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The Anglo-American Oil Agreement and the Wartime Search for Foreign Oil Policy*

Published online by Cambridge University Press:  11 June 2012

Michael B. Stoff
Michael B. Stoff
Affiliation:
Assistant Professor of History, University of Texas at Austin
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Abstract

Unprecedented rates of consumption by the American and Allied war machine during World War II, along with a reduction in world supplies as a result of enemy victories, first brought the United States face to face with the possibility of dependence upon others for our oil after the war. Government officials attempted to avoid that outcome through the Anglo-American Oil Agreement but only succeeded in provoking domestic producers. Meanwhile, British and American oil companies provided relief by private commercial arrangements in the then-new Middle Eastern fields. While Professor Stoff's story ends in the dark ages of naive American belief that such enterprises, when countenanced by our government, constituted freedom from dependence, it is indispensable to an understanding of what came later.

Type
Research Article
Information
Business History Review , Volume 55 , Issue 1 , Spring 1981 , pp. 59 - 74
Copyright
Copyright © The President and Fellows of Harvard College 1981

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References

1 Ickes, Harold, “We're Running Out of Oil,” American Magazine (January 1944), 26–27.Google Scholar

2 For a succinct description of the principles governing American commercial policy, see Paterson, Thomas G., Soviet-American Confrontation: Postwar Reconstruction and the Origins of the Cold War (Baltimore, 1973), 1–29.Google Scholar On oil, see Nash, Gerald D., United States Oil Policy, 1890–1964; Business and Government in Twentieth Century America (Pittsburgh, 1968), 1–156Google Scholar; Blair, John M., The Control of Oil (New York, 1976), 25–183.CrossRefGoogle Scholar

3 DeNovo, John A., “The Movement for an Aggressive American Oil Policy Abroad, 1918–1920,” American Historical Review (July 1956), 854–876CrossRefGoogle Scholar; Hogan, Michael J., “Informal Entente: Public Policy and Private Management in Anglo-American Petroleum Affairs, 1918–1924,” Business History Review, 48 (Summer 1974), 187–205CrossRefGoogle Scholar; Wood, Bryce, The Making of the Good Neighbor Policy (New York, 1961), 159–282.Google Scholar

4 Frey, John W. and Ide, Chandler, A History of the Petroleum Administration for War, 1941–1945 (Washington, D.C., 1946), 22, 56–62, 330Google Scholar; Ickes, Harold L., Fightin' Oil (New York, 1943), 77–78.Google Scholar

5 “Breakdown of Staff of the Petroleum Administration for War,” April 16, 1943, National Archives, Washington, D.C. [hereafter cited as NA], Records of the Office of the Secretary of the Interior, Record Group 48 [hereafter cited as RG 48], File 1–188: Petroleum Administration, Folder 2834; Frey and Ide, PAW, 18–22.

6 U.S., Congress, Senate, Special Committee Investigating the National Defense Program, Hearings, Part 41, Petroleum Arrangements with Saudi Arabia, 80th Cong., 2nd Sess. (Washington, D.C., 1948) [hereafter cited as Arabian Oil Hearings], 25207–25209, 25444–25445.

7 Walton Ferris to Max Thornburg, Enclosure #1, November 24, 1941, NA, Records of the Department of State, Record Group 59 [hereafter cited as RG 59], 800.6363/1–2142; Harold Ickes to Franklin Roosevelt, July 7, 1941, Roosevelt Papers, PSF (73); Herbert Feis to Ralph J. Watkins, September 27, 1941, NA, RG 59, 800.6363/466A; Ralph K. Davies to Roosevelt, October 15, 1941, Franklin D. Roosevelt Library, Hyde Park, New York [hereafter FDRL], Franklin D. Roosevelt Papers, President's Secretary's File [hereafter cited as PSF] (10). Roosevelt Papers, PSF (10); Frey and Ide, PAW, 174; Reginald Stoner to H.A. Stoner, “The Importance of Foreign Oil Reserves to the United States,” December 29, 1942, NA, Records of Interservice Agencies, Record Group 334 [hereafter cited as RG 334], Army-Navy Petroleum Roard: Petroleum Division Subject Numeric File 1942–1946, Folder EF-4; U.S., Congress, Senate, Special Committee Investigating Petroleum Resources, Hearings, American Petroleum Interests in Foreign Countries, 79th Cong., 1st Sess. (Washington, D.C., 1946), 1–2Google Scholar; Ickes, Fightin' Oil, 9; Lingeman, Richard R., Don't You Know There's A War On? (New York, 1971), 286–287, 295, 307.Google Scholar

8 Feis, Three International Episodes, 96–97; “Reply to Statement of the Five Senators …,” n.d., FDRL, the Papers of Oscar Cox, Rox 67, Five Senators Folder; “Remarks on Statements Made on Petroleum by Senators Mead, Russell and Rrewster,” October 4, 1943, NA, Records of the Foreign Economic Administration (housed in the Federal Records Center at Suitland, Maryland), Record Group 169, Box 1740, Procedures and Policy Folder; Ickes to James Mead, December 10, 1943, NA, RG 48, File 1–188: Petroleum Administration, Folder 2829.

9 Tinkle, Lon, Mr. De: A Biography of Everette Lee DeGolyer (New York, 1970), 267Google Scholar; Williamson, Harold F.et al., The American Petroleum Industry: The Age of Energy (Evanston, 1963), 748Google Scholar; Feis, Three International Episodes, 95, 99. See also, Andrew F. Carter to Frank Knox, January 17, 1944, NA, RG 334, File ANPB: 14/1-Foreign Petroleum Policy, Misc. Folder.

10 Jesse Jones to Cordell Hull, August 6, 1941, U.S. Department of States, Foreign Relations of the United States (Washington, D.C., 1852–)Google Scholar [hereafter cited as FRUS (year)] (1941), III, 642–643; Roosevelt to Stettinius, February 18, 1943, FRUS (1943), IV, 859. On strategic and political motives for extending the aid, see Dean Acheson to Stettinius, January 9, 1943, FRUS (1943), IV, 854.

11 Arabian Oil Hearings, 24805, 25091, 25094–25095; Thornburg to Welles, Murray, Ailing, February 3, 1943, NA, RG 59, 800.6363/1105. The Kuwait Oil Company, a subsidiary formed by the Gulf Oil Corporation and the Anglo-Iranian Oil Company, was typical of oil companies operating in British protectorates. The company was registered in Great Britain and had to employ British nationals on its senior staff. Appointment of the company's chief local representative was subject to the approval of the British government, which also retained the right of prior approval for any transfers of company property to firms controlled by non-British nationals. During national emergencies, the British government had preemptive rights to all oil produced by the Kuwait Oil Company and could take possession of the company's plant and premises. John A. Loftus memorandum, “The Petroleum Situation in the Middle East,” January 13, 1944, NA, RG 59, Harley F. Notter File. For similar restrictions on American operations on the island of Bahrein, see Shwadran, Benjamin, The Middle East, Oil and the Great Powers (3rd ed., rev.; Jerusalem, 1973), 390–397.Google Scholar

12 Murray conversation with Seidel, Foster, and Stuart-Morgan, September 5, 1942, NA, RG 59, 890G.6363/375; Allen conversation with Stuart-Morgan, December 21, 1942, NA, RG 59, 890G.6363/384.

13 In the Far East, Jersey Standard and Socony operated through a relatively independent subsidiary, the Standard-Vacuum Oil Company. Both Jersey Standard and Socony suffered from chronic shortages of supply. After the Japanese captured the Dutch East Indies, those shortages became acute. On Stanvac's position in the Far East on the eve of war, see Anderson, Irvine Jr, The Standard-Vacuum Oil Company and United States East Asian Poliai, 1933–1941 (Princeton, 1975).Google Scholar

14 As part of the marketing restrictions, Anglo-Iranian also agreed not to use Kuwait oil to injure the commercial position of Gulf. All the same, both parties admitted that the apparent bilateral nature of the agreement was illusory, since Gulf never marketed any oil in the Far East, the natural outlet for Kuwait production. In addition to marketing restrictions, Gulf also agreed to obtain oil supplies from Anglo-Iranian's production in Iran and Iraq in lieu of Gulf's requiring the Kuwait Oil Company to produce oil in Kuwait. Loftus memorandum, “The Petroleum Situation …,” January 13, 1944, NA, BG 59, Notter File. Drilling began in Kuwait in 1936, but it was not until 1938 that the company had any real success with commercial oil development. By 1942, Kuwait had nine producing wells, which were shut-in as a war measure in July of that year. Shwadran, The Middle East, Oil and the Great Powers, 409–410.

15 Loftus memorandum, “The Petroleum Situation …,” January 13, 1944, NA, RG 59, Notter File; Alling to Gray, September 9, 1943, NA, RG 59, 890F.6363/68. Feis memorandum conversation with J.F. Drake, September 16, 1943, NA, RG 59, 890F.6363/418.

16 For a detailed account of the stock buying venture, see Stoff, Michael B., “The Anglo-American Oil Agreement and the Development of National Policy for Foreign Oil, 1941–1947” (Ph.D. dissertation, Yale University, 1977), 99–107.Google Scholar On Ickes's approach to Gulf, see Feis to Hull, September 16, 1943, NA, RG 59, 890F.6363/69; Alling to Gray, September 13, 1943, NA, RG 59, 890F.6363/68; “Minutes of the Petroleum Reserves Corporation,” September 28, 1943, NA, Records of the Office of War Mobilization and Reconversion, Record Group 250 [hereafter cited as RG 250].

17 On the pipeline, see Stoff, “National Policy for Foreign Oil,” 165–79. Arabian Oil Hearings, 25240–25241; Ickes to Hull, January 7, 1944, FDRL, Roosevelt Papers, PSF (66).

18 Engler, Robert, The Politics of Oil: A Study of Private Power and Democratic Directions (New York, 1961), 273–274Google Scholar; Hawley, Ellis, The New Deal and the Problem of Monopoly (Princeton, 1966), 214Google Scholar; Nash, U.S. Oil Policy, 141–145, 151–152.; Diary of Harold Ickes, Library of Congress, Washington, D.C., vol. 49, 8126.

19 Report of the Foreign Operations Committee of the Petroleum Administration for War, “A Foreign Oil Policy for the United States,” November 5, 1943, found in FDRL, Roosevelt Papers, Official File [hereafter cited as OF] (4435-b); “Resolutions Adopted by the Petroleum Industry War Council Pertaining To A Petroleum Policy For The United States,” December 9, 1943, January 12, 1944, found in NA, RG 250, Box 119, Reports on Petroleum Folder; Petroleum Industry War Council, “A National Oil Policy for the United States,” especially Petroleum Industry War Council resolution of February 2, 1944 (Washington, D.C., 1944). For the position of independents, see resolution of the Independent Petroleum Association of America, December 11, 1943, which is attached to “Report of Special Committee on Foreign Oil Policy to the Petroleum Industry War Council,” January 10, 1944, found in FDRL, Roosevelt Papers, OF (4435-b). See also Hawley, Problem of Monopoly, 187–280.

20 See, for example, unsigned memorandum, November 20, 1943, NA, RG 59, 800.6363/1397; Sappington memorandum, “Memorandum on the Department Position with Respect to the Proposal that the Government Purchase Stock Control or Participation in the California-Arabian Standard Oil Company …,” December 1, 1943, NA, RG 59, 890F.6363/92–1/2; W.L. Parker memorandum, “The Necessity of the Formulation of an Oil Policy by the Department,” December 8, 1943, NA, RG 59, Leo Pasvolsky File; Loftus memorandum, “United States Petroleum Policy in the Middle East,” January 13, 1944, NA, RG 59, Notter File. See also “Foreign Petroleum Policy of the United States, “April 11, 1944, NA, RG 59, 811.6363/4–1144; State Department Technical Committee on Petroleum, “United States Petroleum Policy,” November 10, 1947 [copy in authors possession].

21 James T. Duce, aide-memoire conversation with Basil Jackson, August 9, 1943, NA, RG 59, 800.6363/1281.

22 Jackson to H.B. Blake-Tyler, “Extracts of a letter dated May 28, 1943 to Sir William Fraser, Chairman of Anglo-Iranian Oil Co., Ltd.,” August 31, 1943, Public Record Office, London, England [hereafter cited as PRO], British Foreign Office Political Correspondence, Class F.O. 371 [hereafter cited as FO 371], A9194/3410/45; Extract from War Cabinet Conclusions, W.C. 99(43)2, July 14, 1943, PRO FO 371, E4264/2551/65; Harold Wilkinson to Sir William Brown, September 2, 1943, PRO, FO 371, A9286/3410/45; Jackson to Fraser, August 25, 1943, PRO, FO 371, A9194/3410/65.

23 A conveniently located reprint of the oil agreement in its final form can be found in Mikesell, Raymond F. and Chenery, Hollis B., Arabian Oil: America's Stake in the Middle East (Chapel Hill, 1949), 185–190.Google Scholar For a more detailed analysis of negotiations and of the agreement at its various stages, see Stoff, “National Policy for Foreign Oil,” 193–205, 215–219, 258–261.

24 See, for example, Minutes of Meeting of United States Technical Group Appointed to Conduct Preliminary Conversations with the United Kingdom on Petroleum, Meetings II, III, IV, April 12 & 13, 1944, NA, Records of the Petroleum Administration for War, Record Group 253 [hereafter cited as RG 253], Anglo-American Oil Agreement File, Grey Box II, Folder 5; “Report on the Comments of the Industry Advisors …,” May 20, 1944, NA, RG 253, Anglo-American Oil Agreement File, Grey Box II, R.K. Davies Folder. For examples of discord over the agreement within the industry, see J.H. Thatcher, Jr. to Davies, Summary of minutes of meetings of the Petroleum Industry War Council of July 19, 1944, September 13, 1944, October 25, 1944, NA, RG 253, Anglo-American Oil Agreement File, Box I, Folder 7; “Action by PIWC on the Anglo-American Oil Agreement,” December 6, 1944, NA, RG 253, Grey Box I, Folder 1. For examples of continuing rejection by independents in the West and Southwest, see East Texas Oil Association, “America No Longer Dependent Upon British Shipping To Move Petroleum And Other Products,” n.d., found in NA, RG 59, 890F.6363/10–2945; Beauford T. Jester to Tom Connally and Arthur Vandenberg, June 3, 1947, Library of Congress, Washington, D.C. [hereafter cited as LC], the Papers of Tom Connally, Box 101, Anglo-American Oil Treaty Folder. See also U.S., Congress, Senate, Congressional Record, 82nd Cong., 2nd Sess. (Washington, 1952)Google Scholar, Volume 98, Part 7, 9182, 8502–8503.

25 On the New Deal, see Nash, U.S. Oil Policy, 128–56; Hawley, Problem of Monopoly, 19–146, 212–220.

26 For continuing criticism of the agreement by majors such as the Sun Oil Company and the Sinclair Oil Corporation, see NYT, November 15, 1946; “Statement by H.F. Sinclair,” February 4, 1946, LC, Connally Papers, Box 101, Anglo-American Oil Treaty Folder.

27 Stoff, “National Policy for Foreign Oil,” 272–287.

28 Had the oil deals never taken place, a price war might have erupted, which could have damaged Jersey Standard and Socony. In 1946, the lowest price quoted on the United States Gulf coast for oil was $1.28/barrel. At the time, Aramco was selling oil of comparable quality for $.90/barrel. If a price war had broken out as Aramco tried to move its oil into existing markets, the company could have cut its price even further, since Socal and Texaco admitted that the cost of producing a barrel of Arabian crude was only $.33. U.S., Congress, Senate, Foreign Relations Committee, Subcommittee on Multinational Petroleum Corporations, Hearings, Multinational Petroleum Corporations and Foreign Policy, 93rd Cong., 2nd Sess. (Washington, D.C., 1974)Google Scholar, Part 7, 81.

29 On company plans to use Middle Eastern oil to supply Europe, see McGhee memorandum conversation with Orville Harden, December 3, 1946, FRUS (1946), VII, 40–43. See also Caltex to Aramco, Jersey Standard to Aramco, Socony to Aramco, June 17, 1947, found in NA, RG 59, 890E6363/6–1747.

30 For department reaction to the oil deals, see John A. Loftus memorandum for the Secretary's Staff Committee, “Proposed inter-company arrangements affecting Middle East oil,” February 14, 1947, NA, RG 59, 890F6363/2–1447; Paul Nitze to Will Clayton, February 21, 1947, NA, RG 59, 800.6363/2–2147. On department efforts to promote a more competitive arrangement, see Memorandum meeting between Nitze, Loftus, Robertson, and Eakens and Orville Harden and B. Brewster Jennings, March 7, 1947, FRUS (1947), V, 651–654. For official support of company efforts to abrogate the Red Line agreement, see Secretary of State to Gallman, November 29, 1946, FRUS (1946), VII, 39; Loftus memorandum conversation with Orville Harden, Harold Sheets, and B. Brewster Jennings, January 9, 1947, FRUS (1947), V, 630–631. On continuing concern over the anti-trust question, see Kaufman, Burton I., “Mideast Multinational Oil, U.S. Foreign Policy, and Antitrust: the 1950s,” Journal of American History (March 1977), 937–959.CrossRefGoogle Scholar

31 On American involvement in Iran, see Lytle, Mark H., “American-Iranian Relations 1941–1947 and the Redefinition of National Security” (Ph.D. dissertation, Yale University, 1973)Google Scholar; on Saudi Arabia, see Walt, William Joseph, “Saudi Arabia and the Americans, 1923–1951” (Ph.D. dissertation, Northwestern University, 1960)Google Scholar.