The shape of the international oil industry in the 1950s and 1960s ably reflected the new world order that followed the Second World War. It promised its champions a political and economic prize, and seemed to be a vehicle through which to achieve Cold War dominance. Both the main powers had their own reserves, and their geopolitical influence meant that they could influence reserves that lay beyond their borders. This left little for Europeans to squabble over, and, as they sought to strengthen their position against the Soviet bloc, they tasked collaborative bodies with investigating the problem. In 1956 the Organisation for European Economic Cooperation (OEEC) published a report on the European energy needs outlook for the next decade. Its outlook was bleak: based on GDP and industrial growth projections in the OEEC area in relation to energy input, Europe’s energy gap (the difference between total demand and indigenous supplies) was predicted to widen from 22 per cent in 1955 to 32 per cent in 1975. This in turn would mean increasing balance of payments problems and threats to the security of energy supplies, which could halt economic expansion and weaken the continent against
the Soviet bloc.4
The energy deficit was a major headache for European politi- cal and economic actors. Between 1954 and1956 oil consumption in Europe had gone up by 20 per cent, a growth rate that did not seem to
be slowing down in the short or medium term.5 As a consequence, oil
imports were becoming an ever- growing burden on the balance sheets of European countries, and fears grew in parallel to the widening energy deficit that a sudden arrest in supplies would cause a new economic crisis. Forecasts expected total energy consumption in Europe to double over the
next twenty years.6 The Hartley Report, commissioned by the OEEC and
chaired by Sir Harold Hartley from the University of Oxford, suggested promoting domestic production through coal and nuclear energy, but this could be done only up to a certain point. It warned that the coal indus- try had little prospect of substantial increase, due to prohibitive costs, and that hydroelectric energy also would not plug the gap. The highest hopes were invested in nuclear energy, but the technology was still in its
infancy and the electrical power it produced was not yet convenient.7 The
most accessible and most efficient forms of energy in the decades to come would be oil and gas, which were very scarce on the continent. In the age
of oil, Europe had become a territory of scarce energy resources.8
Throughout the 1950s and early 1960s the largest oil producer in the world was the United States, with 36 per cent of total production. The Middle East came second (24 per cent), followed by Venezuela (16 per cent) and the Soviet Union (13 per cent). The rest of the world combined
accounted for only about 10 per cent of production.9 The Middle East was
developing rapidly as the most important hydrocarbon area, however, not
only as a producer (in 1964 it would surpass the United States)10 but as
the largest basin of proven reserves (63 per cent in 1960, against 12 per cent in the United States, 6 per cent in Venezuela and 9 to 10 per cent in
the Soviet Union).11 Furthermore, the United States was also the largest
world consumer, with almost 500 million tons per year. From 1948 it had become an importer country, which had caused the Truman administra- tion to implement a series of measures to limit overseas exports and to secure the largest quotas of imports from Latin America, which were seen
as easier to defend than the Middle East in the case of a Soviet attack.12
In contrast, the communist bloc was able to provide for itself, with 130
to 135 million tons of annual production and consumption.13 This left
Europe exposed as the world’s third-largest consumer but producing only
3.5 per cent of its supplies.14 Once the United States had cut down on
exports, Europe became inescapably dependent on Middle Eastern sup- plies for 90 per cent of its needs.15
Moreover, neither crude imports nor product sales were directly controlled by European actors. Supplies and markets were managed by a group of large Anglo- American companies that exerted an oligopoly outside the United States and Soviet Union, controlling more than 85 per
cent of the rest of the world’s fields and markets.16 These companies were
five American enterprises (Standard Oil of New Jersey, Gulf Oil, Texaco, Standard Oil of California and Socony Mobil) and two European concerns (British Petroleum and Royal Dutch Shell). At the end of the 1920s, in order to stabilize the market and avoid overproduction crises, these large compa- nies had accepted each other’s relative standing both in the downstream sector (refining and marketing) and in the upstream sector (prospection and extraction), establishing a cartel through a series of informal but rigid
pacts.17 This system created a seller’s market in which prices and flows
were established by the cartel, with very little room for free markets.18
The world’s largest globalized industry by value was thus dominated by a strong oligopoly, which guaranteed stability in the market by con-
trolling the supply of this vital asset.19 It caused some consternation in
US administrations, however, and even more in Europe, where the cartel
controlled between 60 and 90 per cent of the oil market.20 As Paul Frankel,
the most important expert on the oil industry at the time,21 wrote,
[T] he oil companies involved have become, almost in a state of absentmindedness (a state of mind allegedly responsible for the formation of the British Empire), international institutions which perform a vital role for all the countries involved. At the same time they remain unmistakably private enterprises, responsible for and
to their shareholders.22
Outside the cartel, only a few independent US companies were able to carve out niche pockets in the extraction and marketing of oil. These companies were relevant domestically both for production and marketing, but they did not have access to relevant oil fields outside the United States and therefore had a much smaller importance internationally. In effect, as Frankel noted, ‘the only truly independent oil company [Standard Oil of New Jersey] is more balanced and self- sufficient than any other,
depending on no one for either supply or disposal’.23 In 1960 Standard had
a turnover of $8.9 billion, half that of the French state. Shell, the second largest, owned a 10- million- ton tanker fleet, twice as big as the French
merchant fleet.24 These non- state actors were titans in their own right.
A third category of oil companies was state- owned enterprises (SOEs), at the time almost exclusively European. They mostly conducted research within the national perimeters and in colonial territories, or they focused on the downstream sector, buying crude from the cartel and selling it on at national level, thus exerting some influence on domestic prices. The power of these companies was very limited compared to both the cartel and the US independents: in 1956 the American independent
Sinclair could count on a capital of $100 billion, while the Compagnie française des pétroles (CFP), the largest European SOE, had capital of
only ₣34 billion.25 Before the Second World War European governments
had not been excessively concerned with the power of the cartel, partly because oil was still much behind coal as an energy source, partly because the supplies had always been reliable. On the contrary, the US admin- istration had fought to break the oligopoly tendencies on its domestic market. As the status of oil as a fundamental resource became evident, however, together with the economic and political power of the car- tel, European states became concerned by their double dependency on Middle Eastern supplies and Anglo- American control over the industry. The importance of SOEs seemed to offer some corrective for the dimin- ished status of Europe both in the Cold War and the energy markets.
This was the global energy paradigm in January 1956, when French probes finally struck oil in the Sahara. Hopes of discovering important new fields in the desert had been chased by the French government since the early days of the European oil industry; in the 1920s a geological study had suggested the possible presence of substantial quantities of hydro-
carbons.26 After the Second World War France became the most active
European country to promote the development of a national oil industry, with the Sahara providing a natural place to look for new reserves. In 1947 the Bureau de recherche de pétrole (BRP), the body that coordi- nated France’s oil policy, launched a vast research campaign in the area. Four companies were created to explore around 150,000 square kilo- metres: SN REPAL, entirely state- owned and controlled by the BRP and the General Governor of Algeria; CFP- A, jointly owned by CFP and two French financial groups; the Compagnie de recherche et d’exploitation de pétrole au Sahara (CREPS), controlled by the state- run French con- cern Régie autonome des pétroles (RAP) with a minority participation by Shell; and Compagnie des pétroles d’Algérie (CPA), 35 per cent con- trolled by the BRP and 65 per cent by Shell. It is important to specify the ownership of the companies because the French oil code at the time was very strict: foreign companies were allowed to invest only through joint ventures with French bodies, and, though it was not specifically stated, no foreign enterprise could hold the majority of shares in a consortium. Shell was to remain the only exception, principally because of the per- sonal relationship between Pierre Guillaumat, head of the BRP, and Shell’s CEO at the time. This was to become typical of the cooperation between the French state and industry, which ‘enabled targeted investment to be
realized and guided by para- political interests’.27 The French government
was hoping to develop the Saharan resources on an autarchic basis, but
the extreme working conditions imposed by the desert and the complex geological structure of the subsoil did not make the area desirable to the international oil industry. By choice and by necessity, the French state had invested most of the capital in the research campaign. Finally, after four years of exploratory drilling, the efforts paid off: in January 1956 CREPS found 100 million tons of oil reserves in Edjeleh, in south- east Algeria; in June SN REPAL discovered the oil fields of Hassi Messaoud, with 600 million tons of proven reserves, and in December gas at Hassi R’Mel, one of the largest gas fields in the world.
France went from being the European country with the larg-
est energy deficit to a significant producer country.28 This would
become even more important over the coming months as the Suez Crisis unfolded. In order to be considered a producer country, how- ever, France needed to ensure that the Sahara remained within its imperial borders – an idea that was increasingly contested by 1956. As Algerian politics became more strained, and nationalist demands more sharply stated, the boon of energy resources were imperilled by a very different vision of the future.
Bilma Bordaï Zouai Fort Lamy Faya Largeau Abéche N’Guigmi Tahoua Naimey Ouagadougou N I G E R T C H A D L Y B I E Gao H A U T E V O L T A M A L I Tamanrasset Agades Tindouf Reggan Adrar Djanet Ghadames Tripoli Tunis Edjeleh Ouargla Beni Abbas Rabat Annaba Bedjaïa Erdis Tolok Zinder Laouni AbadlaBichar Hassi Messaoud Hassi R’Mel A L G E R I E M A R O C In Salah T U N I S I E
Figure 2 Map of newly discovered North African hydrocarbon fields