Challenge

ISSN: 0577-5132 (Print) 1558-1489 (Online) Journal homepage: http://www.tandfonline.com/loi/mcha20

The Seven Sisters: The Great Oil Companies & The

World They Shaped by Anthony Sampson; The
Control of Oil by John M. Blair; The Brotherhood of
Oil: Energy Policy and the Public Interest by Robert
Engler

To cite this article: (1977) The Seven Sisters: The Great Oil Companies & The World They
Shaped by Anthony Sampson; The Control of Oil by John M. Blair; The Brotherhood of
Oil: Energy Policy and the Public Interest by Robert Engler, Challenge, 20:4, 60-61, DOI:
10.1080/05775132.1977.11470354

To link to this article: http://dx.doi.org/10.1080/05775132.1977.11470354

Published online: 09 Oct 2015.

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Download by: [University of Pennsylvania] Date: 05 May 2016, At: 22:15

 try, this task of digesting, reorganiz-
REVIEWS ing, and marshalling the evidence
from the documentary record has
now been admirably carried out.
The Seven Sisters: The Great Oil Taken together, the three books not
only offer a "primer" on the industry;
Companies & the World They Shaped they also place the current "energy
crisis" in much-needed perspective.
The story that emerges can be out-
By Anthony Sr,Impson. New York: Viking Press, 1975. lined as follows:
xv + 334 pp. $10.00. Since the 1930s, and especially
since the end of World War II, the
major oil companies--Sampson's
seven sisters-led by what is now
The Control if Oil Exxon and by Shell, have seen to it
that the supply of crude oil coming
onto the market has been limited to
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By John M. Blair. New York: Pantheon Books, 1976. the expected annual growth rate of
xxii + 442 pp. $15.00. world consumption, an astonishingly
constant 9.55 percent per annum
between 1950 and 1972. This fcat
has been accomplished, despite the
The Brotherhood if Oil: Energy Policy large number of unpredictable events
that have determined the availability
and the Public Interest . of crude oil in individual producing
countries, by the majors' relentless.
efforts to stage out known reserves
By Robert Engler. Chicago: University of Chicago Press, 1977. and to control the pace of both ex-
xi + 337 pp. $12.50. ploration and extraction.
This control of supply at the world
level has been supplemented by mea-
Alfred S. Eichner sures taken to control the availability
of oil at the national level. In the
case of the United States, these mea-
For anyone trying to understand how tinational corporations-these and
sures included the prorationing sys-
the contemporary world's represen- lesser known official inquiries pro-
tem established in the 1930s with the
tative firm, the multinational corpo- vide the essential source materials
government's help, and the restric-
ration, behaves in the market place, for understanding how the American
tion on petroleum imports in the
mastering the diagrams in a price economy actually functions at the
1950s, when lower-cost foreign ~il
theory t~xtbook is of little value. One microeconomic level.
became available.
must tum instead to the evidence The trouble is that the documen-
The overriding purpose of this
available. from the infrequent gov- tary record, even for a single investi-
control over supply, so dearly ob-
ernment investigations of corporate gation, is voluminous, the desired
tained. has been to make sure that
power. Th~ U.S. Industrial Commis- information mixed with a great deal
competition from outside groups
sion Reports .at the tum of the cen- of extraneous matter and the whole
would not undermine the structure of
tury;· the Temporary National Eco- usually presented unsystematically.
world prices or lead to any significant
nomic.Commission (TNEC) hearings It requires secondary works, like the
shift in market shares. Either everitu-
in the 1930s, the Kefauver commit- three here under review, to make the
ality would have posed a serious
tee's investigation of administered facts contained in the documentary
threat to the economic strength of
prices in the late 1950s and early record accessible to a general audi-
the majors.
1960s and now, mOst recently, the ence. Fortunately for those with a
Nonetheless, by 1970, the system
Church committee's hearings on mul- curiosity about the petroleum indus-
for controlling world petroleum sup- .
ALMS. EICHNER is Professor of Economics, State University of New York plies had begun to unravel at the
at Purchase. . edges. Libya, determined to prevent
 the majors from holding back pro- the majors not to challenge the oil- ent situation-though it somewhat
duction as they had in the other Arab producing countries' control of their falters in its interpretation at the end.
countries, had seen to it that a num- own crude oil supplies, and the deci- Blair's book, while it lacks the human
ber of independent oil companies, sion by the producing countries not drama of Sampson's account, pro-
Armand Hammer's Occidental Pe- to challenge the majors' control of vides the indispensable economic
troleum among them, obtained con- market outlets. A possible point of analysis, together with the most per-
cessions in that country. The inde- conflict-how much oil should be tinent statistical evidence. As a cul-
pendents, in turn, had used the low brought out of the ground and at mination of Blair's earlier service
sulfur content of the Libyan oil and what level of payment to the host with both the Federal Trade Com-
the shorter distance it had to be trans- country-was easily resolved once it mission and the Kefauver committee,
ported to make significant inroads was realized that the two questions it stands as further evidence of the
into the European market. were linked. World crude oil prices loss that Blair's recent death has
Thus, when the new revolutionary could not be pushed higher, as Iran been to the economics profession.
government in Libya pressed for and the other OPEC members with Engler's book is perhaps the least
higher crude oil prices in 1970-71, ambitious developmental programs critical of the three to an understand-
the majors decided on a showdown. wished, unless production was re- ing of the petroleum industry. Some-
Just as the Mossadegh government in stricted. The majors, by conceding what lacking in organizational struc-
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Iran had been brought down twenty the issue of crude oil prices, were ture, it does, nevertheless, marshal
years earlier through a boycott of thus able to assure what was most the evidence in support of its princi-
that country's oil organized by the essential to their interests-the con- pal argument, namely, that the oil
majors preliminary to CIA interven- tinued ability to limit world produc- companies have subverted the organs
tion, so now the Libyans were to be tion to the annual growth in con- of government, making them incapa-
taught a lesson. After first allowing sumption. Indeed, with substantial ble of dealing with the power of the
Hammer to learn the risks of going interests of their own in oil-producing majors.
it alone in the oil industry, the majors properties, the majors could only All three books offer different ad-
mobilized for joint action-with benefit from the higher crude prices. vice about policy. On that question,
John J. McCloy, in his role as Wall It took the embargo organized in the suffice it to say that it will not be
Street lawyer, obtaining the neces- wake of the 1973 Arab-Israeli war easy to bring the major oil companies
sary antitrust clearance. An agree- -and especially the sight of the under any type of national political
ment was reached among the majors majors enforcing the Saudi ban on control. The most likely prospect is
to negotiate with all the oil-producing oil shipments to the United States- that they will continue to serve as
countries simultaneously, to create a to reveal to others the full extent of world planning bodies for energy
"safety net" whereby they could the new working arrangement. supplies, playing off the oil-pro-
come to each other's aid if anyone The precis above provides only ducing and the oil-consuming coun-
of them was cut off from crude oil the broadest outline of the material tries against one another to assure
supplies, and to enlist the support of covered in these three books. It ig- adequate room to maneuver in be-
Washington for whatever further nores many other important matters half of their own quite distinct inter-
steps might have to be taken. touched on-for example, the deci- ests. In the process, we are likely to
But when it came time to execute sion by the majors to increase their observe a crude oil price-industrial
this plan, it became clear that the profit margins "downstream," that products price spiral added to the
oil-producing countries, led by Iran, is, at the refining and distribution wage-price spiral which already
were a lot more united and firm in levels once they could no longer makes the task of managing nation-
their resolve than the oil-consuming count on exercising control at the al economies without inflation so
nations, with the United States at production level; the extent of un- difficult.
their head. The majors, who had pre- exploited petroleum resources, both
viously counted on military and oth- within the United States and abroad, CORRECTION
er types of political support in return and the ineffectualness of the United
In Victor Lebow's review (July /
for keeping the price of crude oil States and British governments in August 1977), page 64, second
low, now decided, in the face of their dealing with the major oil companies.
column, last paragraph, the begin-
home governments' pusillanimity, to Sampson's book is the easiest to read, ning of the third sentence should
align themselves instead with the and it has the journalist's mark of . read: "Close to half a million ... "
oil-producing countries. making a complex subject readily rather than "Close to half a
And so a new modus vivendi understandable. It serves as a good billion .... "
emerged, based on the decision by historical introduction to the cur-

September-October 1977/ Challenge 61