Ch. 27- The Prize summary

Chapter 27 summary of The Prize...

Post WWII: consumption of oil massively increased- all over globe. Didn’t even compare to the demand for oil though. Many reasons for switching from coal to oil.

How the world came to use oil so much/how grew rapidly: Rapid economic growth, rising incomes. Oil was used to fuel factories which made all the products consumers bought- cars, package goods, appliances. Oil and natural gas were transformed into plastics. In the 50s and 60s oil became real cheap. Each country that sold oil wanted more volumes of its own oil in order to gain higher revenues- put pressure on concessionaires to produce more oil- pushed oil into new markets. “Bigger is better” theme of world  Oil production, reserves, consumption. Refineries grew in larger and larger in size; new technologies enabled some refiners to up the yield of high-value products (gasoline, diesel, jet fuel, heating oil) from <50% to 90%. Also in consumers: American cars got bigger- powered by huge engines.

Following WWII was the war between oil and coal starting the U.S: economic and political consequences, impact on international relations, patterns of daily life- for hearts, minds and pocketbooks of consumers. Coal came first, cheap/available, material energy of the country, King. Oil was abundant, cheaper than coal now- and getting cheaper, better for the environment, provided a competitive advantage for energy-intensive industries.

Europe moved to oil: Slow. Because of the Suez crisis, Britain was questioning its security of Middle Eastern oil supplies; decided to push with its first nuclear energy program to reduce dependence on imported oil. Britain struggled with policies that would give coal some protection against cheap imported oil. Concluded that international trade position required growth in oil use.

Another reason to switch from coal to oil- help environment: Clean Air Act-favored. Coal burning creating killer fogs—pollution from open fires in houses. Result- “smokeless zones” were made where burning of coal for home heating was banned.

Japan: slower. Not until 1949 did the American Occupation let oil refining back Japan; end of the Occupation, regaining independence and the Korean war economic growth. Japan no longer was poor- began to run on oil. Gov wanted to reduce foreign influence on its oil industry. More oil consumption was near: The Japan auto export boom was soon to come. End of war- Japan and Germany set great standards for economic performance. Boom years of 50s and 60s were powered by cheap oil.

Europe- most competitive market in 50s and 60s. American companies were limited the amount of imported oil from Europe- had to find somewhere else to get oil.

Price wars/ Competition among suppliers: drove down gas prices. Gas stations advertized lower prices than other stations. Advertisements published. Gas additives.

Suburbs developed. Made car a necessity more than before. Shopping centers, motels, restaurants had opened, theatres, car shows. Became a drive-in society. First highway built in 1949- Eisenhower signed the Interstate Highway Bill in ’56 for system.

Six-Day war: Egypt’s Gamal Abdel Nasser wanted to have power again and ordered a blockade against Israeli shipping in the Gulf of Aqaba. Jordan, Arab military and Egypt military joined. June 5 war began- Israel defeated opponents after day 3. June 6- “oil weapon”- Arab oil ministers called for an oil embargo against countries friendly with Israel. June 7- no oil shipped to U.S. why cut off oil shipped to sources of revenues?

Flow of oil down to tankers and logistics: flow had to be reorganized. U.S. got oil from other embargoed countries. Development of super tankers. Arab countries calmed down; a month after it was clear that the Arab oil weapon and embargo was a failure.

Result of the Six-Day war: confirm how secure oil supply was, men continue to take petroleum for granted- oil was pervasive, readily available, defined and motivated his life- hardly thought about it. Economic advisor for the Coal Board, Schumacher said oil was finite and not be used excessively. Would not always be cheap, reserves will dwindle and warned about the dependency of the Middle East. No one took him seriously.