US Governmenrt and the Cartel, Marshall Plan and Resistance
Through the history of the petroleum industry that I’ve been discussing over the past months, we have explored how giant oil companies acquired wealth and power. This examination reveals fascinating parallels with the world of One Piece, the famous Japanese anime, highlighting themes of ambition, resource control, and navigating complex regulatory landscapes.
- The era of the Pirate King Gold D. Roger vs. the start of the petroleum industry by Petroleum King John D. Rockefeller
- The impassable Red Line in One Piece vs. the Red Line Agreement that new petroleum companies couldn’t cross
- Government-sanctioned pirates, the Seven Warlords, cooperating with the government in plundering vs. the Seven Sisters dominating the petroleum industry under government protection
While it’s uncertain if the author of One Piece drew inspiration from the petroleum industry’s history, striking parallels exist between imperialistic powers in the Age of Exploration and the dominance of nations and corporations in the petroleum sector. This week, I’ll highlight the harms caused by the giant petroleum cartel and international abuses of petroleum dominance, revealing the ruthless power struggles within the industry.
Relationship between the petroleum cartel and the U.S. government
Elevating Aramco as a dominant force in the petroleum industry, the petroleum cartel strategically limited political and military support from the U.S. and U.K. governments to actions that bolstered their own privileges in the petroleum market. In exchange for securing a monopoly while evading U.S. antitrust penalties, the cartel played key roles:
- Ensuring stable and reasonably priced oil supply to the U.S. and its allies.
- Providing financial support to U.S.-friendly nations in the Middle East.
- Allocating a portion of revenue from Middle Eastern oil (largely controlled by the cartel) to respective nations.
- Safeguarding petroleum dominance in the Middle East.
With the Seven Sisters assuming control of Aramco post-World War II and the onset of the Cold War, the cartel’s influence over Middle Eastern oil became pivotal for the U.S. to bolster international influence and counter the spread of Soviet socialism in the region. In executing these functions, the petroleum cartel amassed significant power within the industry, surpassing governmental influence.
The tyranny of the petroleum cartel
The main reason why U.S. oil companies, including the petroleum cartel, gained immense power was their extensive lobbying activities fueled by enormous profits amassed during the World War II. (Exploiting military-supplied oil for profit was a given, and it is even reported that they supplied oil to Germany, an enemy country, through Spain.)
Engaging in a cycle of lobbying with the money amassed and generating even greater wealth, the petroleum cartel, creating a vicious cycle (virtuous cycle for the cartel, vicious for everyone else), absorbed any company that seemed likely to become profitable under the tacit approval and protection of the U.S. government. The octopus-like expansion resulted in the disappearance of numerous small businesses, leading to job losses through mergers and acquisitions.
The exploitation by major U.S. oil companies extended overseas, exemplified by the Marshall Plan.
Marshall Plan: The European Recovery Program (ERP), commonly known as the Marshall Plan, was a U.S. foreign aid initiative from 1947 to 1951, offering assistance to 16 Western European countries in the aftermath of World War II. Proposed by then-U.S. Secretary of State George C. Marshall.
The Marshall Plan, implemented with the aim of revitalizing the post-war European economy.
The U.S. provided $16 billion from 1948 to aid Western Europe’s economic recovery. Over 10% of this aid was mandated for purchasing U.S. oil, with reports suggesting the major U.S. oil companies supplied half of Western Europe’s oil. This positioned the government as an oil cartel sales agent, coercively securing a market for Middle Eastern oil to protect the cartel’s profit structure. While restricting alternatives, the cartel exploited the situation, doubling oil prices from $1.05 per barrel in 1945 to $2.22 in 1948. Attempts by European countries to establish independent refineries failed due to U.S. government approval influenced by the oil cartel lobby. The Marshall Plan illustrated a cycle where U.S. taxpayer money intended for European aid flowed back into the pockets of the oil cartel, showcasing corruption and
Resistance Against the Exploitation of the Oil Cartel
Naturally, there has been a strong backlash against the exploitation of the oil cartel. Labor unions representing small businesses that have collapsed due to the greedy oil cartel, progressive thinkers criticizing conservative forces aligned with the massive oil companies’ lobbying efforts, and even small petroleum business owners facing difficulties due to the cartel’s exploitation have collectively called for an investigation and punishment for the oil cartel’s collusion and other unfair business practices.
Several government agencies, including the U.S. Federal Trade Commission (FTC), have initiated investigations into the five major U.S. oil companies. The report mentioned briefly last week is the “International Petroleum Cartel.”
This report provides a comprehensive overview of the global petroleum industry, emphasizing the influence of the Seven Sisters across exploration, production, distribution, and marketing. It details how major oil companies consolidated their global dominance, focusing on the process and outcomes of controlling the Middle East’s petroleum industry (Chapters 4 to 7). The FTC’s report, viewed as a significant risk by the oil cartel, is marked by substantial redactions due to national security concerns, highlighting a detailed depiction of the oil cartel’s control over petroleum dominance.
Despite reservations from the U.S. Truman administration, Senator John Sparkman, Chairman of the Senate Small Business Committee, publicly disclosed the report, urging an investigation into the oil cartel’s unfair practices. The report’s release sparked public outcry, making the punishment and downfall of the oil cartel seem inevitable.
Failure of Attempts to Regulate Monopoly
In response to public pressure, the U.S. government struggled to agree on the appropriate punishment for the oil cartel. The State Department, citing national security concerns, accepted the inevitability of collusion within the oil cartel, highlighting the importance of ensuring a stable oil supply for Western Europe’s economic recovery. In contrast, the Department of Justice, focused on fair economic practices, pushed for punitive measures against the oil cartel.
While the State Department sought cooperation from U.S. companies within the oil cartel to prevent oil price increases and aid Western Europe’s economic revival, the Department of Justice, with Truman’s approval, launched a comprehensive investigation into the oil cartel’s monopolistic and unfair trade practices. A grand jury was convened to assess potential criminal charges related to the cartel’s collusion.
The State Department emerged victorious, countering the Department of Justice’s pursuit of economic justice. Leveraging the Department of Defense and the CIA, they emphasized the notion that “Stable oil supply equals security.” Truman, yielding to the State Department, abandoned criminal prosecution of the oil cartel, shifting it to a civil suit. Unhappy with mere immunity from prosecution, the oil cartel discreetly secured the transfer of the U.S. petroleum industry oversight from the Department of Justice to the State Department, justifying their actions on security grounds. Consequently, the oil cartel became an extralegal entity free from government regulations.
Ultimately, antitrust regulations against the oil cartel were fully abandoned in 1953 under the early Eisenhower administration. The rationale of anti-communism and security, citing an inability to penalize major oil suppliers due to increased demand during the Korean War and reduced supply from Iran’s oil nationalization, resulted in amnesty for the oil cartel. This underscores the pivotal role of anti-communism and security as tactics for preserving vested interests in any government.
The cartel and U.S. government tactics for petroleum dominance are evident in dealings with the Middle East, notably seen in the nationalization of Iran’s oil, resulting in ongoing economic sanctions. In the next article, we’ll examine why the U.S. labels Iran part of the ‘Axis of Evil’ and identify the real movers behind this designation.
