Goodbye to all that: oil, empire and August 1914

The onset of the First World War underlined the seismic change that was engulfing every aspect of life in the early part of the 20th century. As Europe’s great powers tumbled over the precipice into a catastrophic four years of carnage, few could envision the role that powered transportation would play in the conflict, or the toll that mechanized, industrialized warfare would extract from its youth.

In a war that left such an indelible mark on society, oil would for the first time play a significant role. To that end, the First World War is a significant landmark in the formation of corporations that came to dominate the 20th century. The age of the majors had dawned.

Among the horror and humanity of the First World War, which started 100 years ago this month, those embroiled in the fledgling oil industry found their patriotic niche. Great oil powered dreadnoughts prowled shipping lanes while the relentless thrum of troop carriers married the youth of far flung empire to blood-soaked front line. Men looked down upon the earth from frail, spindly flying machines and huddled around kerosene lamps in half submerged shell holes seeking warmth and respite.

From the Parisian omnibuses that rushed French troops out to meet the German army’s great curling hook as it tore through northern France, to the lumbering British tanks that lay shattered and strewn across the muddy fields of Cambrai, war was mechanized now. War needed oil.

But the push required a catalyst and a champion, and three major elements conspired to drive oil into the war zone. All would come in the fleeting years that fell as Europe’s golden age lurched toward its bloody end.

The first, in February 1907, was the coming together of a Dutch petroleum company and a British trading and transport company that had once imported seashells. The Royal Dutch company, which took the lion’s share of the amalgamated business, was looking for a partner to help redress the growing influence of Standard Oil, a company that Mr. Warren Platt was already pretty familiar with when he founded Platt’s National Petroleum News in 1909.

The following year came the second major event, when a British expedition, after eight years of searching, finally struck oil in the deserts of Persia, prompting the Shah of Iran to grant oil rights for virtually the entire country to one British businessman, William Knox D’arcy. Turning to his majority shareholder, Burmah Oil, the concession would be exploited by a new company, and in 1909 the Anglo-Persian Oil Company came into existence.

The final element also came from Britain, and its champion was a man who, despite his contemporaneous fame, had yet to realize his true destiny. It started with a Royal Commission on Oil Fuel and Oil Engines, instigated in 1912 by the newly appointed First Lord of the Admiralty, one Winston Spencer Churchill.

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The role the Royal Navy plays in this is one of catalyst. As an entity, the Navy held a sometimes-reluctant place at the cutting edge of technology. The move from sails to steam had been difficult, but the military advantages of steam won the case.

Oil was slightly different. Steam power was born of coal, a resource that Great Britain was not short of. The same could not be said for oil, as the only proven reserves of which were currently overseas.

The case was overwhelming though. Churchill’s ally, the retired Admiral John Fisher, had been a long term advocate of oil over coal, recognizing that oil meant less smoke, more power more quickly, less weight and fewer men, meaning that an oil-powered vessel had up to four times the range of a conventional coal-burner. As early as 1904, Fisher had pushed for Britain to secure its oil reserves, even as Anglo-Persia was surveying in Iran.

Churchill echoed the naval man’s sentiment; “in war, speed is everything” he noted. As a former cavalryman himself, the strategic significance of greater speed and range was immediately evident to Churchill.

They won their case in 1912, with the laying down of the first oil powered warship, the battleship Queen Elizabeth. From here on, Britain’s capability to wage war was dependent on its capacity to secure oil. Around the globe, great bunkers that had once housed coal began to accommodate a new fuel.

For Anglo-Persian, the decision was most opportune. While in its discovery phase, the company’s precursors had already come close to bankruptcy twice in its short life. The discovery of oil, which came right on the cusp of a decision by its backers to cut losses and pull out, proved a mixed blessing. They had oil, but nowhere to place it. But the confirmation of naval demand saw production in Persia leap from 1,600 b/d to 18,000 b/d between 1912 and 1914. In time, Anglo-Persian was contributing one fifth of the Royal Navy’s oil needs.

The company also acquired a new brand name to add to its catalog. Savvy German industrialists, backed by Deutsche Bank and looking to penetrate new markets at a time of heightened sensibilities, adopted a patriotic moniker for their UK fuel distribution operations. When war came, the company, its assets and its name — British Petroleum — were all seized. In due course, they passed to Anglo-Persian.

For Royal Dutch, the company under its executive Henri Deterding was alert to the change in naval power, and Anglo-Persian correctly identified them as a rival in the potential riches that military contracts could bring. The whiff of foreign ownership was enough to make it an occasional target of politicians and businessmen, including executives from Anglo-Persian and Churchill himself. But its UK history in the form of its “Shell” brand and its evident commitment to the war effort — one of the company’s key figures Marcus Samuel lost both his son and son-in-law during the war — ensured that there was no popular backlash.

The company itself underlined its early integration as Shell’s own corporate history acknowledges, becoming the sole supplier of aviation fuel to the Royal Flying Corp, the main supplier of fuel to the British Expeditionary Force and, from its petrochemical division, the supplier of 80% of the British Army’s TNT. The effort was enough to earn Deterding an honorary knighthood by the end of the war and Shell virtually occupying the position of quartermaster-general of oil.

When peace and the congress at Versailles came in 1919, as much as Europe tried to pretend otherwise, it was clear to see that the world had changed.
For Germany, its inability to deliver the knockout blow that would have prevented it fighting a war on two fronts was compounded by its inability to secure oil in the way the allies had. Every foray into east Europe to capture Romanian oil wealth was checked by Britain’s imperial forces, while Major T.E. Lawrence’s guerrilla campaign in the Arabian peninsula brought ever more of the oil-rich lands under British influence.

The fact was not lost on either side of the conflict; nor was the growing role of the US as a provider of that oil. Lord Curzon, one of Britain’s chief architects of foreign policy in the Middle East, famously summarized the war with the words ‘The Allies floated to victory on a wave of oil.”

By war’s end, 80% of the oil supply had been coming from the US; a further sign of the changing world around them. Here too lay seeds of discord, as America’s oil industry awoke to the huge potential reserves that Britain and France now sought to divide between themselves. Nor did either statement acknowledge the substantial human cost on both sides that had been the price of victory.

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Comments

  1. johnwerneken at August 17, 2014 2:49 pm

    Yep. Technology changes much faster than people do lol.

     
  2. kai lun at August 15, 2014 11:41 pm

    Great summary! Reminded me of Daniel Yergin’s The Prize. The irony is that we seem to be coming full circle, where shale is seemingly reducing global oil dependency on the middle East.

     

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