The Dilemmas of Oil Empire

Abstract

Americans were the first people to become mass producers and mass consumers of oil, the most powerful fuel and versatile substance ever discovered. During the twentieth century, oil spawned a world-class industry of U.S. oil firms, service companies, and marketers. It produced vast networks of wells, pipelines, refineries, chemical plants, terminals, service stations, and power plants to deliver cheap energy. These complexes served as engines of investment and employment throughout the nation. As the chief transportation fuel, a major source of heat and electricity, and the building block for a proliferating array of consumer goods, oil underpinned a steadily rising U.S. standard of living. 1 The control of oil also helped elevate the United States as the supreme global power. In World War I, as Britain’s Lord Curzon declared, the Allies “floated to victory upon a wave of [mostly American] oil,” powering its ships and tanks. In World War II, America’s oil abundance proved decisive in both the European and Pacific theaters. 2 In the postwar period, American-controlled oil underwrote European and Japanese reconstruction. Oil thus became a key component in the exercise of American hegemony over a relatively prosperous world order, after an era in which an unstable balance of power produced two world wars sandwiched around a global depression. As the century wore on, however, the United States and its oil industry steadily yielded control over the substance. The shifting of the center of oil production from the United States to the Middle East both solidified and destabilized American global power. In the 1970s, pressures on domestic oil supplies, accompanied by the transfer of oil ownership from American and European firms to sovereign states in the Middle East and elsewhere, created economic and political shocks that weakened the foundations of American supremacy and reverberated into the twenty-first century. 3 Just when the decline of the American oil empire appeared irreversible, technological breakthroughs in extracting hydrocarbons from new geological frontiers (for example, sub-salt and pre-salt deepwater, shale, and tar sands) surprisingly regenerated North