CHAPTER 9

The International Oil Industry, 1911-1920

PART I. THE CORPORATE FRAMEWORK
C 1. The Rise of Integrated International Oil
Companies
I NTERNATI ONAL EXTENSION of explo-
ration and producing activities of the major oil
companies greatly altered the nature and di-
mensions of the industry between 1910 and
1921. Multilateral distributing and marketing
systems had grown up in earlier years primarily
to afford outlets for surplus production, first
from the United States and later from Russia,
Burma, and the East Indies. As the demand for
petroleum products increased, the established
distributors endeavored to secure broader,
more dependable, and more economical
sources of supply. Competition for crude-oil re-
serves became a dominant factor in shaping the
character of the large corporations during this
decade. Most of the previous foreign ventures
had been "one-shot" affairs; more of the new
efforts were co-ordinated with long-range pro-
grams.
Leadership in this development was taken
almost inevitably by capitalists from the coun-
tries of western Europe which lacked impor-
tant oil fields at home. In 1910, the United
States was furnishing 63.9 percent of the
world's total production (American Petroleum
Institute, 1951), and had never felt much need
for extraneous supplies. American companies,
generally possessing excessive stocks of crude
oil, were relatively inactive in foreign explora-
tion except in adjacent Mexico until 1918-
1920, when they experienced diminishing do-
mestic discoveries and acute shortages of pe-
troleum products. Several of them engaged ag-
gressively in search for foreign reserves during
the latter period and formed sound foundations
for international producing operations. How-
ever, a veritable flood of new oil in the United
States during the 1920s overwhe' med their
marketing capabilities and caused most of them
to restrict their foreign exploration until later
years.
Several events exerted world-wide influence
on the course of economic change. Dissolution
of the Standard Oil Company by decree of the
United States Supreme Court in 1911 imposed
momentous alterations on the corporate frame-
work of the American industry and its foreign
appendages. World War I, between August
1914 and November 1918, demonstrated the
strategic importance of oil supplies while it
transformed the political alignments and eco-
nomic posture of almost every nation. The Rus-
sian Revolution in 1917 confiscated private
holdings and virtually isolated that country's
great oil fields. Phenomenal successes in Mex-
ico directed the principal foreign explorations
of the decade toward Latin America.
Petroleum geology was a vital element in the
success of almost every foreign prospecting en-
terprise before it was applied generally in the
United States. It is impossible to acknowledge
adequately the decisive role of geologists in the
development of many foreign lands. Account
of some of their work will be taken up in con-
nection with particular regions.
C 2. Advance of the Royal Dutch-Shell Group
The Royal Dutch Company and the British-
owned Shell Transport and Trading Company
combined their operations in 1907 to form a
"Group" which was truly international in own-
ership and aspirations. By 1910, the Group had
widespread marketing systems in Europe and
Asia, held almost a monopoly in the East In-
dies, controlled the largest producing company
in Rumania, owned some oil properties in
Egypt, and had made preliminary investiga-
tions in New Zealand, Russia, Mexico, and the
United States. It had probably the largest and
best trained corps of petroleum exploration ge-
ologists in the world and more than 10 vears of
experience in using their services effectively in
382