6 - An industry restructured

Summary

During the first half of the Opec decade, member governments of the Organisation took over, by stages, the declaration of prices in the world oil trade, the ownership of production in their countries, and the setting of formal limits to output there. During the second half, they took over the actual selling of most of the crude oil traded physically in the world oil market, along with most of the operational responsibility for producing this crude.

That sea-change transformed the structure of international trade in oil. Directly, it involved only just under half the world's production capacity. But most of the other half was in North America, a formerly self-sufficient region already becoming more import-dependent, or in the then Communist landmass, more than self-sufficient in oil but exporting relatively little. The production that Opec governments took over represented about three-quarters of the production capacity in what the industry used to call ‘WOCANA’. More significantly, it accounted for about 80 per cent of world crude oil exports.

Within the former matrix of international oil, private companies owned outside the exporting countries had not only produced about 90 per cent of the crude moving through world trade. They had transported it through their own integrated channels for refining and marketing as products downstream. Vertically integrated supply through the systems of the eight companies regarded as ‘international majors’ then dominated the trade.

Those eight were the four Aramco shareholders, Exxon, Mobil, Texaco and Socal (later renamed Chevron), plus British Petroleum, Gulf and Royal Dutch/Shell – three other largely private companies, ranked in order of their entitlements to Middle East production. These were often described as the ‘Seven Sisters’.