Chapter 5 - Concessions abroad and the disciplined rule of capture

Abstract

Attempts to provide order in the oil market during the three decades following the East Texas drama of the 1930s took shape in Texas but not only in Texas. The definition of the role of government agencies, settlement of court battles, and revisions of legislative statutes spread throughout the United States while a different dynamic was developing in the Middle East. While a modified rule of capture became the focus in the United States, concessions became the institutional mechanism for development and creation of oil wealth in the Middle East and North Africa. By the 1960s the shifting market shares among the major oil-producing countries was dramatic, with US oil production decreasing from 70% in 1925 to 12% by 1973, setting up the conditions for Organization of Petroleum Exporting Countries to become the dominant player in world oil markets. The US policy declarations for the next forty years have embraced “energy independence”—a target based on national security. A side effect has been an interesting dynamic between the industry majors and independents—another institutional innovation.