Oil Industry

Oil Industry
Oil Industry

Oil is an essential economic and strategic commodity. Oil power enabled the internal combustion engine to revolutionize industry, society, and the conduct of warfare in the twentieth century. Necessarily, the oil industry is one of the world’s largest industries, and plays a major political and economic role in many nations.

Conspiracy theories, however, hold that the oil industry secretly controls U.S. politics and foreign policy from behind the scenes. These theories reject conventional explanations for wars, terrorist attacks, and assassinations, and assert instead that these events were “really about oil.”

Actual Conspiracies

The oil industry has often behaved in a conspiratorial fashion. In the early 1870s, John D. Rockefeller resolved to monopolize the oil industry, and his Standard Oil Company soon controlled 90–95 percent of U.S. production and refining.

Standard derived considerable advantage from large size and superior organization, but also ruthlessly used espionage, price-cutting, intimidation, and bribery to destroy or absorb rivals.

Standard negotiated secret agreements with the railroads to charge Standard lower transportation rates than rival companies, and to pay Standard a percentage of every dollar the railroads charged Standard’s rivals.

Antitrust legislation, and the emergence of new sources of supply, ultimately prevented Standard from eliminating all competitors. However, the Rockefeller family amassed a vast fortune and political influence that persists even today.

In 1928, British, Dutch, and U.S. oil companies divided the Middle Eastern market and agreed to prevent overproduction, allocate quotas, fix prices, and deal jointly with outside producers. After World War II, the United States abrogated these agreements and secured an increased presence for U.S. companies in Saudi Arabia, Kuwait, and Iran. The U.S. Congress, Justice Department, and Federal Trade Commission investigated these agreements.

Consequently, in 1952 the Justice Department convened a grand jury to pursue civil and criminal antitrust charges against the oil companies. Ironically, even as the antitrust case progressed, the State Department was negotiating with Britain to create the cartel that controlled Iranian production and refining.

President Eisenhower wanted to use the oil industry to exclude Soviet influence from Iran, and this national security consideration trumped antitrust concerns. At length, the antitrust case petered out without significant result.

The Enron case is a recent example of a criminal conspiracy in the oil industry. After Enron went bankrupt in 2001, company officials were indicted on charges of fraud and money laundering. Other allegations included improper accounting, falsification of financial statements, and conspiracy to manipulate energy prices in California. The full extent of Enron’s political influence remains unknown, although several senior Bush administration officials have Enron connections.

Oil and U.S. Foreign Policy

Most historians agree that the U.S. government uses the oil companies as instruments of foreign policy. Conspiracy theorists, however, cite the above examples from the sordid history of the oil industry to support the argument that the U.S. government is an instrument of the oil companies. Such theorists insist that government policy (especially foreign policy) usually benefits the oil industry.

The theory that the oil industry exerts undue influence on U.S. politics and foreign policy emerges partly from the large number of government officials drawn from the so-called Eastern Establishment. The Eastern Establishment includes northeastern (especially New York) law firms, financial institutions, foundations, media corporations, Ivy League schools, and think tanks such as the Trilateral Commission and Council on Foreign Relations.

Conspiracy theorists contend that “the Rockefellers” (a term synonymous with the oil industry) control the Eastern Establishment, and thereby control the government. The secretary of state, in particular, has always been a member of the Rockefeller faction since World War II, as have many CIA directors.

Conspiracy theories maintain that Middle Eastern coups and wars are manufactured in Washington to increase U.S. hegemony over the region’s oil. Daniel Pipes shows that such theories are strongly held in Middle Eastern countries themselves.

Even responsible national leaders fear that the CIA will overthrow them at the behest of the oil industry, or that Israel and western countries will conspire to attack them for reasons related to oil. (Of course, such a coup actually occurred in Iran in 1953, and Britain, France, and Israel indeed conspired to attack Egypt in 1956.)

Conspiracy theorists contend that the Yom Kippur War, the Iran-Iraq War, the Gulf War, and the current “War on Terrorism” all resulted from U.S. manipulation and were intended to benefit the U.S. oil industry.

In 1967, Israel inflicted a crushing defeat on Egypt, Jordan, and Syria. The Arabs rearmed, and attempted to recapture their lost territories on Yom Kippur in 1973. Arab armies made initial progress until Israel counterattacked. OPEC oil producers embargoed the United States, Portugal, the Netherlands, and South Africa for their support of Israel, and oil prices skyrocketed.

Conspiracy theorists argue that then-Secretary of State Henry Kissinger (the Rockefellers’ principal pawn) engineered this war in order to raise oil prices as part of his strategy of détente. The price increase rewarded the Soviet Union (an oil producer) and punished America’s principal economic competitors (Europe and Japan), who were more dependent on Middle Eastern oil than the United States.

Supposedly, Kissinger told the Arabs that the United States could not induce Israel to begin the “peace process” until the Arabs scored a victory on the battlefield. Moreover, Kissinger restrained Israel from launching a preemptive strike before the Arabs attacked.

In 1979, growing unrest in Iran led to the overthrow of the shah and the rise of an Islamic fundamentalist regime, which seized the U.S. embassy in Tehran. The humiliating hostage crisis, and the Soviet invasion of Afghanistan, triggered a spike in oil prices, and contributed to Ronald Reagan’s electoral victory in 1980.

Just before the election, Saddam Hussein’s Iraq tried to seize Iran’s oilfields, leading to eight years of bloody, indecisive warfare. These events provoked many conspiracy theories. The shah himself believed that foreign conspirators overthrew him, at times naming the oil companies as his nemesis.

Many Iranians still believe the CIA ousted the shah. Some contend that the Reagan campaign conspired with Khomeini to ensure that the embassy hostages were not released before the 1980 election (known as “the October Surprise”).

Other theories insist that Washington wanted high oil prices in 1979 in order to slow European and Japanese economic growth vis-à-vis the United States. Part of this reprise of the 1973 strategy was President Carter’s “green light” for Saddam to attack Iran.

Carter and the oil industry hoped that Saddam’s attack would bring Iranian oil under the control of a de facto ally, and would force Iran to cooperate with Washington, since the Iranian military depended on U.S. equipment.

Carter also hoped this pressure would lead to the overthrow of Khomeini and the release of U.S. hostages before the 1980 elections. Proponents of this alternative “October Surprise” theory observe that the United States “tilted” toward Iraq from early 1980 until early 1990.

Some authors argue that Washington manipulated oil prices downward in the 1980s in order to bankrupt the Soviet Union. To reward cooperative Soviet policies after 1989, however, Washington decided to use Iraq to raise the price of oil.

In July 1990, the U.S. ambassador to Iraq told Saddam Hussein that the United States had “no opinion” on Iraq’s border dispute with Kuwait. Conspiracy theorists consider this a U.S. “green light” for Saddam’s invasion of Kuwait in August 1990. The “green light” was a deliberate trap—the U.S. never intended to permit Saddam to keep Kuwait.

Instead, the U.S. intended to use the resulting crisis and war to increase the price of oil and to introduce major military forces into Saudi Arabia and neighboring oil-rich states, where they remain to this day. The oil industry further profited from the rebuilding of Kuwait after the war.

Conspiracy theorists cite the connections between President Bush, administration officials such as then Defense Secretary Cheney, and the oil industry to support the claim that the 1991 Gulf War was “really” about oil. Such theorists again cite the connections between President George W. Bush, Vice-President Cheney, other administration officials, and the oil industry to support their views of the September 11 terrorist attacks and their aftermath.

The conspiracy view of September 11 is that the Bush administration knew the attacks were coming, but deliberately let them happen to provide a pretext for military aggression. The “War on Terrorism” is thus a fig leaf to cover the “real” U.S. agenda—to control Central Asian oil resources and the potential pipeline routes through Afghanistan and Pakistan.

Allegedly, the United States initially backed the vicious Taliban regime in Afghanistan because the Taliban were receptive to pipeline construction. However, pipeline negotiations failed in 1998, and the United States then began to subvert the Taliban. After September 11, the United States simply executed a long-prepared plan for an invasion of Afghanistan.

The increased U.S. military presence in Central Asia and the Saudi peninsula allowed the U.S. to tighten its grip on the region’s oil, and to prepare for an invasion of Iraq. Conspiracy theorists believed that if the U.S. invaded Iraq, the “real” objective would have been to allow U.S. oil companies to exploit idle Iraqi oilfields.