PART III

THE WORLD-STRUGGLE

FOR OIL

_Some_ BORZOI _Books_

_Midwinter, 1924_

SOCIOLOGY AND POLITICAL THEORY

_Harry Elmer Barnes_

THE OLD AND THE NEW GERMANY

_John Firman Coar_

THE BASIS OF SOCIAL THEORY

_Albert G.A. Balz_

ESSAYS IN ECONOMIC THEORY

_Simon Nelson Patten_

THE TREND OF ECONOMICS

_Various Writers_

THE FABRIC OF EUROPE

_Harold Stannard_

THE WORLD-STRUGGLE

FOR OIL

_Translated from the French of_

Pierre l'Espagnol de la Tramerye

_by_ C. LEONARD LEESE

[Illustration]

NEW YORK ALFRED · A · KNOPF MCMXXIV

COPYRIGHT, 1924, BY ALFRED A. KNOPF, INC.

_Published, February, 1924_

_Set up, electrotyped, and printed by the Vail-Ballou Press, Inc.,

Binghamton, N.Y._

_Paper furnished by W.F. Etherington & Co., New York._

_Bound by H. Wolff Estate, New York._

MANUFACTURED IN THE UNITED STATES OF AMERICA

CONTENTS

PART I. The World's Oil.

Chap. I. "Who Has Oil Has Empire!" 9

II. Oil: Its Origin, Discovery, and History 21

III. Amazing Increase in Consumption:

Fears of the United States 34

PART II. The Struggle of the Trusts.

Chap. IV. The _Standard Oil Company_ 45

V. The _Royal Dutch-Shell_ 59

VI. The Oil World's Napoleon: Henry

Deterding 84

PART III. The Struggle between the Powers.

Chap. VII. The _Europeanische Petroleum Union_: a

German Trust for the Control of

European Oil which founders in

the Great World Conflict 97

VIII. The War and Oil 101

IX. An Imperialism not without Greatness 110

X. The Struggle between Great Britain and

the United States in Mexico 113

XI. A State-subsidised Company: the

_Anglo-Persian_ 129

XII. An American Balkanism: the _British

Controlled Oil-fields_ 143

XIII. Political Tendencies of the Royal-Dutch:

the British Oil Empire 147

XIV. How the United States lost Supremacy

over Oil 151

XV. The American Retort 178

XVI. From Washington to Genoa: the Struggle

for the Oil-fields of Russia 184

PART IV. France's Part in the Struggle between

Great Britain and the United States.

Chap. XVII. The Cartel of Ten 201

XVIII. The Petroleum Consortium 207

XIX. How Great Britain Succeeded in Winning

France over to Her Side in the

Struggle with the United States 215

XX. Great Britain and the Oil-fields of the

French Colonial Empire 234

XXI. The _Standard_ and France 239

XXII. Conclusion: the World in 1923 244

PART I

THE WORLD'S OIL

CHAPTER I

"WHO HAS OIL HAS EMPIRE!"

The question of oil has become one of the most vital in all countries.

Its importance is such that even the most solid political alliances

are subordinate to it. The Great Powers have all an "oil policy." The

United States, where the most powerful trust is an oil trust--the

_Standard Oil Company_--the United States, which control 70 per cent.

of the oil production of the world, have decided not to leave the

question to private initiative alone, but to start a vigorous oil

policy both at home and abroad. The American Senate recently decided

to create the "United States Oil Corporation to develop new petroleum

fields," while Mr. Bedford, Chairman of the Board of Directors of the

_Standard Oil Company_, asked the Government to lend its support to any

Americans who were soliciting oil concessions throughout the world.

This support, which even Wilson--hostile to trusts as he was--did not

refuse, was granted very energetically by Mr. Harding: three European

States have just had experience of it.

Britain, with her usual foresight, understood long ago the importance

of oil, and took the necessary action. In the work of exploration alone

she is at the present moment spending considerable sums, and she will

soon have nearly all the remaining oil-fields of the world in her hands.

France alone remains behind, hesitates, changes her mind, and allows

herself to be despoiled, not only of the region of Mosul, one of the

richest oil-fields of the world, which was formally promised to her by

the Agreements of 1916, but also of the few modest oil deposits which

she possesses in her colonies. For these are almost all exploited by

British firms; and by the Agreement of San Remo the French Government

has, in addition, promised to reserve a large share for "British

co-operation" in new companies which may be established there.

"Who has oil has Empire!" exclaimed Henry Bérenger, in a diplomatic

note which he sent to Clemenceau on December 12, 1919, on the eve of

the Franco-British conferences held in London to consider the future

of Eastern Europe and Asia Minor. "Control of the ocean by heavy oils,

control of the air by highly refined oils, and of the land by petrol

and illuminating oils. Empire of the World through the financial

power attaching to a substance more precious, more penetrating, more

influential in the world than gold itself!" The nation which controls

this precious fuel will see the wealth of the rest of the world

flowing towards it. The ships of other nations will soon be unable

to sail without recourse to its stores of oil. Should it create a

powerful merchant fleet, it becomes at once mistress of ocean trade.

Now, the nation which obtains the world's carrying trade takes toll

from all those whose goods it carries, and so has abundant capital.

New industries arise round its ports, its banks become clearing houses

for international payments. At one stroke the controlling centre of

the world's credit is displaced. This is what happened already in the

eighteenth century when, with the development of British shipping, it

passed from Amsterdam to London. And British statesmen have had, at one

time, a moment of anxiety lest it should move to New York!

Thus began the terrible struggle between Britain and the United States

for possession of the precious "rock-oil."

"The country which dominates by means of oil," said Elliot Alves, head

of the _British Controlled Oil-fields_, a semi-official, semi-private

organization, which the British Government has specially commissioned

to fight the _Standard Oil Company_, "will command at the same time the

commerce of the world. Armies, navies, money, even entire populations,

will count as nothing against the lack of oil."

The War proved it.

* * * * *

Whence does oil derive this formidable power, before which the whole

world bows down? From the fact that the fundamental basis upon which

the industrial life of modern nations rests is fuel. Before the War,

Germany, Britain, and the United States owed the whole of their power

and their wealth to coal. It would have been true to say that the

British Empire rested upon a foundation of coal.

It is essential to have control over fuel in time of peace for economic

prosperity, and in time of war to supply the navy and maintain control

of the seas.

Now oil has considerable advantages over coal. Its extraction is

remarkably easy compared with that of coal. What is the boring of a

well and the installation of some simple machinery on the surface

compared with the expensive subterranean workings which are involved

in the exploitation of a coal-mine? An oil-boring before the War

cost a few hundred thousand francs, while the simplest workings for

a colliery always necessitated an expenditure of several millions.

The installations once made, oil flows by itself into the reservoirs,

whence it is conducted by pipe-lines to the sea-ports and there pumped

into the ships. It may be refined before exportation or only on arrival

in the country where it is to be consumed. The expenditure upon

labour in these various operations is extremely small, especially in

undeveloped countries where native labour is employed. Thus, even at

the present time, in the Dutch Indies the coolies are paid a florin

a day. Now at the end of the War the employés of the _Royal Dutch_

in the Dutch Indies numbered only 1,000 Europeans and 2,906 natives

and Chinese for a production of 1,706,675 tons. A native earned only

300 gold francs a year for 80 tons of oil extracted, refined and

transported to the coast.

After the Bolshevik revolution wages at Grosny were still only seven

roubles a day, which, considering the depreciation of Russian money,

represented very little. Generally the expenses of production in

Russia did not exceed a few kopecks a pood (50 kopecks for one of the

best-known firms, that of Akverdoff).

Thus oil is bound to become in future more and more important as a

fuel, because of its peculiarity in necessitating so insignificant a

charge for labour--which protects it from the inconveniences resulting

from the social crises in the midst of which we live--and because its

net cost is so small. For half a century it was used only for lighting

purposes, and then it had to compete with gas and electricity. At one

time there was talk of limiting production!

Between 1900 and 1910 the invention of the internal-combustion engine

and the enormous development of motoring gave it new impetus. Fine oils

only had been used up to then. Under pressure of the demand, it became

customary to raise and refine poorer and poorer oils, giving from 60 to

75 per cent. of waste products.

There remained the mazut[1] or fuel-oil, which required very high

temperatures for combustion and which was very dirty in use.

Then the German, Diesel, invented the internal-combustion engine

for heavy oil. The mazut, subjected to high pressure in a cylinder,

produces an explosive mixture which, without sparking-plug or magneto,

drives the pistons in the manner of a petrol engine. The installation

is rather heavy, but no boiler is required, and it takes up much less

space than a steam engine of the same power. A vessel fitted with a

Diesel engine can sail for fifty-seven days without re-fuelling, while

with a steam engine it could only sail for a fortnight. A ship fitted

with a Diesel engine and having a speed of 20 knots could sail from

France to Suez, India, Australia, New Zealand, and return by Cape Horn

without re-fuelling. But, better than any words, the following little

table, made out for two boats of the same power, will give an idea of

the great advantages of the Diesel engine:--

--------------------------+--------------+---------------

| Diesel. | Steam.

--------------------------+--------------+---------------

H.P. | 21,000 | 21,000

Weight of engine and | |

accessories | 1,000 tons | 3,400 tons

Space required | 5,300 cu. m. | 10,000 cu. m.

Daily consumption | 100 tons | 360 tons

| (heavy oil) | (coal)

Consumption for a voyage | |

of 15 days | 1,500 tons | 5,400 tons

Bunker space for a voyage | |

of 15 days | 1,700 cu. m. | 7,000 cu. m.

Total space required for | |

engine and fuel | 7,000 cu. m. | 17,000 cu. m.

--------------------------+--------------+---------------

At first oil was used on fishing boats, then on small coasters. To-day

the biggest British cargo boats, of the type of the _Zeelandia_ or

_Sutlandia_, are fitted with Diesel engines. All German submarines

had them during the War. In 1917 Herr Ballin,[2] the great friend of

William II and the head of the _Hamburg-Amerika_ line, just before his

suicide decided on the construction of a fleet of enormous ships fitted

with internal-combustion engines. Scandinavia, Holland, Italy, all now

use the Diesel engine. France alone remains behind in this respect. It

has even been used on railways, a little-known fact. Diesel locomotives

with four cylinders, built by Sulzer Brothers of Winterthur, have

recently been run on the line from Berlin to Mannsfeld.

"The development of our metallurgy," wrote Admiral Degouy in April

1920, "will soon give us the assurance that we also shall be able to

manufacture large-bore cylinders and pistons of flawless casting,

like those made in Augsburg, Nuremberg, Stockholm, and Christiania,

which will support for long periods without change (and consequently

without leakage) the temperature of 1,000° C. which is developed by the

combustion of mazut in these engines."

Since the invention of the internal-combustion engine, mazut has been

introduced directly into the furnaces of great ships. The heating power

of this formerly despised product is almost double that of coal: 1

kilogramme of liquid fuel produces the same results as 1.7 kilogrammes

of coal. Its use allows of the reduction by five-eighths in bunker

space, and by 70 to 80 per cent. of the stokers, since a single man can

look after several boilers. The fuelling of a ship is effected cleanly

and quietly in a few hours. Hundreds of tons of oil can be pumped into

the cisterns in a negligible time, and that even out at sea and in

heavy weather. To give an idea of the difference in time and labour

required for the loading of coal and oil before the sailing of a mail

steamer of the tonnage of the _Olympic_ or the _Lusitania_, I will

quote the following figures:--

Coal 5 days 500 men

Oil 12 hours 12 men

The labour of stoking and clearing the furnaces is done away with;

there is no longer either dust or smoke. Parts of the ship which are

too restricted or too inconveniently placed for housing coal can be

used for oil. It is stored in the double bottom of the boat, and by

utilizing the coal bunkers for general cargo the available storage

space is increased by 10 per cent. On the latest _Cunard_ and _White

Star_ liners the economy of space thus realized has been as much as 33

per cent. And Admiral Lord Fisher drew attention to the fact that on

the _Mauretania_--the sister ship to the _Lusitania_--the adoption of

oil fuel allowed of the reduction of the crew by three hundred men.

The efficiency of a boiler heated by coal is not much more than 60

per cent.; that of one heated by oil reaches 80 per cent. On Japanese

steamers of the type of the _Temyo Maru_, of 21,000 tons, with Parsons

turbines of 20,000 horse-power, the consumption of oil is only 455

grammes to one effective horse-power, instead of 685 grammes of coal.

The flexibility and ease of control are extraordinary.

Since 1911 the merchant fleet of the United States has been consuming

15 million barrels annually. Nearly all the nations have followed

this example,[3] especially those which dream of the dominion of the

seas for the use of oil in their warships gives them an incontestable

superiority. The presence of a squadron sailing under coal is disclosed

at a distance of more than 10 kilometres by enormous clouds of smoke;

under oil its presence is almost imperceptible; it becomes visible

only at the moment when it is about to attack. Ease of approach is

enormously increased; and even if an enemy vessel is discovered by

marine or aerial scouts it is very difficult for the gunners of the

threatened vessel to take their aim at so vague a target as an almost

invisible horizontal silhouette. "No smoke, not even a funnel!"

exclaimed Lord Fisher in his strenuous campaign for the transformation

of the British Navy. Many years elapsed, however, before he saw the

triumph of the new fuel.

It has been objected that ships lose a little of the protection which

is conferred upon them by their belts of coal bunkers; but this

criticism is valueless. For, as they gain considerably in lightness,

it is possible to increase the thickness of the armour plate and the

size of the guns. The abolition of funnels permits of a considerable

increase in the field of fire of the artillery.

Moreover, with oil fuel fleets acquire an extreme mobility.[4] Half

an hour after receiving the order to raise steam the ship is ready to

start. Thirty-five minutes afterwards it is going at full speed. In six

minutes it can pass from normal to maximum speed. Eleven minutes are

needed to get a boiler under full pressure. A voyage at forced speed

entails no extra fatigue for the crew: with coal it is hell!

Thus, since 1912, oil has been constantly used on twenty-eight German

battleships, almost the whole of the fleets of Great Britain and the

United States, and the Russian squadrons in the Baltic and the Black

Sea. _The American Navy has completely abandoned coal for its new

units._

And France? France, which was the first to conceive the idea, had, at

the moment when war broke out, only a few small boats burning oil,

and not a single powerful modern vessel comparable with the _Queen

Elizabeth_. And yet, as early as 1864, it was France that built the

first ship, the _Puebla_, sailing under Lieutenant Farcy, to use the

new fuel, which aroused so much curiosity during the Second Empire.

But the selfish opposition of our coal-owners overcame those who were

favourably inclined, including Napoleon III himself.

No one gives a thought to these facts at the present time. France often

points the way of progress; she never profits by it.

* * * * *

The most far-reaching revolutions have begun with a technical

invention. The unknown monk who first mixed charcoal with sulphur and

saltpetre razed feudal castles and created the great modern States. And

he who balanced a magnetized needle on its pivot was the real founder

of colonial empires.

We are just entering upon an economic period which will turn the whole

world upside-down--the Revolution in Fuel, with its far-reaching

consequences.

FOOTNOTES:

[Footnote 1: "The famous petroleum wells of Baku ... yield crude

naphtha, from which the petroleum or kerosene is distilled; while

the heavier residue (_mazut_) is used as lubricating oil and

for fuel."--_Encyclopaedia Britannica_, 11th ed., vol. iii, p.

230.--TRANSLATOR'S NOTE.]

[Footnote 2: "Herr Ballin committed suicide, foreseeing that

unrestricted submarine warfare, which had then been decided upon, would

be the downfall of Germany."--_Revue des Deux Mondes_: Contre-Admiral

Degouy, "Oil and the Navy."]

[Footnote 3: Since 1920 the world tonnage of oil-burning steamers has

exceeded that of steamers built to burn coal.]

[Footnote 4: At the battle of Jutland, only the oil-burning ships

realized their trial speed.]

CHAPTER II

OIL: ITS ORIGIN, DISCOVERY, AND HISTORY

The Great Producing States before 1914 and in 1921

Oil is found naturally in different forms. Sometimes it occurs as a

volatile liquid at ordinary temperatures; it is then known as naphtha.

Sometimes the volatile principles are only given off at higher

temperatures; it is then called petroleum or rock-oil. Sometimes also

it appears in a semi-solid form, asphalt, its volatile properties

having already evaporated.

It is very rarely that oil is found on the surface or gushing up by

itself without the help of pumps. It is usually met with at a great

depth underground, in pockets in which oil and gas are found above

water. Thus, in order to detect its presence, it is necessary to make

borings. When one reaches a pocket in the neighbourhood of the gas,

the latter escapes by the outlet which is offered. If the boring first

reaches oil, and if the pressure of gas is sufficient, the oil gushes

out and forms a spring. This is what happened in the Caucasus, where

certain wells spouted up to a height of eighty metres through the

borings made by the prospectors. More often the gas pressure is not

sufficient to raise the liquid to the surface, and it is necessary to

install pumps driven by steam to empty the pocket. At the time of the

boring, when the cylindrical metal drill, driven vertically by a metal

cable and held vertical by the derrick (a sort of pyramidal framework

of metal), reaches the deposit, the gas which has been accumulating for

thousands of years escapes, driving, pushing, sucking up the oil, and

making a fountain, a gusher, a sort of artesian well. The oil is led

away in metal pipes, vertical till they reach the surface, horizontal

to the refineries, ports, or other destinations. Once the well is

capped, it is not touched again; it is alone in the desert, and only a

metre records its daily output, while hundreds of thousands of men are

obliged to work underground to wrest coal from the bowels of the earth

by the strength of their arms!

The depth of the wells varies from 200 to 1,600 metres, according to

the region. The duration of the flow is essentially variable, depending

upon the magnitude of the deposit of oil. But it goes without saying

that when a spring has flowed for seven years more or less, like the

first one exploited by the _Mexican Eagle_, it gives out, yielding

salt water. The fact is quite ordinary, and is known in all competent

circles, although it is sometimes brandished as a warning by interested

people in order to lower the value of certain oil shares. One often

hears of "pools," "rivers," or "veritable lakes of oil." These

expressions are most inaccurate. Apart from certain exceptions, such

as the famous well of the _Colombia_ in Rumania in 1913, the deposits

of oil are neither rivers nor pools. They are _actually solid layers

of sandstone, often very hard, impregnated, saturated with oil_. This

sandstone is very porous and contains thousands of cavities or pockets

enclosing the precious "rock-oil." Its thickness varies from the usual

30 or 50 metres (giving wells of a yield of 200, 500, or 1,000 barrels

a day) to _one kilometre_ in certain wells of the _Eagle_ (yielding

70,000 to 100,000 barrels a day, instead of 200 to 1,000). The _Eagle_

is lucky, it must be admitted, and its history is unique in the annals

of oil. Only its sister company, the _Mexican Oil_, which works in the

same field, but for the _Standard Oil_ group, can be compared with it.

Even a superficial examination of the chemical composition of oil,

a hydrocarbon, in which the carbon, in a proportion of 80 to 88 per

cent., is combined with hydrogen, and sometimes with a little oxygen,

reveals in this compound a marvellous source of thermal energy, which

may manifest itself in various ways. For, from the greenish-brown oil

which is lighter than water, no less than 128 chemical compounds are

obtained, which are used in forty different industries. From the retort

in which the crude oil is distilled comes an infinity of substances of

basic importance in modern industry.

* * * * *

Although the intensive use of oil and its industrial applications are

of comparatively recent date, the discovery of deposits of petroleum

goes back to remote antiquity.

The history of oil is as old as the world, since there is already

mention of it in the Book of Genesis. The wells of Baku were known long

before the Christian era. In the peninsula of Apsheron, where they

are situated, arose the cult of Zoroaster and the fire-worshippers.

According to the latter, the flames which escaped from the soil

would burn until the end of the world. They were, at any rate, famed

throughout the world nearly three thousand years ago.

The Greeks and Romans were acquainted with oil. The latter called it

_bitumen_. In Low Latin it was _petroleus_, from _petra_--stone, and

_oleum_--oil; and the word has come down to us through the scholars of

the seventeenth and eighteenth centuries who adopted it.

In ancient mythology and literature oil is often mentioned. It

is probably with oil that the Centaur--to avenge himself upon

Hercules--was obliged to anoint the famous shirt of Nessus! "It is

not without reason," says Plutarch, "that certain authors, wishing to

restore truth to legend, assert that petroleum is the substance which

Medea used to smear the crown and veil that play so great a part in the

tragedies; for fire does not issue from them of itself, but when they

are brought near a flame fire is communicated to them by some kind of

attraction with such rapidity that the eye can scarcely follow it."

Herodotus, in his works, mentions the oil-fields of Zante; Pliny those

of Agrigente in Sicily; Plutarch those of Ecbatana and Babylon. "The

land of Babylon," he says, "is impregnated with fire.... It is as

though the soil, agitated by the fiery substances which lie concealed

in its bosom, has a sort of pulse which makes it quake." When Alexander

conquered these regions he was particularly astonished, in the

province of Ecbatana, at "a gulf from which rivers of flame streamed

continually, as though from an inexhaustible source."[5] His return to

Babylon was celebrated by the burning of two parallel streams flowing

through the streets. And one of his courtiers, to amuse him, caused a

young man to be anointed with oil; scarcely had it touched his body

when he was enveloped in flames.

The Chinese have used oil for lighting from the most distant times;

Europeans since the fourteenth century. It is difficult to go further

back owing to the absence of documents during the Middle Ages. But what

was Greek Fire, if not oil? In the fifteenth century we find traces of

its use in medicine; and even at the present time the natives of Mosul

and Bagdad use some of the purer varieties, which they call "mourn,"

as a dressing for serious wounds. Oil has some fame as a vermifuge;

as, for example, the oil of Gabiau in the south of France. A curious

memoir of François Clouet, who was entrusted with the task of embalming

Francis I in 1547, mentions the use of an oil ("pétrolle") in the

colouring of a waxen mask made in the dead king's likeness.

In the eighteenth century Apsheron was again the astonishment of

British travellers seeking a route to India. "The Russians drink it

as a tonic and as a beverage," writes Jonas Hanway, who visited these

regions in 1754, speaking of petroleum. "It never intoxicates. Used

internally, it is also an excellent cure for gravel. Used externally,

it is a valuable remedy in cases of scurvy, gout, and cramp. It is very

good for removing stains from fabrics, and would be in more frequent

use if it did not leave behind it an abominable smell."

[Illustration: World Production in 1918.]

Finally, the earliest settlers found oil in America, or, to be more

exact, recognized the wells which had already been dug by the

Indians. But it was only in the middle of the nineteenth century that

the real importance of the oil-fields scattered over the globe began to

be realized.

While France about 1840 made the first trial use of shale oil, and

Germany in 1853 invented the oil lamp, later perfected by Laydaw of

Edinburgh, "the bold and inventive spirit of Young America undeterred

by a series of fruitless experiments, set itself to discover the first

springs of the precious liquid in Pennsylvania." In 1858 Colonel Edward

Drake, while boring a salt-water well near Tytusville, was nearly

engulfed with his workmen in a jet of oily liquid, the spring of which

was apparently inexhaustible, and continued to furnish several thousand

litres a day. It was subsequently discovered that this liquid after a

very simple process of purification, would burn with a brilliant light.

The "oil fever" then seized all America and myriads of searchers rushed

into the valleys of the Alleghanies in Pennsylvania.

The oil industry was created. For a long time America was the only

country producing the precious oil; forty years ago she still furnished

two-thirds of the world's supplies. But although the oil-fields of the

Alleghanies and of Ohio were developed rapidly, they have been far

surpassed by the enormous deposits of Baku. In 1898 Russia outdistanced

the United States, and kept the first place until 1902, when America

recovered it after a great struggle, thanks to the new oil basins of

Texas, California, and the Mid-Continent, and above all those of Kansas

and Oklahoma, with its famous "Glen Pool," which in 1908 produced the

fantastic figure of 50,000 barrels _a day_.

Russia has never been able to retrieve her position. Her production,

which in 1901 was 50 per cent. of that of the whole world, was not more

than 20 per cent. two years before the War, and in 1918 had fallen to

7.86 per cent. The cause is chiefly the diminution of production of the

"black region" of Baku, in the peninsula of Apsheron, which juts out

into the Caspian Sea and is connected with the open seas by a railway

and by a pipe 800 kilometres long, through which the annual flow of oil

towards Europe before the great world catastrophe amounted to 400,000

tons. In five years the average yield of the wells diminished by 40

per cent., while the mean depth of the borings was increased by 25

per cent. It was necessary to dig more and more deeply to find less

and less oil. The old oil-fields of Baku were nearing exhaustion. Now

they alone furnished four-fifths of the production of Russia. That

is why, in 1918, Russia lost the second place, which she had held so

long, to her young rival Mexico. It is true that the two revolutions

which she had to undergo in this quarter century helped the process

considerably. The revolution of 1905 caused the bloody disturbances

of the Caucasus: the finest factories were burnt and numerous wells

destroyed. Great unrest continued incessantly in this region until the

triumph of Lenin. But there are still in Russia oil-fields of very

considerable extent, scarcely touched before 1914, which the world

cannot afford to dispense with.[6]

The United States, Russia, Mexico, Rumania, these were, in order of

importance, the four chief oil-producing countries before the War.

Rumania shares with America the distinction of being the first country

in which rock-oil was extracted. The same year in which Colonel Drake

made his experiments at Tytusville 250 tons were extracted from a well

by hand-pumping: the oil was only just below the surface. Since then

Rumanian production has continually increased. It was 500,000 tons when

the region of Moreni, one of the richest in the world, was discovered.

Foreign capital flowed in immediately, and Rumanian production reached

its highest point in 1913 with 2 million tons. The War gave it an

appreciable setback; at the present time it does not come to more than

half this figure.[7]

[Illustration: Pre-war production of oil in Mexico, Rumania, the Dutch

Indies and Galicia.]

Although the production of Rumania, hampered by the lack of electricity

which hinders the borings, has recovered with difficulty, that of

Mexico, often a prey to civil war, has known no pause in its incredible

progress. In ten years it has passed from 3 to 160 million barrels,

carrying its share in world production from 1 per cent. to 23 per cent.

The figures are worth quoting:--

-------+---------------------+-----------------

Year. | World Production | Percentage from

| 1910-21 (barrels). | Mexico only.

-------+---------------------+-----------------

1910 | 328,000,000 | 1.10

1911 | 344,000,000 | 3.65

1912 | 352,500,000 | 4.70

1913 | 385,000,000 | 6.80

1914 | 400,000,000 | 5.30

1915 | 426,500,000 | 7.70

1916 | 459,500,000 | 8.70

1917 | 505,500,000 | 10.09

1918 | 515,000,000 | 12.40

1919 | 551,000,000 | 15.85

1920 | 684,000,000 | 23.35

1921 | 759,000,000 | 25.00

-------+---------------------+-----------------

It is Mexico which saves the world to-day, for the United States--the

greatest producers in the world--do not even supply enough for their

own consumption, and are obliged to call in the help of Mexico to make

good their deficit. In spite of all their efforts, they have only

succeeded, during the last three years, in increasing production by 24

per cent., while Mexico has augmented hers by 130 per cent. The other

countries follow at a considerable distance. Here is the record of each

for 1921:--

Barrels.

United States 469,639,000

Mexico 195,064,000

Russia 28,500,000

Dutch East Indies 18,000,000

Persia 14,600,000

Rumania 8,347,000

India 6,864,000

Poland (Galicia) 3,665,000

Peru 3,568,000

Japan and Formosa 2,600,000

Trinidad 2,354,000

Argentina 1,747,000

Egypt 1,181,000

Venezuela 1,078,000

France 392,000

Germany 200,000

Canada 190,000

Italy 35,000

Algeria 3,000

Great Britain 3,000

Other countries 1,000,000

The total production was 759,000,000 barrels of 42 gallons, against

684,000,000 barrels in 1920. It exceeds 100 million tons, easily

beating the records of the preceding years. If we remember that half a

century ago, it was only 66,000 tons, and that _between 1913 and 1920

it has almost doubled_, we shall see what a tremendous stimulus the

great world War has been.

But fears are increasingly felt. Will it be possible to satisfy the

dizzy increase in the consumption of oil? And do not certain countries

already fear to see the reserves contained in their soil exhausted?

FOOTNOTES:

[Footnote 5: Plutarch's _Lives_, Alexander the Great, chap. xliv.]

[Footnote 6: Cp. chap. xvi, _The Struggle for the Oil-fields of

Russia._]

[Footnote 7: Having fallen to 920,000 tons in 1919, it had increased to

1,030,086 tons in 1920 (12 per cent. increase). This slight recovery is

the first noted; for six years Rumanian production steadily decreased.

The worst year was 1917.]

CHAPTER III

AMAZING INCREASE IN CONSUMPTION

Fears of the United States

The consumption of oil is rising at a terrific rate. Entire branches of

industry are transformed, and it may be said that all modern transport

is increasingly dependent upon the use of the new fuel. Automobilism

and aviation owe their existence to it. Not only do steam engines

tend to give place to the oil motor in a great number of cases, but

they themselves begin to use oil instead of coal. Locomotives and the

engines of ships more and more seek the source of their energy in

oil. No more smoke, no more troublesome ash, and double the calorific

power. The work of a fireman, formerly so exhausting, is reduced to

the opening and closing of a tap. If coal is replaced by mazut in the

furnaces of ships, their radius of action is increased by 50 per cent.;

it is more than tripled if the internal-combustion engine is used.

Certain British engineers are not afraid to assert that _one ton of

mazut, used in a Diesel engine for ships, is equivalent to at least six

tons of coal_.

Few countries hesitate in face of such advantages. Since 1885 the

railways of Southern Russia have been run on oil; those of Rumania

since 1887. The railway companies of the United States consumed 20

million barrels even in 1909--that is, _one-tenth_ of the production at

that time. And the last few years have been marked by the conclusion

of contracts by the United States Railroad Administration for the

delivery of 50 million barrels. The engines of the Southern Pacific

Railway have been aptly described as veritable monsters. Their boilers

are two metres in diameter and fourteen and a half metres long. Their

heating-surface is double that of ordinary locomotives. The driver's

place is in front, which allows him to see the track.

Mexico has long since followed the example set by the United States. So

also has Austria for her Alpine railways. France has made experiments

which have been much talked of; and the Argentine, only a few months

ago, has concluded important contracts with the _Shell Transport and

Trading Company_ for the supply of oil for her railways. Everywhere the

substitution of oil for coal is going on, and consumption is developing

with such rapidity that the supply is no longer anything like equal to

the demand. Even if Russia recovered, the discrepancy between the needs

of the world and the quantity available would be considerable. That

is why the price of liquid fuel, which requires little labour in its

production, remains so high.

Since North America supplies 80 per cent. of the world production,

the dollar has become the standard currency for oil. At the present

time, Rumanian oil, delivered in Hungary, is sold at the same price as

American oil. _The market-price is therefore fixed for the whole world

by New York._

Very few people realize at all clearly what will be the consumption

of oil in a few years' time. It is natural enough, for it is only a

short time since our great and instructive Press began--very timidly,

however--to entertain its readers with this burning topic. There is

no one, at present, who does not know that the question of fuel is of

supreme importance to the whole industrial life of Europe.

Now, the world-production of coal was, in 1920, about 100 million tons

short, compared with the production in 1913. The directors of colliery

companies endeavour to increase the output of the mines, but they

obtain in general only disappointing results, which is not strange when

we observe the increasing number of miners' strikes, the rise in wages,

and the fact that laws are continually passed to reduce the hours of

labour.

In producing steam, one ton of mazut gives almost the same result as

two tons of coal; more than 50 million tons of fuel-oil are therefore

required to make good this enormous deficit.

Now, in 1919 the world production of mazut did not exceed 75 million

tons. After making good the shortage of coal, this would leave only 25

million tons to satisfy the ordinary demand. This comparison of figures

makes clear how great is the need of oil, at a time when the use of

oil, in preference to coal, is becoming more and more the order of the

day. Now, the great and general increase in consumption is not equalled

by the production which, though far from stationary, is none the less

much below the needs which are predicted for the future in competent

circles. An American oil journal recently published the following

figures for the consumption of the United States:--

1907 24 million tons

1918 57 million tons

1919 75 million tons

And even at the beginning of 1920 an increase of 25 per cent. over 1919

was noted. The rate of increase was such that, in January and February

1921, the American consumption was greater by 230,729 barrels _a day_

than the national production. The stock of oil in the United States,

both national and Mexican, has recently been considerably reduced,

and does not amount to more than 114,000,000 barrels, representing

only four months' consumption, although for years past it has always

been sufficient to meet the consumption for six months. It must be

remarked that motor-cars are terrible gluttons for petrol, and that in

the United States every farmer has his car. In a self-respecting family

there are generally three--a limousine for use in town, an open car for

touring, and a Ford for the servants to fetch provisions. It has been

calculated that there is on an average one motor-car to every thirteen

inhabitants. The Ford works alone are capable of turning out three

million annually.

And, as if that was not enough, America is planning to develop, by

motor traction, the means of transport in Asia, the continent without

railways. We may predict for this a consumption of 120 million tons in

the near future.

_The United States consume twice as much oil as the rest of the world,

while their resources do not amount to more than one-seventh of those

of the world._

Their consumption increased in 1920 by 25 per cent.; their production

only by 11 per cent. And already fears are entertained that it may

diminish. Two-thirds of the oil-fields of Oklahoma, which state alone

produces nearly one-quarter of the total, have been developed; and the

number of borings tends to diminish.

If the increase in world-consumption of oil continues at the rate that

it has done during the past few years, the oil reserves of the United

States, calculated on the basis of 70 barrels to each inhabitant,

without allowing for increase of population, would, according to the

Smithsonian Institute, come to an end about the year 1927.

These figures seem to me a little exaggerated, for the reserves

contained in the soil of the United States cannot possibly be

completely exploited in so short a time. But the figures published by

the Geological Survey of the Department of the Interior shows that

other countries consume half as much oil as the United States, while

their soil contains seven times more.

"These countries consume at the present time two million barrels a

year; at this rate, they have reserves sufficient for 250 years. The

United States consume 400 million barrels a year; they have only enough

for 18 years.[8]

"The total amount of oil which can still be extracted from the soil of

the entire world has been computed at 60,000 million barrels--43,000

million have already been brought to the surface by successful borings.

"Of the 60,000 million which remain to be extracted, 7,000 million are

to be found in the United States and in Alaska; 53,000 million in the

rest of the world."

That is why the American Navy, having in view the treatment of

bituminous shale by distillation, has reserved to itself the rights

over immense deposits, chiefly in Colorado and Utah. If the United

States do not succeed in acquiring new oil-fields in the rest of the

world, the position will become so serious that they will only be able

to avoid war at the price of economic vassalage.

There is oil in all parts of the world, and yet dominion over oil is

one of the most concentrated possible.

From Alaska almost to Tierra del Fuego, every country in the New World

possesses some.

Alaska.

Canada: its presence was discovered in 1789 by Sir Alexander

Mackenzie.

United States.

Mexico.

Central America.

Venezuela.

Trinidad, Guiana.

Colombia.

Ecuador, Peru, Bolivia.

Chili, the Argentine.

Brazil and Uruguay: it is hoped that oil will be found shortly.

[Illustration: Map of the Principal Oil-bearing Regions of the World.]

In Europe it is less evenly distributed:

Hanover (Wenigsen).

Alsace.

Italy.

Poland. The Ukraine. Rumania.

Hungary: a subsidiary company of the _Anglo-Persian_, the _D'Arcy

Exploration_, found oil deposits in March 1921.

Asia is nearly as rich as America:

The Caucasus.

Persia, Mesopotamia.

Dutch Indies.

Siam, Burma.

China.

Japan and Formosa.

Africa and Oceania, on the contrary, seem to possess only small

quantities of the precious oil. There is some in North Africa, in

Egypt, and possibly in Madagascar. The great British prospecting group,

which I have already mentioned in connection with Hungary, is making a

thorough search at this moment in Western Australia and New Zealand.

Now nearly all these oil-fields, scattered in the four corners of the

world, and in so many different countries, are at the present moment in

the hands of two great trusts--one American, the _Standard Oil_, and

the other Anglo-Dutch, the _Royal Dutch-Shell_--and certain companies

controlled by the British Government.

FOOTNOTES:

[Footnote 8: Cp. Part III, chap. xiv, _How the United States Lost

Supremacy over Oil_.]

PART II

THE STRUGGLE OF THE

TRUSTS

CHAPTER IV

THE STANDARD OIL COMPANY

Although it sometimes happens that governments oppose each other

openly in the struggle for oil, as in the case of Poland, Rumania, the

Caucasus, and Turkey, they prefer, in general, to hide behind trusts.

There exist in the United States numerous oil concerns whose power is

far from negligible, such as the _Sinclair Oil Company_, with a capital

of 500 million dollars, and the _Texas_ and the Doheny interests,

which together represent another 500 million dollars. But all these

independent producers must bow before the unchallenged supremacy of the

_Standard Oil_.

The _Standard Oil_, a purely American concern, preceded the _Royal

Dutch_--a Dutch company with considerable British, and recently a

little French, capital[9]--by twenty years.

As a matter of fact, there is no longer to-day one _Standard Oil_, but

forty companies, all bearing this name followed by that of a town or

State:

_The Standard Oil of New Jersey_,

_The Standard Oil of Pennsylvania_,

_The Standard Oil of Kansas_,

_The Standard Oil of Ohio_.

The first is the most important. All are federated under one great

administrative body.

The Chairman of the Board of Directors of _Standard Oil Companies_ is

at the present time Mr. Bedford, formerly Chairman of the _Standard Oil

of New Jersey_, where his place has been taken by Walter Teagle. This

great Council is the real brain of the _Standard_, from which emanates

the general policy of this federation of companies, as powerful as the

Government of the United States--more powerful sometimes.

Its history, like that of all American trusts, has something of the

marvellous. At the beginning of a great undertaking there is always a

great man: the founder of the _Standard_ was John Rockefeller, a small

dealer in oil, who, in 1865, conceived the idea of forming a federation

of all American oil-dealers.

There were in 1870, in the United States, 250 refineries, which waged

among themselves a merciless price-war.

It was to put an end to this struggle, which was so advantageous to

the consumer, that the _Standard Oil Company_ was created, _a combine

of refiners, not of producers_. Following a strict and constant

principle, which it has always observed, the _Standard_ has refrained

from seeking raw oil, leaving this task entirely to the prospectors and

producers. But as soon as it reaches the surface, the oil, wherever

it is found, becomes the exclusive property of the Company, to whose

innumerable refineries it is conducted by pipe-lines. The original

_Standard Oil Company_, that of Ohio, began humbly with a capital of

a million dollars, and the small consumption of 600 barrels a day.

Established in Cleveland, it grouped together all the interests in

the refining and transport of oil acquired in Pennsylvania since

1865 by Rockefeller, Andrews, Harckess and Flager. Two years later,

not only had it brought all the refineries in the neighbourhood of

Cleveland under its own control, but it had built others at Baltimore,

Philadelphia, New York, Boston, and Pittsburgh.

Six years after its inauguration, it already acquired the greater part

of the crude oil produced in the United States. Moreover, its capital

had been twice increased, in 1872 and 1874.

At the end of ten years, it transported and distributed 95 per cent. of

the American output.

In 1881 it amalgamated thirty-nine oil companies. The trust was

constituted and already disposed of a capital of 75 million dollars.

The first cycle of its growth was finished. Supreme in the United

States market and sure of its monopoly, it completed the laying of its

first pipe-line to the Atlantic. The _Standard Oil_ was about to lay

claim to Europe.

The Agreement of January 2, 1882

Such fortunes were not built up by entirely honourable methods. The

directors of the _Standard Oil of Ohio_ had formed pools. They imposed

buying and selling prices on every company which participated. This

system, which in a dozen years gave such wonderful results, was not

without its faults. There was friction between members of the pool. The

need for establishing unity of direction was soon felt. It was with

this object that the _Standard Oil Trust_ was founded in 1882.

It was the first time that the word "Trust" appeared in the name of

a firm. A Committee of nine members, or trustees, was formed. It

comprised all the Rockefeller family: John Rockefeller, Payne, William

Rockefeller, Bestwick, Flager, Warden, Pratt, Brewster, Archbold. The

nine trustees became the sole delegates and depositories of all the

39 companies conjointly engaged. They received from each concern the

shares and the corresponding voting powers. Trust Certificates, of a

nominal value of 100 dollars, were exchanged for shares only in the

proportion of the value of each undertaking to the total value of all

the undertakings constituting the Trust.

The Agreement of 1882 which sealed the pact, provided for the admission

into the Trust of new companies and the eventual formation of a

_Standard Oil Company_ in each State of the Union.

Companies of four kinds entered the combine of 1882:--

1. Fourteen companies in which _the whole_ of the shares were held by

the trustees. Among these were the _Atlantic Refining Company_, the

_Standard of Ohio_, and the _Standard of Pittsburgh_. The first of

these companies succeeded in recovering its liberty in 1911.

2. Rich private individuals, having an interest in the oil industry

and holders of large parcels of shares, such as W.C. Andrews and John

Archbold.

3. Twenty-four companies in which the _majority_ of the shares were

held by the trustees:--

_Central Refining Company of Pittsburgh_,

_Germania Mining_,

_Empire Refining_,

_Keystone Refining_,

_National Transit Company_, etc.

These twenty-four companies placed themselves under the control of the

Trust from 1882 onward. Two others have come in under compulsion:--

(1) The _Tide-water Pipe-line Company_, having constructed pipe-lines

itself, entered into fierce competition with the _Standard_. On

October 9, 1883, it was compelled to negotiate with the _National

Company_. Under the resulting contract, it agreed to provide 11-1/2

per cent. of the quantity sent to the ports by pipe-lines as its

share of the traffic, and was guaranteed an annual profit of at least

half a million dollars for fifteen years.

(2) _The Producers' Associated Oil Company_, born of a concerted

effort of independent producers to fight the _Standard_, gave in in

October, 1887.

4. One other company alone forms the fourth class. The Trust has an

interest in this but has never been able, whatever its efforts, to

obtain the majority of the shares and to control the company. This is

the _United States Pipe-Line Company_. This company experienced many

difficulties and mortifications. After having struggled against the

inertia of the railways devoted to the _Standard Oil_, and spent more

than 15,000 dollars on law costs alone, it succeeded in pushing its

lines up to Washington, but could never get any further, nor reach the

coast; the _Standard_ bought up the intervening territory.

At its zenith, in 1911, when it was declared illegal by the Supreme

Court of the United States, the _Standard_ owned 90 per cent. of the

pipe-lines and controlled 86-1/2 per cent. of the oil production of

America. A single company, the _Pure Oil Company_, founded in 1895,

whose field of exploitation was Germany, was able to maintain its

independence. The seventy-five small refineries existing outside

the Trust did not refine, all put together, a fifth as much as the

_Standard_. The refinery which the latter possessed at Bayonne was by

itself more important than ten of these competing refineries.

The European market was almost completely conquered. Everywhere the

_Standard_ operated by means of its subsidiary companies:--

The _Anglo-American Oil Company_ in Great Britain.

The _American Petroleum_ in Holland.

The _Deutsche Amerikanische Petroleum Gesellschaft_ in Germany.

The _Société pour la Vente du Pétrole_ in Belgium.

The _Vacuum Oil_ in Austria-Hungary.

The _Societa Italo-Americana per Petrollo_ in Italy.

The _Romana-Americana_ in Rumania.

The _Danske Petroleum Altieselskabet_ in Denmark.

The _Swenska Petroleum Altiebolage_ in Sweden.

The _International Oil_ in Japan.

In Galicia, the Trust held its own against all similar indigenous

enterprises. The Rumanian refiners were obliged to come to an

understanding with it; otherwise it would, with its powerful means

of pressure, have created a monopoly for itself. And the _French Oil

Cartel_ was at its mercy.

Causes of the Success of the Standard

The difficulty is not to produce oil, but to transport it, for it is

generally found in more or less desert regions. Hence Rockefeller's

brilliant idea, to construct pipe-lines bringing the oil direct to the

great centres! Thenceforward, since the oil was transported almost

automatically, its price dropped considerably. All the producers became

tributaries of the pipe-lines, and the _Standard_ obtained practically

complete control of the market.

This was the first cause of the success of the _Standard_. All

the small producing companies became compulsorily its clients. As

controller of the market, it fixed the price in draconian fashion.

There is a second cause: its alliance with the great railway companies,

and the support which it received from the railway magnates--Scott of

the _Pennsylvania Railroad_, Vanderbilt of the _New York Central_,

Jewet of the _Erie Railroad_, Watson of the _Lake Shore_, and many

others less well known.

Its subsidiary, the _South Improvement Company_, on January 18, 1872,

made contracts with the railway companies, by which it fixed the

proportionate shares in the transport of oil to the Atlantic seaboard

as follows:--

27-1/2 per cent. to the _Erie_,

27-1/2 per cent. to the _New York Central_,

45 per cent. to the _Pennsylvania_.

The companies thus favoured by the _Standard_ made their competitors

pay double rates. One of these latter produced before the Inter-State

Commerce Commission the scandalous tariffs demanded of them:

On the _Louisville and Nashville Railroad_, increased rates to

competitors of 87 to 333 per cent.;

On the _Cincinnati, New Orleans, and Texas Pacific_, from 63 to 267

per cent.;

On the _St. Louis, Iron Mountain and Southern_, from 82 to 257 per

cent.

Systematic negligence in transport was proved with regard to

competitors. The _Union Tank Line Company_, which owns tank-wagons

as the _International Sleeping Car Company_ owns restaurant cars,

would only put them at the disposal of the _Standard_, and compelled

its adversaries to dispatch their oil in barrels, which is much more

costly. The Trust alone was entitled to lay its pipe-lines beside the

railway-lines or underneath the track. It possessed 35,000 miles of

such lines at the end of last century--or rather the _National Transit

Line_, which acts as its instrument, owned them. Such abuses could not

be allowed to continue. The inquiry by the Hepburn Committee revealed

a multitude of crying injustices. For example, it was enough for the

_Standard_ or the _South Improvement_ to telegraph "_Wilkinson and Co._

have received a truck which only paid $41.50; screw them up to $57.50,"

and the order was executed.

The Charter of the _South Improvement_, which had even succeeded

in acquiring the right of expropriation in order to construct

its pipe-lines, was withdrawn under the pressure of indignant

oil-producers. But the Federal Government of the United States will

never succeed in crushing the _Standard Oil_.

Its Two Dissolutions--Roosevelt's Fight against the Standard Oil

Twice over, in 1892 and 1911, its constitution was judged illegal, but

in vain.

In 1892 the system of nine trustees was declared illegal by the Supreme

Court of Ohio. The trustees voted the dissolution of the Trust, but

continued to administer all the corporations in the same way until

1899. The Trust was apparently divided into twenty distinct companies;

the nine old trustees distributed the shares in such a way as to

possess the majority in each one. Thus they made sure, as before, of

unity of direction. Rockefeller had reversed the judgment of the court.

Here is the legal formula, which is dignified in its simplicity:

"John Rockefeller has placed in the hands of the said attorney

256,854/292,500 of the total shares held by the said trustees on July

1, 1892, in each of the companies whose shares were deposited."

Still better, after receiving the shares which were granted them in

each company, the old trustees took them and sold them to the _Standard

Oil Company of New Jersey_, which has a capital of 100 million dollars

of common stock, and only ten million dollars of preferred stock. For

the _Standard_ has a monarchical constitution. All power to the holders

of preferred stock! The holders of common stock have none but that of

drawing dividends. Though they may be in an enormous majority, they

count for nothing in the direction of the enterprise.

About 1900 Rockefeller went still further. He increased the number

of ordinary shares, and reduced that of the privileged shares. A

memorandum of the Industrial Commission drew attention to this. "During

the year 1900, the common stock has been increased by 38,550,700

dollars and the preferred stock has been reduced by 3,968,400 dollars."

In short, Rockefeller makes the concern more and more autocratic.

The _Standard_ forms a veritable State within a State, which nothing

can bend. The Trust was reconstituted, with a holding company, the

_Standard Oil Company of New Jersey_, holding the title-deeds of all

the other companies.

It was then that Roosevelt undertook to destroy a power before which

everything bowed down. The Federal Government brought an action

before the Court of St. Louis, under the Sherman Anti-Trust Law. The

_Standard Oil_ and the seventy companies dependent on it were accused

of "conspiracy, coercion, intimidation, rebating and other illegal

acts in restraint of trade." The Federal Court of St. Louis ordered

the dissolution of the Trust in 1909. The _Standard_ entered an appeal

before the Supreme Court of the United States, which confirmed the

dissolution in 1911, after five years of inquiries, prosecutions,

judgments and appeals. The struggle had been going on since 1906.

Many judgments had to be reversed. Thus, the _Standard Oil Company

of Indiana_, with a capital of only a million dollars, was ordered

to pay a fine of 29 million dollars for an illicit understanding

with the _Chicago and Alton Railway_. It was paying only six cents a

hundredweight for transport, while its competitors paid eighteen. This

judgment was reversed in July 1908 by the Court of Appeal of Chicago.

"It is strange," ran the decision "that a company with a capital of a

million dollars should be fined a sum representing twenty-nine times

this capital." The first tribunal had found 1,462 infringements proved,

and had zealously applied the maximum for each case; that is how it had

arrived at the incredible figure of 29 million dollars.

The _Standard Oil_ was given six months to dissolve. The result was the

same as in 1892. There were simply thirty-four companies apparently

independent. In the midst of this new constellation, the _Standard Oil

Company of New Jersey_, whose capital has risen to 600 million dollars,

merely shines with a greater brilliance than its satellites. And the

_Standard_ has no longer to fear attack from the Government of the

United States, which bows obediently to its will. Even better, the late

President Harding energetically supported its claims throughout the

world. Whoever attacks the _Standard_ attacks the Federal Government

itself.

To think of Rockefeller's modest company in 1870, with its 600 barrels

a day and its small capital of a million dollars, and to see what it

has become to-day, is to be lost in amazement. In 1920, the Great

Council of the _Standard_ controlled a capital of a thousand million

dollars; representing almost equal profits, and a daily consumption

of two hundred million barrels, which it even hopes to see presently

increased to three hundred million. Here are the original and the

present positions; they are widely different:--

Capital has increased from 1 to 1,000.

Profits have increased from 1 to 100,000.

Production has increased from 1 to 300,000.

The _Standard_ has soared so high because it was a national enterprise.

Every bank, every shipping company, every railway in the United States,

was interested in the success of the Trust, for this great corporation

exported to the four corners of the world a commodity drawn from

the soil of the Union, and brought into the country, one year with

another, more than a hundred million dollars. It looked as though all

competition was impossible, and yet a European company has been found

bold enough to attack, not only in Europe and Asia, but on its own

ground of the United States, this financial power, whose turn-over must

be estimated at twelve thousand million francs at least, or more than

twice the pre-War budget of a nation like France.

FOOTNOTES:

[Footnote 9: Forty per cent. of the capital of the _Royal Dutch_ is in

French hands, but France unfortunately has no voice in the direction of

this undertaking.]

CHAPTER V

THE _ROYAL DUTCH-SHELL_

In face of the formidable hegemony which the _Standard Oil_ exercised

over the oil markets of the world, an opposition arose, at first timid,

then bolder in proportion as success attended its efforts.

This was the _Royal Dutch_ allied to the _Shell_. Thirty years have

sufficed to give it a unique position in the world.

It was in 1890, at The Hague, that the _Royal Dutch Oil Company_[10]

was founded, with a capital of 1,300,000 florins. As a result of

borings carried out in the Sunda Islands, the Government of the Dutch

Indies granted it concessions at Sumatra. After some years, as the sale

of crude oil did not give a sufficient return on the capital already

sunk, the directors of the young company resolved to erect a refinery

on the spot. It was necessary for this purpose to increase the capital

to 1,700,000 florins in 1892. A strange fact to relate to-day, this

issue was a failure. The capitalists of the day had lost confidence

in an undertaking whose net profits for two years had been _nil_. In

spite of these initial difficulties, the board of directors persevered.

It even acquired new concessions, whose more profitable exploitation

allowed of a first dividend in 1894 of 8 per cent. This distribution

restored the confidence of the public, and the _Royal Dutch_ was

able to increase its capital without difficulty in 1895 to 2,300,000

florins, with a view to extending its sphere of action. In the same

year it was able to distribute a dividend of 44 per cent. Considering

the importance of its operations, the company decided in 1897 to

increase its capital to 5,000,000 florins, in order to obtain tank

steamers to transport its products. The dividends had then risen to 52

per cent., but it could not keep up for long so exceptional a rate.

For, from 1898 onward, the _Standard_, becoming uneasy, tried to obtain

control over its rival. To escape from its grip, the _Royal Dutch_ was

compelled to issue one and a half million preference shares, which

were allotted to friendly groups. A bitter economic struggle followed.

The _Royal Dutch_ maintained its independence, but the _Standard_, to

destroy its young rival, did not hesitate to sell in extra-American

markets at less than cost, and the steady lowering of the price of

oil compelled the Dutch company to reduce its dividend to 6 per cent.

It was maintained at this rate the following year, but began to rise

again in 1900, and reached 24 per cent. in 1901.

Since then the _Royal Dutch_ has progressively increased its capital

to the present fantastic figure, under conditions which were so

many windfalls for its shareholders. Its dividends during the great

world War rose to the enormous rates of 45, 48 and even 49 per cent.

There were some years when it went so far as to distribute to its

shareholders dividends in shares of 200 per cent., thus tripling its

nominal capital.

The Alliance with the Shell

The early career of the _Royal Dutch_ was as modest as that of the

_Standard Oil_ and far more troubled. At its very beginning it found

in the East a young British firm, the _Shell Transport and Trading

Company_, which put up a keen competition, the more disastrous because

the latter possessed a fleet of tank steamers, while the _Royal Dutch_

as yet had none. The _Shell_ was directed by Sir Marcus Samuel, one of

the cleverest business men in London.

Samuel had begun humbly as a trader in sea-shells. His business

prospering more and more, he hunted about for some commodity to

exchange for the shells which he brought from the East. He decided upon

oil, and became himself a producer in Borneo.

In 1897 the _Shell_ was registered in Great Britain, with the view

of absorbing the business of _Samuel and Company_ and certain other

similar concerns. The new company had a large number of tank steamers

and hundreds of depots.

The _Royal Dutch_ had then amalgamated the greater number of the

independent producers of the Sunda Islands, but was experiencing some

difficulty in getting its oil to Europe, and so decided to negotiate

with the _Shell_.

Hence the agreement of 1902, by which the two companies entrusted the

sale of their products to a company which they created specially for

the purpose, the _Asiatic Petroleum_. Its capital was subscribed as

follows:--

1/3 by the _Royal Dutch_,

1/3 by the _Shell Transport_,

1/3 by the Rothschilds.

This simple alliance became a complete union ten years later. The

_Royal Dutch_ and the _Shell_ amalgamated on the following basis:--

On January 1, 1907, the two groups transferred their assets to two

companies, one Dutch, one British. These were the _Bataafsche Petroleum

Maatschappij_ and the _Anglo-Saxon Petroleum_.

The _Bataafsche_, or _Batavian Oil Company_, which now has a capital

of 200 million florins, was specially entrusted with the extraction

of oil and with everything concerning its production. Its oil-fields

are situated in Java, Sumatra and Borneo, and it exploits them directly

or by subsidiary companies. It has interests in the Mexican _Corona_

company and in many Russian companies.

Although this last part of its program has not hitherto been

productive, the _Bataafsche_ has distributed during the last few years

dividends representing annually nearly half its capital. Directly or

indirectly, it is responsible for almost the whole production of the

Dutch Indies, which amounts to nearly 20 million barrels annually, and

is steadily rising. To meet this increase, the _Batavian Oil Company_

is obliged every year to construct new reservoirs. In 1920 their

capacity had reached more than 900,000 tons.

The _Anglo-Saxon Petroleum_, with its head-quarters in London, was

entrusted with everything concerning the transport and sale of oil,

that is to say, with the commercial side of the business. Unlike the

_Bataafsche_, this company undertakes no direct exploitation, although

it controls the production of a large number of subsidiary companies in

Ceylon, British India, Malay, Northern and Southern China, Siam, the

Philippines, Australia, New Zealand and South Africa. For the _Royal

Dutch-Shell_ has an almost organic structure. Instead of reproducing

itself in new companies, always the same, like the _Standard Oil_,

it only receives new adherents for distinct functions. One company

is entrusted with the distribution of its products, another with the

exploitation of oil-fields or with refining. The _Royal Dutch_ and the

_Shell_ have become to-day holding companies. In 1907 the _Royal Dutch_

ceased to be an industrial enterprise and became an omnium of oil

securities.

Forty per cent. of the profits resulting from this co-operation were

to come to the _Shell_, 60 per cent. to the _Royal Dutch_, which has

reserved the lion's share for itself.

At the time of signing this agreement the _Shell_ was not without

a certain anxiety. Thus it was agreed, in order to safeguard its

interests, that the _Royal Dutch_ would buy, on January 1, 1907,

half a million ordinary shares of the _Shell_ at the price of thirty

shillings, and would undertake not to sell again without the consent of

the board of directors of the _Shell_.

In case of liquidation or sale by private contract before January 1,

1932, it was stipulated that the net product of the liquidation, up to

£9,000,000 sterling, was to be divided equally between the _Shell_ and

the _Royal Dutch_, and that only above this amount the products should

be shared in the proportion of 40 and 60 per cent. We see how closely

these two concerns are allied. The only difference which exists between

them is that, officially, one is Dutch, the other British.

Deterding's First Victory. The Chinese Campaign

Freed from all obstacles in the Dutch Indies and allied with one of

the most powerful British firms, the _Royal Dutch_, under the skilful

guidance of Henry Deterding, was ready to attempt a conquest of the

world.

But for the second time it came up against the hostility of the

_Standard Oil_, which waged a bitter warfare in the Far East--the

famous price-war of 1910.

The _Standard Oil of New York_ considered China as its private

property. It had taught the Chinese to use kerosene by distributing,

free of charge, lamps inscribed _Mei Foo_, or _Good Luck_. When this

method became too expensive it sold them at cost price, and when the

_Royal Dutch_ appeared as a competitor it was selling, in this way, two

million lamps a year. With a population of 400 million Chinese, this

produced an unlimited market for kerosene, for which, in comparison

with petrol, the American demand is small.

The _Standard_ tried to fight by selling refined oil below cost price

in foreign markets, while keeping the price very high in America in the

shelter of the tariff wall. It even went so far as to sell in the Far

East 50 per cent, lower than in Holland, although the latter market was

nearer the American oil-fields. At the same time the refined American

oil, which was quoted in England at the end of August 1910 at 6-1/4d.

a gallon, fell at the end of November to 5-3/4d., and in December to

5-1/2d. Deterding's receipts from the sale of kerosene were reduced by

3,750,000 dollars. But he would not give way. He did not leave China;

he stood his ground and fought. Although his oil was of an inferior

quality to that of the _Standard_, it was near at hand, and had not

to be transported for long distances like that of its rival (which

involved the latter in great expense). An agreement was finally made.

The _Standard_, which had taken possession of the Chinese market in

1903, gave up 50 per cent, of that trade to the _Royal Dutch_. The

latter's share has even been increased recently to 60 per cent. For the

first time Deterding had conquered!

Perhaps he would not have triumphed so easily if the _Standard Trust_

had not been dissolved just at that time by the Supreme Court of the

United States. But two such powerful groups could not have continued

indefinitely to struggle for the international market without making

sure of some stability and limiting their respective zones of operation.

After many attempts they have come to an understanding.

In 1907 an agreement fixed the quota of oil that each group might send

to the British market.

In 1912 an agreement of a similar kind put an end to the struggle that

had been going on in the Far East.

The absence of a definite general agreement between the two great

Trusts did not exclude the possibility of tacit agreements, which

regulated their operations in the international market and assured to

both an extraordinary prosperity. _The_ Standard _has several times

made very tempting offers of close co-operation to the_ Royal Dutch,

_leaving this group free to make its own conditions_. The _Royal

Dutch-Shell_ has always refused, for _the future is its own_. What will

happen to the _Standard_, an almost exclusively American concern, when

the oil resources of the United States are exhausted? Since 1919 it

has been endeavouring to acquire oil-fields in the rest of the world,

to guard against this danger, but everywhere it finds the "closed

door." The _Royal Dutch_, aided by the British Government, has taken

possession of all that remain in the world.

New Struggle with the Standard Oil for the Conquest of the World

One day, to the great astonishment of everybody interested in the

American oil industry, Mr. Deterding brought a cargo of oil to the

United States and sold it under the very nose of the directors of the

_Standard Oil_. Emboldened by this first success, he tried to establish

himself in the United States, and with this aim in view bought

oil-bearing properties in Oklahoma. The _Royal Dutch_ rapidly increased

its territory.

By a bold policy and without recourse to the sharp practices of the

directors of the _Standard Oil_, Deterding revenged himself for

the attack upon him in the Far East. The _Royal Dutch_ sent large

quantities of petrol to America and sold them at rates as high as those

of the _Standard_. This enabled it to make good its losses in the Old

World and to emerge victorious from the struggle.

During his Chinese campaign Deterding had been handicapped by the

inferiority of the oil from Borneo. To remedy this he proposed to

obtain possession of various Californian wells.

Of all the wars that Deterding has waged, that of California is

the most interesting and perhaps the most strenuous. It required a

remarkable audacity for the _Royal Dutch_ to establish itself on the

very territory of the _Standard_ in America. Would it not meet there

the coalition of this great firm and the independent oil companies?

And yet Deterding triumphed. He created the _Roxana Petroleum Company_

in Oklahoma, the _Shell Company of California_ on the shores of

the Pacific, and then extended his conquests to Texas, New Mexico,

Colorado, Utah, Arizona, Montana, Dakota and Nevada. Everywhere the

_Royal Dutch_ brings with it its curious methods. It begins by taking

an option for six months on an oil bearing property, giving it the

right to examine the books of the company and to make an inquiry. At

the end of six months it takes an option on another property, and

continues in this way throughout the region. After leaving nearly all

the options without sequel, the _Royal Dutch_ is ready to begin boring

operations on its own account in selected places.

This method, adopted for the first time in California, is to-day the

_habitual method_ of the _Royal Dutch-Shell_. Thus this company rarely

makes miscalculations in the oil-fields it exploits. Its agents have

orders to report the minutest details to head-quarters.

In order to interest the American public in the success of his

enterprise, Deterding was clever enough to place upon the New York

market, in 1916, 220,000 so-called American shares. This issue was a

great success, and it has thus become against the interest of many

Yankees for the United States Government to start reprisals against the

_Royal Dutch_, of which the late President Harding has often spoken.

In 1915 the _Royal Dutch_ already controlled one-ninth of the American

output. _One-third of its total production comes to-day from the United

States._ It has obtained for its pipe-lines the right of passage to

St. Louis and the river, and its surveys of Virginia and Louisiana are

complete. It owns the great refineries of Martinez, near San Francisco,

and of St. Louis and New Orleans.

Seventy-five per cent. of the Californian output, which exceeds ten

million tons, now escapes the control of the _Standard Oil_.

But more than this, the _Royal Dutch_ is gaining possession of the

deposits of Mexico and Venezuela. The oil-bearing territories of

Tampico and Panuco, the railway, and the local oil companies belong

to Mr. Deterding. The importance of this region is well known. Its

geographical position, a few miles from the sea, and its nearness to

the Panama Canal double its value. Three hundred and fifty kilometres

by sea, one hundred and seventy-five by pipe-line across the isthmus of

Tehuantepec, and the oil can be delivered at a centre which commands

the whole South American market.

Not content with conquering the _Standard Oil_ on its own ground,

Deterding also caused it to lose its "Algeria." Master of the _Mexican

Eagle_, which he bought from its founder, Lord Cowdray, in 1918 for

more than a thousand million francs, he controls to-day the bulk of

Mexican production. By this master-stroke he increased by 50 per cent.

the quantity of oil that the _Royal Dutch_ can offer to the world.

The Americans felt the loss very keenly, for hitherto all the output of

the _Mexican Eagle_ had gone to the _Standard Oil_.

The _Mexican Eagle_ had a large number of tank steamers, the

acquisition of which brought up the fleet of the _Royal Dutch-Shell_ to

more than a million tons.

Moreover, the directors of the _Royal Dutch_ do not hesitate to assert

that the oil-bearing district of Venezuela, of which, since their

agreements with the _General Asphalt Company_, they control more than

15,000 square miles, is as rich in oil as the district of Tampico.

That is why they have put up enormous buildings, both warehouses and

refineries, at Curaçao. The _Shell_, which has operated for four

or five years in Venezuela, has just overcome the difficulties of

approaching the coast by constructing a flotilla of tankers of very

small draught, thus permitting the transport of oil from Maracaibo to

Curaçao.

The Panama Canal itself is seriously menaced. The United States have

spent more than 300 million dollars in constructing the canal, and now

American vessels are going to be dependent upon the _Royal Dutch_ for

oil. Mr. Deterding has a depot at one end of the canal and another at

the entrance to the gulf. He dominates American commerce.

This is indeed a work of conquest. Mr. Deterding follows the commercial

example of Great Britain. _He has stations at all the strategic points

of the world._ He also controls the Suez Canal at both ends. The

capacity of the refinery at Suez has been increased by 7,000 barrels

a day, on account of the increase in the tonnage passing through the

canal during the War. Mr. Deterding is building a station on the Cape

Verde Islands, situated just half-way between Africa and America. He

has establishments at the Antipodes, in the East and West Indies, on

the west coast of South America, on the coast of Africa, and at the

Azores. The European market, in particular the French, is dependent

on him. Through the instrumentality of M. Deutsch de la Meurthe, the

oil deposits in Asia, owned by the Rothschilds, have come under the

_Royal Dutch_ trust, which possesses 90 per cent. of the capital of

the oil companies of the Caspian and Black Seas and 25 per cent. of

that of the _New Russian Standard Company_ of Grosny. In August 1920

the _Shell_ bought the _Mantasheff_ and the _Lianosoff_, together

with a 40 per cent. interest in the _Tsatouroff_, fearing to see the

_Standard Oil_ acquire the Nobel properties at Baku. The contract was

signed in London, but was incompletely carried out, for Great Britain

hoped to treat directly with the Soviets at Genoa and to have no more

responsibility towards the former owners.[11]

A large part of the Rumanian production is controlled by the _Royal

Dutch_.

In Germany the _Royal Dutch-Shell_ has an interest in the _Erdol und

Kohle Veränderung Aktien Gesellschaft_, the _Aktien Gesellschaft für

Petroleum Industrie_ and the _Deutsche Bergin Aktien Gesellschaft_.

Since 1912 it has established itself in Sweden as the _Anglo-Swedish

Oil Company_, to drive out the _Standard Oil_, until then mistress of

the market. Everywhere the _Royal Dutch_ insinuates itself into the

good graces of governments, thanks to its elastic methods and to the

cleverness of some of its directors, such as the brilliant Armenian

Gulbenkian, who has been well named the "Talleyrand of Oil." In

co-operation with the Belgrade Government, it has just formed a new

company at Agram, with a capital of 50 million crowns, to exploit the

oil of Jugo-Slavia.

As the _Financial Times_ wrote: "Following the creation in France

of the _Société Maritime des Pétroles_ and the _Société pour

l'Exploitation des Pétroles_, the _Royal Dutch_ is able to obtain from

the French Government an important interest in the oil-fields which

remain at its disposal."

Its last triumph was its entry into Spain. The eminently suggestive

list of companies controlled by the _Royal Dutch_ will give an idea of

the network which it has spread over the whole world:--

_Shell Transport and Trading Company._

_Asiatic Petroleum Company._

_Anglo-Saxon Petroleum._

_Bataafsche Petroleum Maatschappij._

_Erdol und Kohle Veränderung Aktien Gesellschaft._

_Aktien Gesellschaft für Petroleum Industrie._

_Deutsche Bergin A.G._

_Anglo-Swedish Oil Company._

_Asiatic Petroleum_ (Ceylon).

_Asiatic Petroleum_ (Egypt).

_Asiatic Petroleum_ (Federated Malay States).

_Asiatic Petroleum_ (India).

_Asiatic Petroleum_ (Northern China).

_Asiatic Petroleum_ (Philippines).

_Asiatic Petroleum_ (Siam).

_Asiatic Petroleum_ (Southern China).

_Asiatic Petroleum_ (Straits Settlements).

_Anglo-Egyptian Oil-fields._

_British Imperial Company_ (Australia).

_British Imperial Company_ (New Zealand).

_British Imperial Company_ (South Africa).

_Astra Romana._

_Caribbean Petroleum._

_Dordesche Petroleum Industrie Maatschappij._

_Dordesche Petroleum Company._

_Sumatra Palembang._

_Nederlandsche Indische Tanks Troomboat._

_Vereinigte Benzinwerke, Hamburg._

_Home Light Oil Company._

_British Petroleum Company._

_Norsk Encelska Mineralojeanie Colaget._

_Shell Marketing Company._

_Italian Company for the Import of Oil._

_British Tanker Company._

_Moebi Hid._

_Ceram Petroleum._

_Ceram Oil Syndicate._

_Société Bnito._

_North Caucasian._

_Russian Standard of Grosny._

_Mazut Company._

_Ural-Caspian Company._

_Grosny Sundja Oil-fields._

_New Shibaïeff Petroleum._

_Commercial and Industrial Oil Companies of the Caspian and Black Seas._

_Mantasheff._

_Lianosoff._

_Tsatouroff._

_Kotoku Oil-fields Syndicate._

_United British Refineries._

_New Orleans Refining Company._

_Simplex Refining Company of Panama._

_Panama Canal Storage Company._

_Shell Company of California._

_Californian Oil-fields, Ltd._

_W.V. Oil Company._

_Volley Pipe-Line Company._

_Roxana Petroleum Company_ (Oklahoma).

_Trahola Pipe-Line Company_ (Oklahoma).

_Shell Corporation of Martinez._

_Shell Company of Canada._

_Roxana Petroleum Maatschappij_ (Texas).

_Tampico-Tanuco Petroleum._

_La Corona._

_Mexican Eagle._

_Eagle Oil Transport._

_Venezuelan Concessions Company._

_Curaçao Petroleum._

_General Asphalt Company._

_Burlington Investment Company._

_United British Oil-fields of Trinidad._

_United British West Indies Petroleum Syndicate._

_Turkish Petroleum._

_Roxana Petroleum Corporation of Virginia._

_Ozark Pipe-Line Corporation._

_Union Oil of Delaware._

_Société Maritime des Pétroles._

_Photogen_ (Austria, Hungary, Poland).

_Jugo-Slav Petroleum._

This list is certainly not complete, and it grows longer every day. Is

it not eloquent by itself?

The _Royal Dutch_ has penetrated every State in the world, assuming

everywhere the national colour of the country it desires to conquer.

It has travelled far since it began in the Dutch Indies, with a tiny

capital of a million florins and seven small tank steamers. Its annual

production, which was then 25,000 tons, to-day exceeds 15 million tons.

Its fleet of tankers is one of the most powerful in the world. Last

year it amounted to 1,400,000 tons. _And the_ Royal Dutch _controls a

capital of twenty-two thousand million francs_.

Partial Decline of the Standard

The _Standard Oil_ is certainly no longer the colossus of the world.

It has never completely recovered from the last judgment delivered

against it in 1912, which compelled it to separate from its subsidiary

companies. Although the sentence of the Supreme Court could not

put an end to the community of interests which united these--since

Rockefeller himself possessed 25 per cent. of the shares of the various

affiliated companies--it has certainly hampered the development of

the _Standard_ during the last few years. The very heavy taxation

imposed upon it has also contributed to limit its powers of expansion.

The American Government takes 44 per cent. of its income in the form

of taxes. In 1920 Rockefeller paid an ordinary federal tax of 12 per

cent. and a super-tax of 65 per cent. In fact, Rockefeller and all his

associates are being driven out of the business by the federal taxes.

If Rockefeller is the person who paid in 1920 the largest sum in income

tax (14,800,000 dollars), it is clear that the greater part of his

money is passing from the coffers of the company to be invested in

Government, State and municipal securities which are not taxable.

_Up to about 1890 the_ Standard Oil _reigned as absolute mistress of

the oil market, both in Europe and America_. But in 1890 the oil from

the Caucasus, Galicia and Rumania began to break up this monopoly.

Purely European financial groups, the Rothschilds of Paris and Vienna,

the Nobels of Sweden, the great German banks, and those of Lille and

Roubaix which later were to form the "Consortium du Nord," became

progressively more and more interested in the new oil enterprises

that were taking shape in Eastern Europe. Germany had formed an actual

Trust, the _Europeanische Petroleum Union_, which, but for the War,

would certainly have led to German control of all European oil. Instead

of only two great Trusts fighting for world supremacy for the benefit

of Britain or the United States, we should see a third, claiming Europe

and Turkey in Asia for its share in the name of Germany.

But this group, expanding rapidly when war broke out, found itself

opposed from that moment by another organization, the _Royal

Dutch-Shell_, which was also advancing by giant strides and which

concentrated all its power throughout the world against that of the

_Standard Oil_.

The most skilful part of the policy of the _Royal Dutch_ was to

_establish itself wherever there was any oil_, while the _Standard_

confined itself almost exclusively to America. This was a great

mistake. To dominate the production and sale in America was defensible

as a commercial policy so long as the United States were the greatest

producers of oil. It became an error from the day on which important

oil deposits were discovered in other parts of the world.

The _Standard_ still has the preponderance in the United States, where

the _Shell_ only appeared in 1900, but it is far from controlling 86

per cent. of the output, as it did at the height of its power in 1911.

It has been much too negligent about extra-American oil deposits.

In 1890 a representative of the _Standard Oil_ was in Java, studying

the oil situation in the Far East. He urged the _Standard_ to establish

itself there before any competitor appeared. Hypnotized by the American

market, it refused.

In a similar way it came into Rumania too late, and controls only 10

per cent. of the total output, while the _Royal Dutch_ controls 31 per

cent. In Mexico the _Standard_ also met with the competition of the

_Royal Dutch_, which, in combination with British interests, takes 40

per cent. of the production. In Russia its rôle is insignificant.

This state of affairs has been brought about by the errors of judgment

of the directors of the Trust. _The power of the_ Standard Oil _has

diminished_, and it no longer exercises a really effective control

except within the United States. Even this control the _Royal Dutch_

is striving to filch from it. The latter has just formed a new trust,

uniting the companies hitherto independent: the Doheny group and

the British Pearson syndicate, the _Associated Oil_, the _Oklahoma

Producing_ and the _Oil Union of Oklahoma_, with six or eight other

undertakings which have been successfully conducted during the last

few years. The _Shell_ is trying to bring in the _Mexican Petroleum

Company of Delaware_,[12] a sister company to the _Eagle_ and the

greatest producer in Mexico, which has up to now remained faithful

to the _Standard Oil_. That is why it bought up large quantities of

_Mexican Petroleum_ stock in May 1919 on the New York Exchange. If it

succeeds the _Standard_ will see its remaining share in Mexico yet

further diminished.

This new Trust has the financial support of the Morgans. It is

particularly directed against the _Standard Oil_.

These facts are very little known in France. _The_ Royal Dutch _is

about to launch a new attack on the_ Standard, or to acquire an

interest in a Trust destined to combat it, which will perhaps end by

grouping under its ægis all Rockefeller's competitors.

The Pearson syndicate, under Lord Cowdray, has joined the _Royal

Dutch_. Now, Mr. Doheny himself is coming in too.

The great oil International develops continuously. Where will it end?

Already the _Standard Oil_ produces no more than 17 per cent. of the

oil of the United States--it is true that it has always disdained the

extraction of petroleum--but it refines only 49 per cent., which is a

much more serious matter.

Rapid Increase in the Activities of the Royal Dutch

Production

1910 1,600,000 tons

1913 7,000,000 tons

1920 15,000,000 tons

Net Profits

1907 13,000,000 florins

1915 29,000,000 florins

1920 130,000,000 florins

Dividends

1907 27-3/4 per cent.

1915 49 per cent.

Authorized Capital

1890 1,300,000 florins

1902 7,500,000 florins

1910 50,000,000 florins

1911 100,000,000 florins

1916 150,000,000 florins

1918 230,000,000 florins

1919 400,000,000 florins

1921 600,000,000 florins

Financial Results of the Royal Dutch since its Agreement with the Shell.

-----+----------------+----------------+----------------+-------------

| Gross Profits | Prior Charges | Net Profits | Dividends

Year | (in | (in | (in | (per cent.)

| 1,000 florins) | 1,000 florins) | 1,000 florins) |

-----+----------------+----------------+----------------+-------------

1907 | 13,657 | 242 | 13,415 | 27-3/4

1908 | 13,592 | 66 | 13,526 | 28

1909 | 12,978 | 66 | 12,912 | 28

1910 | 14,644 | 92 | 14,552 | 28

1911 | 13,693 | 2,652 | 11,041 | 19

1912 | 26,680 | 302 | 26,378 | 41

1913 | 30,554 | 384 | 30,170 | 48

1914 | 30,937 | 571 | 30,366 | 49

1915 | 30,419 | 440 | 29,979 | 49

1916 | 32,823 | 193 | 32,630 | 38

1917 | 49,740 | 5,367 | 44,373 | 48

1918 | 96,877 | 24,487 | 72,390 | 40

1919 | 118,169 | 18,169 | 100,000 | 45

1920 | 138,736 | 9,286 | 129,450 | 40

1921 | 107,170 | 3,071 | 104,098 | 31

-----+----------------+----------------+----------------+-------------

FOOTNOTES:

[Footnote 10: The Netherlands were then in the position in which France

now finds herself. The _Royal Dutch_ began by sending two engineers to

the United States to familiarize themselves with the details of oil

production, since Holland possessed no such industry.]

[Footnote 11: A first instalment, representing 70 per cent. of the

value of these companies, was alone paid. See chap. xvi, _The Struggle

for the Oil-fields of Russia_.]

[Footnote 12: The _Mexican Petroleum Company of Delaware_ has control

of a large number of companies in the United States and in Mexico,

which include the following:--

_Mexican Petroleum of California_,

_Huasteca Petroleum_,

_Tamahua Petroleum_,

_Tuxpan Petroleum_,

_Mexican Petroleum Corporation_.

]

CHAPTER VI

THE OIL-WORLD'S NAPOLEON: HENRY DETERDING

If the _Royal Dutch_ has succeeded in its amazing effort to reduce

the power of the _Standard Oil_, it is because the former possessed

a man who was worth millions, whom the Americans, in their outspoken

admiration, have called the "Oil-World's Napoleon"--Henry Deterding.

"Mr. Deterding is Napoleonic in boldness, and Cromwellian in depth,"

said Admiral Lord Fisher, the reorganizer of the British Navy in the

twentieth century. The strongest personality in the oil-world is no

longer Rockefeller, but Deterding. Supported by such men as Gulbenkian,

the "Talleyrand of Oil"; Colijn, formerly War Minister to the

Netherlands; Loudon, Cohen, Stuart, and Sir Marcus Samuel, the founder

of the _Shell_ and a former Lord Mayor of London--Deterding dared to

challenge the _Standard Oil_ and to keep up the war for twenty years in

every part of the world, and even to establish himself on the latter's

own ground, the United States.

The _Royal Dutch_ was established in 1890, when the _Standard_ ruled

as absolute sovereign over the markets of Europe and America. De Gelder

was the first Chairman, but he was soon replaced by the more capable

Kessler.

"Old Kessler," as the _Royal Dutch_ people call him among themselves,

fixed his head-quarters at Batavia. Needing an assistant, he engaged

the young Deterding, who was then employed in a bank at Batavia. It was

Kessler who guided the _Royal Dutch_ through the difficulties of its

early years. But he died suddenly in 1900, and Deterding succeeded him.

While the _Standard_ stuck to the formula, "American oil to light

the world," Deterding set to work to acquire oil deposits as near as

possible to all markets. The new policy extolled by Walter Teagle,

Chairman of the _Standard Oil of New Jersey_, on the occasion of the

fiftieth anniversary of the company in January 1920, is no other than

that pursued by Deterding for fifteen years. For the _Standard Oil_,

seeing to what a pass its former policy has brought it, has sought

since 1919 to revise its methods and copy those of its rival.

_Five factors have contributed to the world-wide expansion of the_

Royal Dutch.

1. Deterding's cleverness in associating the _Royal Dutch_ with the

_Shell_, and in interesting the Rothschilds of Paris in his operations.

Thanks to these connections, he surrounded himself with able

personalities, such as Frederick Lane, Sir Marcus Samuel, Sir Waley

Cohen, and Gulbenkian.

2. The support of the Dutch Government.

3. The support of the British Government.

4. The fact that the _Royal Dutch_ had not a market close at hand to

absorb its production, in the Dutch Indies, as the _Standard_ had in

the United States.

5. The readiness of the Dutch and British to prospect over-seas.

It is a combination of these forces--personal, political, and

economic--which has resulted in the formation of the _Royal

Dutch-Shell_ group, now a world-power. Under the laws of the United

States, a similar group would be impossible.

"Deterding is a plunger," said an American oil-man, who has often been

a competitor of his in various parts of the world. "He plunges with

other people's money, not his own; that is why he takes such risks.

For instance, he paid five times what any one else would have paid to

gain a footing in Egypt, and he has lost a great deal there. However,

he pays in shares for the properties he buys, and this gives him an

advantage over the _Standard_, which has always paid in cash. In spite

of everything, he merits great praise for having started from nothing

and having built up the great organization which he directs."

Deterding's profession of faith, so to speak, is summarized in a

memorable declaration which he made to the Committee of Imperial

Defence in March 1913:--

"Oil is the most extraordinary article in the commercial world, and the

only thing which retards its sale is its production. There is no other

article in the world of which you can guarantee the consumption as long

as you can produce it. _In the case of oil, begin by guaranteeing the

production and consumption will look after itself._ There is no need

to bother about consumption, and as a seller, it is useless to make

contracts in advance, because oil sells itself. All that you need is

a well-filled purse, so that you are dependent upon no one, and can

say to the people who will not buy to-day, 'Very well. I am going to

spend £1,000,000 in building reservoirs, and in future you will have

to pay much more!' _The great point for the Navy is to make certain

of oil from a group which can draw its supplies from many different

geographical points_, because one cannot count on any particular

oil-field. My experience is that districts which have regularly

produced 18,000 barrels a day, have dropped to 3,000 without any

previous warning."

Since its alliance with the _Shell_, the _Royal Dutch_ has undergone

a world-wide expansion. Deterding concluded long-term contracts with

the famous British State-subsidized company, the _Anglo-Persian Oil_,

guaranteeing it the greater part of the Persian output until 1922.

But his cleverest stroke was certainly to acquire an interest in the

management of the _Mexican Eagle_. Owing to this, the output of the

_Royal Dutch-Shell_ group increased by more than 50 per cent., rising

from thirty to more than fifty million barrels a year. The purchase of

shares from Lord Cowdray cost Deterding a thousand million francs.

Deterding conducts his business like a soldier. He accepts or refuses

a proposition once and for all. It is often dangerous not to fall

in with his wishes. The _New Schibaïeff Petroleum Corporation_ has

had experience of this. Reconstituted in 1913, with a capital of

£1,150,000, it set itself against the will of Deterding. He fought, and

at the end of the struggle the £1 shares were worth 6-1/2d., at which

price the _Royal Dutch_ bought them up, at the same time condescending

to accept control of the company.

The establishment of close relations between the _Royal Dutch-Shell_

and the British Government was one of the most noticeable activities

of the oil-world. It has not been proved that the British Government

really controls the _Royal Dutch_, although well-informed people

believe it. If there has been any change in the direction of the _Royal

Dutch_, which, according to the constitution of the company, should

remain in Dutch hands, it must have been effected as a result of

agreements between the Dutch and British Governments, for the shares

of the _Royal Dutch_ were held by interests closely connected with the

Royal Family of the Netherlands. An alliance of this nature would have

great advantages. Besides, since the British Government has purchased

the control of the _Anglo-Persian_, Sir Marcus Samuel has made great

efforts to induce it to take an interest in the _Royal Dutch-Shell_

group. The _Royal Dutch_ has become more British than ever since 1922,

when it ceded the greater part of its share in the _Shell_ to the

purely British consortium directed by the bank of _Cull and Company_.

Deterding would find it difficult to do without the support of British

foreign policy. He knew this very well when he transferred his offices

from The Hague to London.

The most striking proof of the alliance between the British Government

and the _Royal Dutch_ is the course of events in India, where the oil

situation is peculiar. In 1905, in exchange for certain exclusive

rights and for a protective tariff granted by the State, the _Burmah

Oil Company_ consented to maintain a fixed price for kerosene. In

India, in an open market, kerosene would cost £25,000,000 sterling

instead of £11,000,000 annually. Such, at least, is the opinion of

Sir John Cargill, Chairman of the _Burmah Oil_. Before the War, there

was overproduction of kerosene in India; this surplus has since

been transformed into a veritable dearth. The _Royal Dutch_ supplied

the _Burmah Oil_ with the petroleum that was needed to satisfy the

Indian market. Thanks to Deterding, India will continue to get its oil

cheaper than other countries. Without his help there would have been a

considerable rise in price, and the _Burmah Oil_, in which the British

Admiralty is interested, would have been weakened, and would have

fallen into the hands of other companies.

The _Royal Dutch-Shell_ has rendered the same service to the British

Government in Egypt. "We have conducted our business on the same lines

in Egypt," said Sir Marcus Samuel. "_In order to help the Government,

we have operated in the Egyptian market in the same way as in India._"

In exchange the _Royal Dutch_ counts on the support of the British

Government. This is the case in Venezuela, where the Venezuelan

Government is trying to establish its rights over concessions which the

company covets. And not in vain, for on March 7, 1921, it was announced

in France that the Venezuelan Courts of Justice had upheld the validity

of the fifty years' concessions which had been granted to the _Colon

Development_, in which the _Royal Dutch_ is interested, through the

_Burlington Investment_.

But in Mesopotamia the company seeks the support of France against

the _Anglo-Persian_, and is not opposed to American participation. I

believe, rather, that it desires the support of the French Government

in case the British Government, hypnotized by the _Anglo-Persian_,

deserts it. In any case, it hopes to play off one against the other.

Deterding's ambition is to crush the _Standard Oil_. He is the

declared enemy of the _Standard_, Mr. W. Teagle, for whom he has some

sympathy, excepted. When people tell him that he will never succeed

in getting the better of the _Standard_, with its enormous capital,

he replies that he has the means to fight against all the dollars

that the _Standard_ can gather. Has he not the Rothschild millions at

his disposal? Besides, he has great advantages over the _Standard_.

I have already mentioned the cost of production of the _Royal Dutch_

in the Dutch Indies. It is considerably lower than that of the

American Trust.[13] In a price war this would give it an incontestable

superiority. The _Royal Dutch-Shell_ possesses such reserves of oil

that the question of exhaustion does not arise for it; and it extends

over the whole world, whereas the _Standard_ has been able to root

itself firmly in America alone. Several European States have crossed

swords with it, for example, Austria, which definitely closed Galicia

against it in 1911. Its high-handed methods have made many enemies.

The _Royal Dutch_, on the contrary, thanks to its clever and elastic

policy, has insinuated itself into the good graces of most governments.

Almost everywhere, public opinion is on its side.

Besides, _Deterding knows more about the affairs of the_ Standard

_than the_ Standard _itself_. This statement was made by a director

of the American company. Deterding has no difficulty in following its

movements. On one of his visits to New York, he installed himself in

the Board-room of the _Standard_, in order to tell the directors that

he was not satisfied with the way in which the Chinese agreement was

respected, that they owed him a rebate on oil sold in his preserves,

and that they must not sell any more there--or it would be war. He

spoke for ten or fifteen minutes, and that was time enough to say a

great deal. Without a note, he quoted many details, and even figures;

for example, the exact number of gallons sold by the _Standard_ in

various places. And when one of his hearers inquired, after his

departure, whether it was all accurate, another of Mr. Deterding's

interrogators replied: "Last time he came, we took down all his

statements in shorthand and verified them afterwards. We saw that he

had an incredible knowledge of our affairs in every country in which

our interests conflict with his own."

Will there soon be a renewed conflict between the _Royal Dutch_ and

the _Standard Oil_? Deterding wanted it quite recently. If we are

to believe the authorities on the matter, we have narrowly escaped

the greatest oil war in history. For once, Deterding gave way to the

moderate counsels of the more conservative members of his company, and

war was not declared. Mr. Colijn was sent from The Hague to the office

in Great St. Helen's, in the city of London, and it was announced that

Mr. Deterding was taking a much-needed rest.

These personal struggles with the _Standard_ are probably at an end.

Agreement is actively sought, at present, between the _Standard_

and the _Anglo-Persian_, especially owing to the influence of Sir

John Cadman. Since 1922, Elliot Alves and the _British Controlled

Oil-fields_ have followed the same policy. Perhaps before long there

will be an "oil peace," concluded between the directors of the great

Trusts. Was it not even outlined at The Hague Conference? Time will

show how long it will last.

My information, drawn from an authoritative source, tends to prove that

a great re-grouping of oil interests will not long be delayed.

A true saying, but perhaps a strange one--"Oil will be poured on

the troubled waters of Europe." For economics is more powerful than

politics. We are at the dawn of the great "Age of Oil."

FOOTNOTES:

[Footnote 13: Only for the American portion of its production are the

costs of the _Royal Dutch_ as high as those of the _Standard_.]

PART III

THE STRUGGLE BETWEEN THE POWERS