Saturday, October 03, 2009

The Prize by Daniel Yergin

The Prize is one of the best non-fiction books I have read in years. The book follows the ups and downs, in and outs of the oil industry from birth to the early 90s. It is truly amazing to read about the machinations of the early titans of the industry. If you look around you will still see the early companies like Shell, Exxon, Marathon, etc. The story of Shell is truly amazing. It's also interesting to read how global exploration gave riches to some countries that had previously been backwater areas of the globe. It's an insider account with a huge broad view of the geopolitical effects of oil-energy. I knew of its importance in WW2, but I had no clue that oil was also a player in WW1.

The story of Iran, its relationship with the West and the Shahs is a wonderful thread throughout the book. The Brits struck it big in Iran and made the Shahs wealthy & able to 'modernize' their country. There was always the fear of the Russians/Soviets making a push into Iran for a warm water ocean port, and oil raised the stakes. The Brits and the Shah had an interesting relationship, and with the UK's withdrawal stage, the USA took their spot, but not entirely as the Brits still received the oil. The USA helped the idiot Shah's son stay in power (I need to find a good book on the coup of '53). The USA viewed him as a regional policeman (along with Saudi Arabia (S.A.)). No country better exemplifies the tug of war with oil 'rents', concessions, nationalism, and the danger oil riches can pose to oil exporting nations.

There were some funny moments and good lessons. The Venezuelan oil minister that viewed oil as a corrupting force that could go to waste was a good figure to read about who wanted to use oil as a way to help his country. The Mexican nationalization of the oil industry prior to WW2 hovered over the oil companies as a spectre for years and affected how they dealt with producing nations. It also explains how PEMEX, the national Mexican oil company, has seen the Cantarell field decline rapidly partly from not allowing American oil companies to help manage the field. Those pesky Anglo companies exploit those innocent oil producing nations grrrr. The S.A. correctly doubted the threat of nuclear energy replacing oil. They knew the difference between electricity generation and transportation fuels. The catfights between the OPEC countries, especially Iran-S.A, read like teenage boys fighting over the conch in Lord of the Flies. Congress investigating and attacking oil companies every other decade was very very funny as there is this theme of windfall, obscene, unethical profits that seems to pop up in politicians' speeches whenever oil jumps in price. American independents, wildcatting, and the random Texans all gave me a chuckle.

The saddest thing to read is how the random luck of living on top of a resource that the modern world values has enabled complete psychos to have greater influence than they should have. Should Chavez be a force in South America? No way, but he is an oil exporter (who has hurt his nation's oil production through bizarre loyalty oath requirements) that generates income for his country through geographic luck and price spikes. The Soviet Union was kept on life support longer because of the huge currency earnings they made from their oil exports in the 1970s (similar to today). Same applies to the Middle East and the autocrats and thugs that rule there. These states usually concentrate the oil wealth in the ruling elite or royal family rather than through oil revenue sharing programs like in Alaska & Norway (hopefully also in Iraq soon). This new book, albeit with a strong slant to every interview, does show the dark side of oil's impact. This is one of the reasons why I am all for reducing, not eliminating, oil's role in the total energy pie.

Despite wandering off topic, I highly recommend this book. If someone were writing a paper on Cold War dynamics or ways in which the USA fought the Soviets through non-military avenues, they should check sections of this book out. Any paper on the future of energy, energy investment, and how to tackle oil would see a benefit from reading parts of this book. Energy exploration and investment has a long term look to it, as things are more complicated than flicking a switch and producing more or less.

More oil found in Bakken area. Could add billions to reserve estimates, which could prove the dead geologist who estimated upwards of 30-40 billion in reserves there to not be such a crackpot.

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