III. Defining The Problem

To understand the complexity of the problem of United States dependence on Middle Eastern oil it is necessary to examine the history of the petroleum industry.  Exploring the problems genesis, how it came to international attention, and the difficulties it is currently posing will allow for an understanding of this political problem.

            In 1859, Colonel E. L. Drake successfully drilled the first oil well outside of Titusville, Pennsylvania.  From this drilling a new desire as well as an industry were born.  Throughout the later part of the nineteenth century companies such as the Standard Oil Company formed in hopes of dominating an unexplored but ever promising industry.  During the first forty years of the petroleum industry, oil was mainly used for illumination.  Domestic demand in the United States started off slow. As the refining process was still being perfected, many people preferred using older sources for illumination such as lard.  Nevertheless, foreign demand took off right from the beginning due to shortages of fuel sources for illumination.  “There were good reasons for the early interest of consumers outside the United States in petroleum.  This was particularly true of Europe where, with the exception of the British Isles, there had been an acute shortage of fats and oils for a generation or more” (Williamson 322).  Realizing the possibilities for wealth, oil companies swiftly expanded their exporting markets.  “In Cuba, where a tariff discriminated against refined oil, Standard had operated a refinery near Morro Castle since 1881” (Williamson 661).  Thus began the global interest in oil.   However, it wasn’t until World War I that nations would realize the true importance of oil and the role it would play in politics. 

            As World War I came to an end nations realized how important oil had been throughout the war.  It had changed the way the war was fought.  “The part played by petroleum in the prosecution of the war was admitted at the time by every government and public…through the greatly accelerated development of motor transport and aviation and of the use of fuel oil in industry and at sea” (Longrigg 33-34).  National leaders and national governments saw that oil equaled power and felt control of it was necessary for a nation’s security and survival.  This is a philosophy that still affects international politics.  “If oil was power, it was also a symbol of sovereignty.  That inevitably meant a collision between the objectives of oil companies and the interests of nation-states, a clash that was to become a lasting characteristic of international politics” (Yergin 229). 

            The United States became aware of the vast petroleum resources available in the Middle East after World War I had concluded.  Exxon first expressed an interest in Iraq in 1919, however the State Department said it could not support one company alone but would help support a group of American oil companies.  As Exxon pushed to get involved in Iraqi oil, the State Department continued to hold off, requesting in 1921, that all interested members undertake preliminary geological surveys in Iraq.  Meanwhile, European interests in Iraq were very high and the British Petroleum Company already had authority in that region.  Against State Department orders to “wait for permission” Exxon, with support from other American oil companies such as Texaco, Gulf, Atlantic Refining, Sinclair, and the Standard Oil Company decided to start private negotiations with British Petroleum.  When the State Department was informed of the private negotiations they were disappointed and tried to convince the American oil companies to wait, but the negotiations with European interests continued until 1928.  In 1928 the first American presence in Middle Eastern oil production was established with the help from the creation of the 1928 Red Line Agreement.  “The Red Line Agreement obligated the consortium members not to compete against each other within the area of the old Ottoman Empire.”  Thus, a new oil company was created in Iraq called the Iraq Petroleum Company, which was split into ownership between five interested foreign companies. The interested American Countries were grouped together and called Royal Dutch-Shell ( See Figure 1). 

 At the start of the Second World War, companies such as Exxon and Standard Oil lost most of their shares and control in the Iraq Petroleum Company as well as other companies located in the Middle East.  During World War II the allies used seven billion barrels of petroleum, six billion of which was supplied by the United States.  This caused many public officials to worry about the United States running out of oil.  As the threat of oil shortages became evident to American officials, policy makers and the American oil industry focused more of their attention on the Middle East.  The United States discovered oil reserves in Kuwait and Saudi Arabia  (Mintz).  To push an increase in production in Saudi Arabia during the post war period, the Roosevelt administration provided American oil companies with scarce construction materials.  “In all, Saudi Arabia received $99 million of direct and indirect Lend Lease assistance during World War II”  (Establishing the American Presence).

The 1950’s brought a combination of burgeoning consumer culture and cheap fuel in the United States, which led to a sharp increase in oil consumption.  World oil prices were so low that in 1960 OPEC (the Organization of Petroleum Exporting Countries) was created by Venezuela, Iran, and Arab oil producers as a producers cartel to negotiate for higher oil prices.  OPEC began to help control member country’s oil production and eventually began to regulate prices by 1973  (Trumbore).

In 1973 inflation was high reaching 10% in the United States and most of the western world (Canadian Economy).  At the same time demand for Middle Eastern oil had been increasing due to nearly empty domestic oil reserves.  A few months later on the Jewish holy day of Yom Kippur, the countries surrounding Israel attacked Israel.  The United States supported Israel in the war and OPEC decided to place an oil embargo on the United States for its support of Israel.  This caused oil prices to quadruple and brought international attention to the severity of the U.S. dependence on Middle Eastern oil imports (Canadian Economy). A second price hike in 1979, when the price of oil jumped from two dollars per barrel in 1971 to thirty-five dollars a barrel was also cause for alarm (Canadian Economy).  In 1979 the Iranian Revolution led by Ayatollah Khomeni was an Islamic fundamentalist reaction to modernization, liberalization, and western corruption.  The revolution caused Iranian oil production and exporting to stop.  OPEC took advantage of this and cut back on oil production to drive up prices even more.         

Relying on the Middle East for a main source of energy poses many difficulties.  First, importing oil from a foreign country automatically binds the United States to some problems that country may be having.  A unique example of this is when Kuwait provoked Iraqi aggression over a disagreement about historical national borders.  A dispute that a country like Kuwait gets involved with that brings fighting and war to Kuwaiti oil fields will make the United States have to get involved as well, because it is necessary for United States to protect its source of oil in Kuwait.  Therefore, the United States has to look out and protect for the countries they are importing oil from.     

In short, the United States is faced with a very evident problem.  In order to come up with successful solutions to the problem, it is necessary to examine the origins of the problem as well as all aspects of it.  Researching the genesis and history of Middle Eastern oil dependency will only provide political scientists with a greater knowledge on how to solve the problem.