PETROANALYSIS || ARTICLE
Achnacarry… the world was a better place to be
Yes, an oil monopoly was set then, in September 1928. It brought stability to the oil market. But plenty of American independent producers were not happy with it and they used their powerful lobby to fight against it in Washington DC from within the Federal government and in Capitol Hill as well as in the press and through public opinion.
They did so because by definition, American crudes are high-cost ones. They had been historically, and remain as such to the present day when compared to international standards.
At that time, Standard Oil of New Jersey had gone international and it saw the WORLD as its horizon, while small producers in Texas or Oklahoma were encapsulated in their tiny communities governed by a cowboy like far west mentality that gave birth to the rules and values of American capitalism. The Sherman Antitrust Act of 1890, although not up to the expectations of the tiny number of followers of Marxist theory in the US, is a milestone for the hardships of the oil Majors. American public opinion is not friendly to them or at least don’t champion them. By the way, this is something not completely understood by leftists especially in Latin America where resource nationalism’s very early roots could be found in Mexico and later in Venezuela.
In 1959, unable to compete with cheaper imported oil by the Majors and mainly from Venezuela, TIPRO – the Texas Independent Producers & Royalty Owners Association – succeeded to get the approval of President Eisenhower for the Mandatory Oil Import Quota Program. American Majors, not satisfied with their triumph in Iran in 1953 where they stripped BP’s 100 percent monopoly down to just 40 percent, needed in 1959 further concessions from their British competitor which then still enjoyed significant positions in Kuwait, Iraq, Abu Dhabi and Qatar, besides what still had in Iran. That gave birth to OPEC, a subject we have earlier dealt with here.
Both BP and Shell enjoyed a favourable cost structure that allowed them to bring prices down by a few cents when they considered it necessary in a glutted market environment. Venezuela then protested to the British Ambassador in Caracas, and when OPEC was established the stated objective was to avoid further price discounts. In theory, it was an intended replay of Achnacarry!
Caracas presented a TIPRO-like model for quotas, but it took OPEC over two decades to agree on that, and once applied the compliance was – and still is – imperfect.
In the battle arena of domestic politics between the two parties, Majors and independents et cetera – where disagreements would have been much easier to overcome if the US had possessed entities such as, say, Russia’s Rosneft or Gazprom – the struggle reflected itself on the rest of the world and mainly on OPEC, since this organization took over the complex responsibility of bringing stability to the international oil market. This has become more complicated with the ever pressing desire to achieve the objective of Energy Independence through the very expensive Shale Revolution and the dangerous America First Doctrine.
No matters how hard you try to keep OPEC away from politics, America’s high-cost crudes, both conventional and shale, is essentially in an anti-Achnacarry spirit and needs politics to survive and…. prevail.