The Tyranny Of Oil

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To Forrestal and others concerned that the United States was depleting its home reserves, the Aramco merger had opened the way for Persian Gulf oil to flow under American direction into European markets. The partners in Aramco needed help to buy scarce pipe to complete their line to the Mediterranean. On September a, 1947, W. S. S. Rodgers, the Texaco chairman, told Forrestal: I personally think that [pipe] is worth about five or ten times as much in that line as it is in one of those [domestic American] lines, particularly if we are to go ahead with this Marshall Plan and try to do something in Europe. Because a barrel delivered in the Mediterranean is in a way the same as a barrel delivered here in this sea-board.

Thus the project for the American companies to develop Middle East oil in place of their American oil for marketing in western Europe began to emerge. Some days later Forrestal, having fought off domestic bidders to clinch the pipe for the Middle East line, noted in his diary at a cabinet meeting: I took the position that we should not be shipping a barrel of oil out of the United States to Europe [while] the greatest field of untapped oil in the world is in the Middle East.

The trans-Arabian pipeline, called Tapline, connecting Dhahran with the port of Sidon on the Mediterranean, was triumphantly completed in 1949. Equally important as a link in the emerging system were tankers to haul the oil the rest of the way to Europe. The United States government’s contribution, decided at an emergency cabinet session in mid-1947, was to declare one hundred T2 tankers war surplus and clear them for sale to foreigners as well as U.S. citizens. Most of them found their way into the hands of the major oil companies, but the fast-rising Greek shipowner Aristotle Onassis—under the Truman Doctrine, Greece was a favored ally—bought twenty for the Middle East life line to Europe.

As the parts of the system were being fitted into place Forrestal consulted frequently with industry men about the oil’s destination. One businessman Forrestal saw at that time was Robert McConnell, an industrialist and engineer who had served in various government positions in the war and had just been in Germany. Forrestal’s diary notes: [McConnell] came in to see me with a vigorous expression of the thesis that it would be a basic mistake to reactivate the coal industry of the Ruhr. He said that an oil economy would produce greater efficiency at lower cost (and would have various political advantages).

Never did these profitable efficiencies and political advantages loom larger than in the winter of 1948. Every day the plight of a Europe dependent upon Communist-controlled coal grew worse. In a memorandum to Truman, Forrestal said: Without Middle East oil the European Recovery Program has a very slim chance of success. The U.S. simply cannot supply that continent and meet the increasing demands here.

By contrast with the coal of western Europe, the oil of the Middle East was in abundant supply and flowed to the surface with little labor in the almost uninhabited desert areas bordering the Persian Gulf. It could be piped to tankers in the Gulf or in Mediterranean ports. It could then be shipped over sea-lanes safeguarded by the U.S. Navy and delivered at bargain prices to power plants and factories in Europe. Accordingly, a changeover to oil took on new significance as a way to promote European recovery.

Of course, there were obstacles to be overcome in completing the system. Domestic American oil interests, like all commodity producers, wanted a piece of Marshall Plan business, and for a time some Texas oil produced by independents found its way to Europe. The British wanted to pay for Middle East oil, as they always had, in sterling. But there was not much question in 1948 as to who was calling the tune. Putting up the entire $13 billion for the Marshall Plan, the Americans could and did say where funds would be spent. In the fall of 1949 Jersey Standard completed a huge refinery at Fawley on the Thames and was soon selling Middle East petroleum, for dollars, to the European Cooperation Administration for the British market. In its first two and a half years ECA authorized countries receiving Marshall Plan funds to purchase $384 million worth of oil from the Middle East. When the European Marshall Plan Council programmed a fivefold increase in refinery capacity, the lion’s share of this expansion went to the U.S. companies. Thus all five U.S. majors gained a strong place in every western European market as they helped these countries shift the basis of their economies from coal to oil.

So fundamental a change required far longer to accomplish than the Marshall Plan’s four years. But by the time the Korean War boom turned the plan into a success, Europe’s new energy pattern was established. By 1956 western Europe was dependent on the Middle East for 30 per cent of its energy; by 1970, notwithstanding subsidies everywhere to encourage coal mining, for 60 per cent. Oil, as the political scientist Benjamin Schwadran wrote later, had become “the decisive factor in the recovery of Europe and the backbone of the NATO structure.”