Seizing Power

Oil’s Brief History

Today’s world is desperately dependent on oil – quite a change from when the largest oil reserves were first discovered about 150 years ago. For most of the intervening period, the US dominated oil exploration and consumption, and petroleum markets remained relatively stable. Wealthy 19th-century oligarchs such as the Rockefellers and Carnegies ran the industry as a business. When their power waned in the early 20th century, control fell to the “Seven Sisters” oil companies – a group of US and European energy companies – and then, in 1960, to the Organization of Petroleum Exporting Countries (OPEC). Saudi Arabia – the “alpha dog” of OPEC – had traditionally sought to keep oil prices low in order to keep the West from moving to alternative energy sources.

But the situation changed radically during the 1973-1974 Arab oil embargo, when oil first became a political weapon. OPEC cut supplies in reprisal for the 1973 Israeli-Arab Yom Kippur war and quadrupled the price of oil to consumers. As the 1970s went on, Saudi Arabia had a harder time keeping OPEC members in line: The desert kingdom believed that oil-exporting nations would generate more revenues...