Rogue Nation: American Unilateralism and the Failure of Good Intentions (2003) (13 page)

The Texas Railroad Commission had been created in 1891 as a populist attempt to gain some control over monopolistic railroads. In 1931 it was also granted some power to regulate ‘physical waste’ in oil production. From that narrow base, through many difficult twists and turns, it came effectively to ration production and stabilize prices globally until the Saudi-led Organization of Petroleum Exporting Countries (OPEC) was established in 1960. In effect, the Texas Railroad Commission was the American OPEC of its day.

America’s massive supply of inexpensive energy powered it to global leadership. By 1913, the U.S. per capita income of $5,301 was well above the $4,921 of the then superpower Great Britain, and the United States had become the world’s largest producer of steel and many other key industrial products.
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For a moment in the 1880
s
, the oil industry had been thrown a scare when Thomas Edison’s electric light bulbs began to replace oil lamps. But the invention of the ‘horseless carriage’ in 1885 saved the day, and the growth of the automobile industry changed the face of America and the world. By the time of America’s entry into World War I, there were already 3.5 million autos on U.S. roads. This number grew to a bit more than 23 million by the end of 1929, when Americans owned 78 percent of all the autos in the world.
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Nor was the oil important only as an economic force. World War I began in 1914 with steam-powered trains carrying troops into battle and horses pulling artillery and supply wagons. It ended four years later with gasoline-powered British tanks crashing through German trenches, and German U boats choking for lack of diesel fuel. As the director of the French Comite General du Petrole put it, oil was ‘the blood of victory,’ and 80 percent of it came from the United States.
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More than the late entry of American troops, it was the early and continuous participation of American oil that gave the allies the victory.

If oil was a key part of the game in World War I, it was the whole game in World War II. As Japan pushed further into China in 1940, the United States debated whether to impose an embargo on the oil exports that were essential for Japan’s military machine, lest doing so only trigger a Japanese invasion of the Dutch East Indies to gain control of its oil fields. Finally, in July 1941, the Japanese takeover of Indochina resulted in a de facto embargo on July 25. From that point, the attack on Pearl Harbor and the war in the Pacific were only a matter of time. Even with the East Indian oil fields in their hands, however, the Japanese needed to move the stuff to their home islands. It was a long and vulnerable supply line, and Japan lost the war because it could not keep its oil tankers running. In the end, Japanese tankers were being sunk as fast as they were launched, and the Japanese fleet became inoperable for lack of fuel. The atomic bomb may have provided the coup de grace, but it was lack of oil that led to Japan’s defeat.

It was the same story in Europe. Hitler failed to take Moscow largely because he had to divert a large part of his forces in an attempt to capture the Baku oil fields that were essential to keep his entire war effort going. At the same time, the poor quality of the Russian roads caused the German forces to use twice as much fuel as initially estimated. They failed to get to Baku, and Hitler’s armies literally ran out of gas about twenty miles from Moscow.

In the Battle of the Bulge, his last-ditch effort to drive the allies back into the sea, Hitler again failed for lack of fuel. Indeed, once the U.S. and Great Britain managed in 1943 to defeat the Germans’ North Atlantic submarine fleet, which had been attacking the tanker convoys to England, the fate of the Axis was sealed. Oil flowed unopposed from America to power the allied forces. In all, the allies consumed about 7 billion barrels of oil to fight the war, and 6 billion of them came from America.
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When wartime gasoline rationing was lifted in the United States, shortly after Japan’s surrender, the cry of ‘fill ‘er up’ became the new national slogan. Between the end of the war in August 1945, and the end of 1950, U.S. auto sales, which had declined during the war, exploded as Americans began to create a whole new lifestyle.
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For three centuries Americans had built the country. Then for a decade and a half, through depression and then war, the country had scrimped and denied itself. Now it was time to enjoy the nation’s birthright of cheap energy.

BUBBA MORTGAGES HIS FREEDOM

F
latbush, Brooklyn, is a typical suburb, 1890
s
style. Built within a twenty-minute train ride from downtown Manhattan, it has short, straight blocks with sidewalks; close-set houses from whose verandahs neighbors can easily chat with one another; stores, schools, and train stations within easy walking distance. Cars are not really necessary and, in fact, only cause a nuisance by cluttering up the street. Flatbush was not built with automobiles in mind.

Americas post-war boom was largely driven by construction of a very different kind of suburb. New housing developments mushroomed far from central cities in what most people had thought of as the countryside. But the countryside grew a new kind of suburb, with long, curving blocks, no sidewalks, plots of half an acre or more, within walking distance of nowhere, and with no nearby shops or train stations. The houses started big and got bigger over time as family rooms, country kitchens, and dens became necessities. And, of course, these houses were completely climate controlled and stuffed with the latest electric appliances. In the ten years after the war, over 9 million people moved to suburbs like these, and by 1976 more Americans were living in the suburbs than in either rural towns or cities.
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All these people, of course, had to get their shopping done somewhere, and the suburban strip mall arose to answer the demand. Again it differed significantly from the old downtown business district. In place of rows of stores in several-story buildings fronting a common sidewalk, suburban zoning ordinances mandated clumps of low-rise shops in the middle of vast parking lots – frequently making it impractical to walk from one store to its next-door neighbor. Meanwhile, the face of downtown was changing too. With so many people living in suburbs, the central cities became compounds of high-rise office buildings. But these buildings were not the brick-and-stone structures of an earlier day. They were gleaming glass towers that acted as heat sinks in summer and ice boxes in winter and were made habitable only by the climate control systems enabled by cheap energy.

At first, the suburbs typically did not have large enough concentrations of people to justify the investment of a private rail line, and they were located beyond the jurisdiction of cities that might have installed public transportation systems. So the only way to get to and around them was by car. There was another factor at work. While private companies had to invest in, maintain, and pay taxes on railroad lines, roads were a public good provided by government. Along with home building, road construction became a boom industry. The prototype for all this was Los Angeles. There, a fledgling public transportation system was destroyed when a consortium of automobile, fuel, and tire companies bought up the streetcar companies, shut them down, tore up their tracks, and turned the streetcar routes into bus routes. The idea was to increase the market for buses, cars, tires, and fuel. It worked.

In 1947 California undertook to build a massive road system that would be interlinked into a whole regional network. New Jersey soon followed with the Garden State Parkway and New Jersey Turnpike, and most other states came along shortly afterward. In 1956, President Eisenhower inaugurated the granddaddy of all road projects by signing the Interstate Highway Act, which aimed to create a 41,000-mile national network of superhighways. The project was promoted primarily as a national security measure that would enable quick evacuation of cities in the event of atomic attack; it was, however, not the military but rather a vast array of lobbyists from the auto, oil, rubber, real estate, trucking, and parking industries who pushed it through. Eisenhower said it ‘would change the face of America,’
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and it did.

People not only moved their residences to the suburbs, they began to move their offices there as well. Increasing air travel made offices near airports attractive. Like roads, the airways and airports were built and maintained by the government, and travelers were turning in droves to the new jets that not only cut travel time dramatically but also cut prices as a result of their low fuel costs. Meanwhile, public transport and railroads dwindled as Americans took to the subsidized roads and skies.

By 1975 the country was designed and built to favor cars and airplanes over trains and buses, private transportation over public. Most of us lived in large, widely spaced houses far from our jobs, recreation, or any place else we might go. The lifestyle that cheap energy had given us was no longer a choice: The very architecture of the country demanded it.

The proximate cause of this transformation, the car, also metamorphosed. Because people spent so much time in their cars and saw them as an expression of their own personalities, the vehicles gradually became bigger, more powerful, and more luxurious. Tail fins and wraparound chrome bumpers adorned cars that grew to 25 feet in length. Automatic shift and air-conditioning became the standard, as did the V-8 engine with more than 250 horsepower. What difference did it make that by 1973 the average car got only 13 miles per gallon? Gas was no problem.

SHOCKS

A
ctually, it had been getting to be a problem for some time. As early as 1943, Interior Secretary Harold Ickes had written an article entitled ‘We’re Running Out of Oil!’ The discoveries of the 1920
s
and 1930
s
were not being repeated, and with consumption rising, it was inevitable that the United States would become a net importer. That situation materialized sooner than most expected – in 1948, when for the first time ever U.S. imports of oil exceeded exports.
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Not since the arrival of the first settlers in Jamestown had America been energy dependent. Now it was becoming so.

But aside from representing a historic change, the switch was not immediately of much concern. The Texas Railroad Commission maintained price stability by keeping actual production well below capacity. As a byproduct, this practice provided a surge capability in time of crisis. It was this surge capacity that had provided the margin of victory in both world wars, and from 1948 until the late 1960
s
, it remained at several million barrels a day. But consumption rose beyond all expectation, not only in the United States but around the world, as Europe and Japan recovered and other countries began to industrialize. Between 1960 and 1972, free world oil consumption climbed from 19 million barrels a day to more than 44 million barrels a day.
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In 1970, when U.S. production peaked at 11.3 million barrels per day, the surge capacity was down to 1 million barrels per day.
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From there it was all downhill. In 1971 the Railroad Commission authorized production at full capacity. Imports nevertheless rose rapidly, from a little more than 2 million barrels a day in 1967 to 6 million, more than 35 percent of U.S. consumption, by 1973.
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In 1968, the State Department had notified the Organization for Cooperation and Development (OECD) in Paris that in the event of a future crisis there would be no surge supply from the United States.
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The world and the United States were now heavily reliant on production from the Middle East, one of the most insecure regions in the world, and this reliance would only increase.

Although it had been known since ancient times, oil did not become a focus of commercial interest in the Middle East until 1900, when the impecunious Shah of Persia, in an attempt to shore up his ever-precarious financial condition, approached a retired British diplomat about the possibility of selling a concession for oil exploration in Persia. After many adventures, William Knox D’Arcy, a British entrepreneur who had made a fortune in gold mining in Australia, bought the concession and with financial backing from the British government brought in a gusher on the morning of May 26, 1908. In 1909, D’Arcy’s company made what a later generation of American entrepreneurs would call an ‘IPO’ (Initial Public Offering), going public as the Anglo-Persian Oil Company. As the British rivalry with Germany intensified over the next five years, the British government, at the strong urging of the young Winston Churchill, bet heavily on oil-fired naval vessels to replace coal-fired ships. Then in June 1914, His Majesty’s government bought 51 percent of the shares of Anglo-Persian. It turned out to be a wise purchase, for during the war that began in August of that year, the Anglo-Persian Oil Company came to produce 20 percent of the oil consumed by His Majesty’s fleet.
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The story of the discovery and development of the great Middle East oil fields is a fascinating and complex tale, too long to tell here in detail. Suffice it to say that after D’Arcy’s strike in Persia the race was on, and destitute Sheiks all over the Middle East suddenly became the objects of affection of western oil entrepreneurs in search of drilling concessions. Due to their imperial reach, the British got most of those in what became Iran, Iraq, and Kuwait. But they somehow managed to convince themselves there was no oil in the Arabian peninsula. Thus, when Standard Oil of California (Socal) went calling on King Ibn Saud for a drilling concession in Saudi Arabia, a British diplomat told the King, who was reluctant about having foreigners poking holes in his kingdom, to take the money because there was no oil and he could therefore get the money and the foreigners would soon be gone. But in March 1938, Damman N°7 well gushed, and the rest is history.