noble tradition of Easterners coming to seek their fortunes in Texas oil, beginning with the Mellons and the Pews at Spindletop, and continuing through what Fortune magazine once called the “swarm of young Ivy Leaguers” who, Bush among them, in the post–World War II years had “descended on an isolated west Texas oil town”— Midland—“and created a most unlikely outpost of the working rich” as well as “a union between the cactus and the Ivy.” It was not coincidental that the best men’s store in Midland, Albert S. Kelley’s, dressed its customers almost exactly the way that Brooks Brothers did.

Bush quickly mastered the skills of the independent oil man, flying off to North Dakota in atrocious weather to try to buy royalty interests from suspicious farmers, combing courthouse records to find out who owned the mineral rights adjacent to new discoveries, arranging for a good drilling rig crew as quickly and as cheaply as possible—and, of course, making the pilgrimage back East to round up money from investors.

The would-be reconstituted Republican party was under assault from the right, and at one point Bush had to defend himself against the charge from the John Birch Society that his father-in-law was a communist—on grounds that the gentleman happened to be publisher of the unfortunately named woman’s magazine Redbook

Unlike Jimmy Carter, who made energy the centerpiece of his Administration, Ronald Reagan was determined to make it a footnote. The energy crisis resulted mainly, he maintained, from regulation and the misguided policies of the United States government. The solution was to get the government out of energy and return to “free markets.”

Then, one evening, a week after the meeting, Yamani was back in Riyadh at dinner with friends when he received a phone call advising him to turn on the television news. An item at the end of the broadcast reported tersely and without any adornment that Ahmed Zaki Yamani had been “relieved” of his post as oil minister. That was the way he learned he had been fired. Yamani had been in the job twenty-four years, a good, long run in any position anywhere. Still, it was an abrupt, embarrassing, and disconcerting end to a quarter-century career.

By the spring of 1988, Iraq, making use of chemical weapons, was manifestly winning. And Iran’s ability and will to carry on the war were fading fast. Its economy was in shambles. The defeats were draining support for the Khomeini regime. Volunteers, fervent or otherwise, were no longer forthcoming. War weariness gripped the country; in one month, 140 Iraqi missiles fell on Tehran alone.

One month short of eight years after it began, the Iran-Iraq War ended in a stalemate, though one that favored Iraq. As far as Baghdad was concerned, it had won the war, and it now intended to be the dominant political power in the Gulf, and one of the world’s major oil powers.

DURING THE SUMMER of 1990, the world was still in the euphoria over the end of the Cold War and the new, more peaceful world that it portended. For 1989 had certainly been the annus mirabilis—the miracle year—in which the international order had been remade. The East-West confrontation was over. The communist regimes in Eastern Europe had collapsed, along with the Berlin Wall itself, the great symbol of the Cold War. The Soviet Union was in the midst of a profound transformation arising not only from political and economic change but also from the eruption of long-repressed ethnic nationalisms.

Saddam Hussein’s objectives seemed clear: to dominate the Arab world, to gain hegemony over the Persian Gulf, to make Iraq into the predominant oil power—and ultimately to turn Greater Iraq into a global military power.

The Iran-Iraq War, which Saddam Hussein had launched, had cost the country half a million deaths and serious casualties and had ended in a stalemate. Yet a nation of eighteen million was continuing to support a million-man army.

To justify his actions, Hussein offered a plethora of rationales. He claimed that Kuwait rightfully belonged to Iraq and that the Western imperialists had snatched it away. Actually, Kuwait’s origins went back to 1756, two decades before the United States declared its independence, and certainly much before the beginnings of modern Iraq, which was knitted together in 1920 out of three provinces that had been part of the Ottoman Empire for four centuries and, for several centuries before that, had been outlying provinces of various other empires.

Fearful that Saudi Arabia might well be next on Hussein’s list, many countries hurriedly sent military forces into the region. American forces were by far the largest component, reflecting guarantees that went back to Harry Truman’s letter to Ibn Saud in 1950.

The absorption of Kuwait could start Iraq on the path to becoming a new superpower. Eleven years earlier, four out of five of the major producers of the Persian Gulf had been pro-Western. With Kuwait absorbed into Iraq, there would be only two friendly producers.

The air war continued for a month, with systematic attacks on Iraqi command and control centers and a broad range of military and strategic targets. The biggest surprise, at least for the U.S. Air Force, was not that the coalition aircraft and missiles thoroughly knocked out Iraq’s air defense capability, but that they did it so easily and so quickly, with so minimal a loss of aircraft.

Exxon and Mobil— once Standard Oil of New Jersey and Standard Oil of New York—became ExxonMobil.

Saudi Aramco—the successor to Aramco, now state-owned—remains by far the largest upstream oil company in the world, single-handedly producing about 10 percent or more of the world’s entire oil with a massive deployment of technology and coordination.

the U.S. Senate rejected the Kyoto treaty by a vote of 95 to 0. There were three main concerns. The first was the impact of CO2 restrictions on the overall economy and economic growth. The second specifically concerned restrictions on coal, from which half of the nation’s electricity was generated. And the third was that the treaty would require cutbacks from the industrial countries, but not developing countries.

The industrial world is twice as energy efficient as it was in the 1970s.