they became cheaper. The Volkswagen was the symbol of Germany’s economic recovery, quite soon putting even the great British makers almost out of business. Cheap transport of course allowed manufacturers to drop their costs, at least relative to other goods, and at the same time allowed ordinary consumers to spend on something else the money that they saved on travel. Besides, an automobile industry was very productive of other jobs — maintenance, spare parts, garages, roadside restaurants and hairdressers, and on and on.
The Americans had a very strong hand as regards oil. In the first place, their own reserves were very large. If any effort had been made to put up the world price the Americans would just flood the markets and bring the price down. Then again, oil technology was expensive and very demanding; there was a large investment to be made, and there had to be excellent teamwork, with first-rate management, itself of course expensive, and the Anglo- Americans in that respect were irreplaceable. Just how vital such things were was shown in the 1930s. Mexico had oil; she acquired a revolutionary government that was hostile to the USA. It nationalized oil, offering insultingly low compensation to the American owners. Nationalized oil did not thrive. Men were appointed for political reasons, the state invested in misguided and sometimes corrupt ways, and the labour union was spoiled — too many employees, paid too much. The result was that Mexican oil could not easily compete on the world markets, and the employees (inflation having taken its cull of real value) ended up worse off than they had been before nationalization. The example taught Venezuela (for now), the other great Latin American producer, to behave more prudently: the State, there, took just a fifty-fifty share of the profits. In the Middle East, local rulers were persuaded without much difficulty that they should co-operate with British and American oil firms — in Iran, a nationalist who sought more, Mohammad Mossadegh, was expelled by a coup in which the Shah co-operated with the British and the CIA; Anglo- Iranian thereafter held 40 per cent of the oil, and in Saudi Arabia there were no problems at all, as oil installations spread over the desert, and local rulers who had started off with camels and tents suddenly found themselves rich.
In the later 1950s oil entered a new era. The supply grew from 8.7 million barrels per day in 1948 to 42 million in 1972. American output almost doubled (to 9.2 million barrels) but its share fell from two thirds to one fifth, whereas Middle East output rose from a million barrels to 20 million. Known oil reserves showed the same pattern — the American share falling from one third to 10 per cent (38 million barrels, to the Middle East’s 367 million). The Shah became greedy, and wanted Iran to be a ‘great power’. An ambitious Italian proved willing to take only 25 per cent of the profit, whereas the Anglo-American share had been 50 per cent (the ‘seven sisters’ were Exxon, Chevron, Mobil and Texaco, with the British Gulf, BP and Royal Dutch-Shell). The Japanese also indicated to Saudi Arabia that they would take less than half (though defining ‘profit’ after various expenses was not easy). In 1958 Nasser at least in theory united Egypt and Syria, thus controlling the Suez and Mediterranean pipeline routes for oil; and that year there was a coup in Iraq, when the king was overthrown and his prime minister was lynched, his body hauled through the streets of Baghdad and flattened to a pulp as a car was driven back and forth over it. Arabs began now to talk about what they might do to expand their control, and use it against Israel. At that point, an angry Venezuelan took a hand. He had been embittered by American support for an army dictatorship, had spent years of impoverished exile, and had finally left the USA for Mexico because he did not want his children to be Americanized. In 1959, in charge of oil, he had asked the Americans for preferential treatment: Venezuelan oil cost much more to produce than Middle Eastern oil (80 cents per barrel to 25) but it had a strategic location. This time, the Americans refused — they were protecting their own, and anyway gave preferential treatment to Canada and Mexico. The Venezuelan then went to the Middle East and discovered that the Saudi expert had done his training in Texas, and had been taken for a Mexican and sometimes refused entrance to hotels. At the time, oil prices were naturally falling, as supply grew. The companies had been absorbing the trouble out of their own profits, and not passing any of the load back to the states, through lessened royalties. At this point the USSR entered the field, doubling oil production in the later fifties and displacing Venezuela as second-largest oil producer. Soviet oil was also cheap — at Odessa, one half the Middle Eastern price. The oil companies now said that the states should take some of the load, or allow cutbacks in volume. There was much rage: when Standard Oil high-handedly announced a price cut, Venezuela took up an alliance with the Saudis; the Shah sympathized; and the Iraqis, though they were rivals of Nasser’s Egypt, also came in. In 1960 OPEC was set up, the ‘Organization of Petroleum Exporting Countries’. The five founding members controlled 80 per cent of crude oil exports.
Sixties prosperity in the West nevertheless went ahead, and oil became cheaper and cheaper — by 36 cents per barrel. From 1960 to 1969 the price fell by one fifth, or, in value, two fifths, because of general inflation in the decade. This was because supply, and variety, greatly increased. There was now a large Algerian field, which the French, when recognizing that country’s independence at Evian in 1962, cornered. Libya turned out to have reserves of high-quality oil that could easily be converted for aircraft and for low-sulphur-content crude oil which suited the now emerging ‘green’ concerns. Libya by 1965 had become the sixth-largest exporter, producing over 3 million barrels per day in 1970. Meanwhile, American policy was in disarray: the companies could probably not cut back production without infringing anti-trust laws, and the government behaved bewilderingly, preventing tankers from importing oil but allowing trucks to do so. The tankers therefore arrived and deposited the oil in trucks, which went over the border and then turned back again over it, to avoid tariffs. This decisively discouraged oil prospecting. The system of protection depended upon oil companies each adhering to a limited quota, as regulated by the government, and such quotas belonged only in a world of potential oil glut. That world had gone.
But the Western world, America in the lead, deserved such mismanagement, because it was becoming extraordinarily self-indulgent — in Shakespeare’s words, like rats that ravin down their proper bane (‘and so we drink, we die’). From 1948 to 1972 American consumption trebled, to 16.4 million barrels every day. In western Europe it went up fifteen times, to 14.1 million and in Japan to 4.4 million. Housing was put up with hardly a concern for fuel economy: centrally heated, air conditioned and above all dependent on motor cars — of which the USA was the prime example, the 45 million of 1949 becoming the 119 million of 1972. There was also a new petrochemicals industry, which produced plastics of ever greater sophistication (coal had been at the start of this: in the 1890s, a great Belgian industrialist, Ernest Solvay, had made his fortune by using by-products of coal to produce the first plastic, Bakelite, named after its Belgian-born inventor, Leo H. Baekeland). There was a proliferation of gigantic-scale technology, producing larger jet aircraft and ever larger tankers; petrol stations and motels multiplied, turning more and more of the Western world into a huge version of the ‘ribbon development’, the bland snaking of ugly roadsides, of which Orwell had complained in the later 1930s. In
It had an indestructible relationship with motor cars; in 1948, in California, two brothers found that food could be produced by the same very simplified assembly line methods that had given the American war economy such triumphs, and after 1954 ‘fast food’ took off. This had feedback effects on agriculture, as cows could now be bred that grew more meat more quickly per hoof — the tower block of beef. Puritans complained that Americans were becoming obese — sitting in motor cars, eating fatty fast food, and then sitting in front of televisions. The Eisenhower years saw a great burst of motorway construction, beginning with the Los Angeles Freeway in 1947; in 1956 came the funding for an interstate network, and the claim was made, with perverse pride, that the concrete involved would have produced eighty enormous dams.
There was a further problem for energy consumption, with the emergence of Japan as a great economy. By 1960, Japan — where firewood had been more important than oil — had become a major consumer; it went together with an extraordinary exporting drive, with the economy growing at over 10 per cent per annum. In 1955 the Japanese had made 70,000 cars, but in 1968 the figure was 4.1 million. Huge Japanese tankers, of 300,000 tons, were now being built. There was an alarm in 1967, at the time of the Six Day War between Israel and Egypt, but at the time the Arab countries were desperate for oil money and attempts at an oil embargo on the West failed; in any case, the Shah, now obsequiously courted by the Americans, would not join it, and rivalries between the various producer states meant that no serious co-operation was possible. Still, the hourglass was running out; and one sign that the West would be badly caught out occurred in 1971, when the British withdrew their forces from the Gulf. This saved a small sum — $20m — and opened up Kuwait, especially, to threats from neighbours. It was — with severe competition — the silliest decision made by a British government of that era.
Various other factors came into play. The first was the weirdness of American policy. Oil had been protected against cheap imports, because it was a strategic commodity, and under Harold Ickes there had been sensible regulation — reserves were created, from the surplus, and in the war crises of 1951, 1956 (Suez) and 1967 the reserves had been used, to offset interruptions in supply and keep prices down. From 1957 to 1963 the surplus had amounted to 4 million barrels per day. However, the artificially high price, through protective tariffs, of imported oil
