At an Organization of Petroleum Exporting Countries summit meeting outside Algiers in March 1975, the conference host, Algerian Pres. Houari Boumédienne, proclaimed that oil was "not merely a fuel, but the source of life itself."1 That rhetoric, while grandiose, contains more than a grain of truth.
Indeed, crude oil and its products can contribute to sustenance of life, a fact the general public often forgets in its zeal to condemn those who produce them.
Energy from oil and natural gas represents the most significant tangible bases for the industrial growth of nations, the improvement in countries' standards of living, and the employment of millions of people worldwide.
Saudi Arabia, in fact, used proceeds from oil sales to construct two entire cities that provide homes, jobs, education, industrial goods, and services for its citizens.
Western markets have long thrived using this abundant source of energy, and now Third World economies in the Middle East, Asia, Africa, and Latin America are experiencing substantial socioeconomic improvements due to increased production and/or use of oil and gas.
As energy goes, so go the economies of the world. Remove it, and industries can flounder, economies can crumble, and people can die. Nations have waged war to keep oil (and the profits generated by it) flowing. The power and the responsibility inherent in its control are enormous.
A little history
Over the years, myriad changes have affected the producers of oil and gas. The seven corporations, dubbed the "Seven Sisters," that were the original giants of the industry before the 1920s, had an enormous influence on those that came afterward.
John D. Rockefeller's Standard Oil, which controlled the industry for 30 years, was broken up into 38 companies by the Sherman Anti-Trust Act in 1911 (all still under the control of the original board, however, and led by Rockefeller, who held a quarter of the shares).
Three of these split-off companies, originally known as the Standard Oil Group, were Standard Oil Co. of New Jersey (later Exxon Corp.), Standard Oil Co. of New York (originally Socony; later, Mobil Corp.), and Standard Oil Co. of California (Socal, later Chevron Corp.). They became three of the powerful Seven Sisters.
Spindletop field in East Texas was the birthplace of two more of the sisters, Texas Co. (Texaco Inc.) and Gulf Oil Corp.
The Dutch company Royal Dutch, operating in the Far East, merged with Shell Transport & Trading Co. (exporter of oil from Russia, Romania, and Germany) to become the sixth sister, Royal Dutch/Shell.
And Anglo-Persian Oil Co. (later Anglo-Iranian), which supplied oil to the British navy and, for a time, was 51% owned by the British government, became British Petroleum Co. Ltd. (now BP), rounding out the seven largest and most powerful international oil companies providing energy to the world.
Even entities as powerful as the Seven Sisters, however, have had to struggle to remain competitive over the years. Evolving to meet challenges has kept them profitable and growing despite wars and political checks that came into play to thwart or balance the power that was once inherent with the size and wealth of these giants. Texaco even survived bankruptcy.
Today competition continues-with each other and with independents and national oil companies that have arisen worldwide, often with the help of the sisters themselves (OGJ, Oct. 23, 2000, p. 74).
Innumerable restrictive government regulations, high taxes, and other challenges also require these companies to move quickly to maintain their positions.
Today, five giant, publicly traded oil companies, all but one of which are augmented members of the original seven, have grown despite oil downturns and competition within the industry. They continue to command a major presence:
- Original sisters Exxon and Mobil have merged to form ExxonMobil Corp., the largest publicly traded oil company in the world, which ranks No. 1 in most measures of oil company scope (OGJ, Oct. 16, 2000, p. 98)
- Royal Dutch/Shell-at No. 2-has remained among the top companies by the steady acquisition and redistribution of various smaller assets worldwide.
- BP also grew, by acquiring smaller majors Amoco Corp. and ARCO to become the third largest nonstate-owned oil company.
- And recently Chevron (which had earlier acquired assets of another original sister, Gulf Oil) announced plans to merge with Texaco, creating ChevronTexaco Corp., another giant that would become the world's fourth largest privately owned oil company (OGJ, Oct. 23, 2000, p. 28).
- Megamajor TotalFinaElf SA, in a shotgun wedding between TotalFina SA-itself the product of a merger of Total SA and Petrofina SA-and Elf Aquitaine SA, has also become a major private oil power. Formerly fourth among the giants, the company will drop to fifth after the ChevronTexaco merger.
All the original Seven Sisters, then, remain-at least in some form-among the top major players and continue to provide the "source of life itself" to the world's population.
- Sampson, Anthony, The Seven Sisters, The Viking Press, 1975, p. 2.