The International Petroleum Cartel, Staff Report to the Federal Trade Commission, released through Subcommittee on Monopoly of Select Committee on Small Business, U.S. Senate, 83d Cong., 2nd sess (Washington, DC, 1952), Chapter 2, "Concentration of Control of the World Petroleum Industry," pp. 21-36.



The petroleum industry consists of several separate but related physical operations. The first is exploration and discovery of oil. Once crude oil is discovered, it has to be produced--that is, extracted from the ground--and transported to a refinery which converts the crude into usable products. In some cases refineries are located near the source of production; in others, the oil is moved several thousand miles before it reaches a refinery. From the refinery the finished products are moved to various sales outlets, where they are purchased by the ultimate consumer. Generally speaking, the operations performed by the industry have been classified under four functional headings: exploration and production, refining, transportation, and marketing.


Outside of the United States, control over the petroleum industry (including reserves, production, refining, transportation, and marketing) is divided, for all practical purposes, between state monopolies and seven large international petroleum companies, five of which are American and two British-Dutch.

Control by government monopoly.--In some countries, state authorities control all phases of the petroleum industry from production through marketing, and operations by private companies are prohibited. The most striking example is Soviet Russia, which holds exclusive control over the petroleum industry in Russia, Albania, Austria, Czechoslovakia, Hungary, Rumania, Poland, and Sakhalin. In 1949, these countries controlled 6.1 percent of the world's reserves and accounted for 8.4 percent of world production.

Other countries in which petroleum production is under government operation are Bolivia, Brazil, Chile, China, Mexico, Spain, and Yugoslavia.. These countries, in 1949, held only 1.2 percent of the world's crude reserves, and accounted for 1.8 percent of world production. Thus all countries, including Russia and Russian satellites, which owned and operated the petroleum resources in their respective countries, accounted, in 1949, for only about 10 percent of world production and a little over 7 percent of the world's crude reserves. Although Russia and Rumania are important producing countries, they have not been substantial exporters of oil for several years. Mexico, therefore, is the only country in this group which has been a recent quantity producer for the export market.

In contrast to Mexico, many of the state-monopoly countries are not self-sufficient in oil, depending upon imports for part of their supplies. Bolivia, Brazil, Chile, and China imported substantial quantities of oil in 1949, most of which was supplied by one or more of the large international oil companies. In some of these countries, private corporations are permitted to engage in marketing operations.For example, the Standard Oil Co. (New Jersey) has subsidiaries which market in Brazil and Chile.

There are also a few countries, such as Argentina and Peru, in which the petroleum industry is operated under a dual system of public and private ownership. In Argentina, Yacimentos Petroliferos Fiscales (YPF), a Government-owned corporation, engages in all phases of the petroleum business. Its total crude production, in 1949, averaged 45,870 barrels per day, compared with a production of 17,300 barrel. for all private companies.1 The state corporation also controls a major portion of the country's refining capacity. Yet, in spite of this dominance of YPF in crude production, Argentina's imports of oil in 1949, were in excess of 60 percent of consumption. 2 Most of these imports probably caine from the seven international oil companies

In Peru the situation is the reverse. The operations of the Peruvian Government corporation, Emprese Petrolera Fiscal, are insignificant compared to the operations of the private petroleum companies. In 1949, a subsidiary of Standard Oil (New Jersey), International Petroleum Co., Ltd., accounted for more than 80 percent of Peru's petroleum output; a subsidiary of Royal Dutch-Shell produced 18 percent of the output; and the Peruvian Government corporation accounted for only about 1 percent.3 A comparison of refining capacity in 1950 showed International Petroleum Co., Ltd. with 33,000 barrels daily, while the Peruvian Government corporation had only 1,300 barrels. 4 International Petroleum Co., Ltd., Peru's principal producer, owns its concession in fee simple and pays no royalties to the Peruvian Government. 5

In summary, the facts about government operations in the inter. national oil industry appear to be as follows:

I. Russia, Roumania, and Mexico are important producers, but only Mexico has any significant production for the export market.

2 State monopolies for the development and production of oil exist in several other countries, which, however, have limited oil reserves and must import the bulk of their requirements from private corporations.

3. Some state-monopoly countries permit private companies to operate side by side with the government organizations, either as marketers (as in Brazil and Chile) or as integrated producers (as in Peru and Argentina).

4. On an over-all basis, state-monopoly countries control only about 7 percent of the world's petroleum reserves and 10 percent of world production. But even these figures overstate the importance of government monopolies, since all state-monopoly countries, except Russia, Roumania, and Mexico, must rely on imports for most of their oil supplies; and, as will be shown later, most of these imports must necessarily come from one or more of the seven international oil companies.

Control by seven international petroleum companies.-- The outstaniding characteristic of the world's petroleum inctiistry is the dominant position of seven international companies. The seven companies that conduct most of the international oil business include five American companies--Standard Oil Co. (New Jersey), Standard Oil Co. of California, Socony-Vacuum Oil Co., Inc., Gulf Oil Corp., and The Texas Co.-and two British-Dutch companies--Anglo-Iranian Oil Co., Ltd., and the Royal Dutch-Shell group.6 Apart from Mexico and Russian-controlled countries, these seven companies control directly or indirectly most of the world's petroleum business.

Control of the industry by these seven companies extends from reserves through production, transportation, refining, and marketing. All seven engage in every stage of operations, from exploration to marketing. The typical movement of petroleum from producer until acquired by the final consumer is through intercompany transfer within a corporate family. Outright sales, arms-length bargaining, and other practices characteristic of independent buyers and sellers are conspicuous by their absence. Control is held not only through direct corporate holdings, by parents, subsidiaries, and affiliates of the seven, but also through such indirect means as interlocking directorates, joint ownership of affiliates, intercompany crude purchase contracts, and marketing agreements. The remainder of this chapter will show the extent to which control is centralized in these seven corporations.

Control of world crude reserves.--In 1949, the seven international petroleum companies owned 65 percent of the world's estimated crude-oil reserves. Control of reserves means, in effect, control over future oil supplies (unless new reserves or synthetic fuels are developed). These companies held about 82 percent of all foreign reserves (reserves outside the United States) and about 34 percent of the United States (domestic) reserves. United States reserves are held by six of the seven international companies, since Anglo-Iranian Oil Co., Ltd., does not operate in the Western Hemisphere. Outside the United States, Mexico, and Russia, these seven companies, in 1949, controlled about 92 percent of the estimated crude reserve. 6a

Table 8 shows an estimate of the crude reserves controlled by the seven largest international petroleum companies, as of January 1949. 7

TABLE 8.--Estimated crude oil reserves held by 7 international petroleum companies, January 1949
[in billions of barrels]

  United States Foreign Total
Anglo-Iranian Oil Co., Ltd
13.9 13.9
Gulf Oil Corp. 1.3 5.8 7.1
Royal Dutch-Shell 0.8 4.5 5.3
Standard Oil Co. (New Jersey) 3.1 9.3 12.4
Standard Oil Co. of California 1.3 2.8 4.1
Socony-Vacuum Oil Co., Inc. 1.4 2.0 3.4
The Texas Co. 1.5 3.0 4.5
Total, 7 companies 9.4 41.3 50.7
Total estimated reserves, Jan.1, 1949 28.0 50.3 78.3
Percent of total, 7 companies 33.6 82.1 65.0

Sources: World Oil, December 1948, pp. 37 et seq.; company Annual Reports to Stockholders for 1949; Company Prospectuses, and Twentieth Century Petroleum Statistics, by De Golyer and MacNaughton, March 1949.

Control over world crude oil production.--In view of the concentration of control over reserves by the seven international companies, it is to be expected that these same flrnis would also dominate preduc.tion. Their importance in the production of crude oil is shown in table 9.

TABLE 9.-Crude oil production of 7 international petroleum companies by geographical areas, 1949
[In thousands of barrels daily]

  Western Hemisphere     Eastern Hemisphere     Grand Total
  United States Other Western Hemisphere Total Near and Middle East Other Eastern Hemisphere Total  
Anglo-Iranian Oil Co., Ltd
Gulf Oil Corp.
Royal Dutch-Shell
Standard Oil Co. (New Jersey)
Standard Oil Co. of California
Socony-Vacuum Oil Co., Inc.
The Texas Co.
Total, 7 companies
Total Production
257.1 (1)
1,692.1 (1)
8,531.3 (1)
Percent of total, 7 companies

(1) Excluding the production of the USSR and countries of Eastern Europe under Russian control. Total excluded production was 80,300 barrels daily in 1949.

Source: Company Annual Reports; World Petroleum, January 1950; Moody's Industrials, 1950; and World Oil, July 15, 1950

It will be seen that in 1949 the seven international petroleum companies accounted for more than one-half of the world's crude production (excluding Russia and satellite countries), about 99 percent of output in the Middle East, over 96 percent of the production in the Eastern Hemisphere, and almost 45 percent in the Western Hemisphere. If United States production is excluded, their share of the output of the rest of the Western Hemisphere is 80.5 percent. If United States production plus that controlled by U. S. S. R. and her satellite countries is excluded, these seven companies accounted for 88 percent of the remaining world's production. This figure understates the degree of control of the private petroleum industry because some of the output outside of the United States and Russia is produced by countries with state monopolies. Since the production of these countries must first satisfy internal demands, it is evident that only a relatively small quantity of crude is available from any source other than one of the seven large companies. 8

Control over world crude oil refining capacity.--The crude oil refining capacity of the world is also largely controlled by the seven companies, as is shown in table 10.

TABLE l0.--Crude oil refining capacity controlled by 7 international petroleum companies, 1950
(In thousands of barrels daily]

  Western Hemisphere     Total Eastern hemisphere Grand Total
  United States Other Western Hemisphere Total    

Anglo-Iranian Oil Co., Ltd
Gulf Oil Corp
Royal Dutch-Shell
Standard Oil Co. (New Jersey)
Standard Oil Co. of California
Socony-Vacuum Oil Co., Inc
The Texas Co
Total, 7 companies
1, 727.7
Total capacity
2, 185. 2 (1)
10,760.9 (1)
Percent of total, 7 companies

(1) Excluding refining capacity of U. S. S. R., Hungary, Poland, and Rumania.
Source: Refining capacity of individual companies in United States is from Bureau of Mines, Information Circular 7578, Petroleum Refineries, Including Cracking Plants in the United States, Jan 1, 1950. Statistics for Eastern Hemisphere, other Western Hemisphere and total capacity are from World Petroleum, Annual Refinery Issue, Vol. 21, No. 8, 1950, and from the companies' Annual Reports for 1949.

As the table indicates, 9 the seven international oil companies controlled, in 1950, almost 57 percent of the world's crude-oil-refining capacity. In the Western Hemisphere, excluding the United States, they held more than 75 percent; and in the Eastern Hemisphere, 79 percent. Excluding the capacity of the United States and that under Russian control the seven international companies owned more than 77 percent of the rest of the world's crude-oil-refining capacity.

Control of world cracking capacity.--Control over cracking capacity is potentially of greater economic significance than control over crude-refining capacity. The cracking process enables a refiner to obtain a greater quantity of higher-valued products (for example, gasoline as compared to residual fuel oil) from a given quantity of crude than can be obtained by the straight-run distillation method of refining. The cracking process also enables the refiner to vary the proportions of products produced, thus giving greater flexibility to the refining operation. Moreover, it is only by using cracking processes that the petroleum industry is able to produce high-octane gasoline and many of the chemicals which are the basic raw materials for synthetic rubber and many plastics. Thus the cracking process has made the petroleum industry an important supplier of products to other industries, and the concentration of control over the world's cracking capacity thereby affects a broader seguient, of the world economy than control over crude-refining capacity.

As will be seen from table 11 control of the world's cracking capacity is even more concentrated in the hands of the seven international petroleum companies than is control of crude refining. In 1950, these seven companies owned 17 percent of the cracking capacity of the United States, 53 percent of that of the Western Hemisphere, 84 percent of that of the Eastern Hemisphere, and 55 percent of that of the world. If the capacity of the United States and Russia (including her satellites) is excluded, these seven companies held 85 percent of all cracking capacity in the rest of the world, as compared with 77 percent of the crude-refining capacity of the same area.

TABLE 11.--Capacity of cracking plants controlled by 7 international petroleum companies, 1950
[In thousands of barrels daily]

  Western Hemisphere     Total Eastern hemisphere Grand Total
  United States Other Western Hemisphere Total    

Anglo-Iranian Oil Co., Ltd
Gulf Oil Corp
Royal Dutch-Shell
Standard Oil Co. (NJ)
Standard Oil Co. of California
Socony-Vacuum Oil Co., Inc
The Texas Co
Total, 7 companies
Total cracking capacity
348.3 (1)
5,045.0 (1)
Percent of total, 7 companies

(1) Excluding capacity of U. S. S. R., Rumania, Hungary, and Poland.

Source: Data on individual company capacity In United States are from the Oil and Gas Journal, Mar. 23, 1950. Other data are from World Petroleum, annual refinery issue, vol. 21, No. 8, 1950.

Control of world petroleum transportation facilities.--In international trade petroleum and petroleum products are usually transported by tanker. Pipelines are important in areas where extended movements over land are necessary and feasible; but, outside the United States, this use is limited to moving crude petroleum from producing areas to refineries or water terminals. As with reserves, production and capacity, petroleum transportation facilities outside the United States are also largely controlled by the seven petroleum companies.

At the end of 1949, Anglo-Iranian Oil Co., Ltd., reported that its subsidiary, British Tanker Co., operated 134 ships of about 1,400,000 dead-weight tons, and that additional tanker tonnage under various forms of charter amounted to about 2,000,000 dead-weight tons. In all, Anglo-Iranian directly employed some 14 percent of the world's tanker fleet. 10 Royal Dutch-Shell controlled and had under charter, at the end of 1949, more than 4,000,000 dead-weight tons. 11 Thus between them, these two foreign companies owned or controlled approximately 30 percent of the world's tanker tonnage.

The five large American companies also operated large tanker fleets. Standard Oil Co. (New Jersey) owned 2,213,000 dead-weight tons at the end of 1949, exclusive of tonnage under charter and tonnage owned by nonconsolidated companies. 12 Gulf Oil Corp. owned 617,597 dead-weight tons, with an additional 311,074 tons under long-term charter; 13 in February 1948, Texas Co. controlled about 800,000 tons; 14 Standard Oil Co. of California, 552,000 tons; 15 and Socony-Vacuum, about 467,000 tons, 16 not including tankers under long-term charter. Although these data are not complete, 17 they show that the five American companies control about 5 million dead-weight tons, or more than 20 percent of the world's tanker fleet. Thus the seven international oil companies control at least 50 percent of the world's tanker fleet, and perhaps more, since most of the large oil companies have added substantial tonnage to their tanker fleets in 1950.
Actually, the use of the world's tanker fleet as a yardstick tends to understate the degree of concentration, since large tonnages are owned and controlled by governments or agencies of governments. 18 Therefore, a better yardstick would be the world's privately owned tanker fleet, which is estimated to have been between 18 and 19 million tons in 1948. 19 Since the seven large oil companies own or control about 12.4 million dead-weight tons, their percentage of control is about two-thirds of the total privately owned tanker fleet as compared to one-half of the world's total tanker tonnage.

It is noteworthy, too, that all of the important pipelines outside the United States are owned by the same seven oil companies. The principal petroleum pipelines abroad, and the corporate ownership of each, are shown in the following listing: 20

1. The Oficina-Puerto la Cruz pipeline system in Venezuela consists of 99 miles of trunk line and 118 miles of gathering lines and is owned by Mene Grande Oil Co. (a Gulf subsidiary), and Creole Petroleum Corp. (a subsidiary of Standard Oil Co. (New Jersey)).

2. The Andian National's pipeline in Colombia is 335 miles long, and links the fields of Tropical Oil Co. with a marine terminal at Mamonal. The line is owned by Andian National Corp., Ltd., a subsidiary of International Petroleum Co., Ltd., which in turn is a subsidiary of Standard Oil Co. (New Jersey).

3. The South American Gulf Oil Co.'s line in Colombia extends 252 miles from Petroles in the Barco concession to the port of Covenas. Ownership of the South American Gulf Co. is divided equally between Socony-Vacuum Oil Co., Inc., and the Texas Co.

4. The Iraq Petroleum Co., Ltd., has a pipeline system which runs from the Kirkuk field in Iraq to Haifa and Tripoli on the Mediterranean Sea. The Kirkuk-Haifa lines are 621 miles long, and the Kirkuk-Tripoli lines are 532 miles in length. Iraq Petroleum Co., Ltd., as will be brought out later, is controlled by 4 the large oil companies.

5. The Anglo-Iranian Oil Co. owns pipelines extending from producing fields in Iran to the Persian Gulf. There are several lines, and the total daily capacity of the system exceeds 500,000 barrels.

6. Recently completed by the Trans-Arabian Pipeline Co. is a 30-31-inch crude pipeline from Qaisuma, Saudi Arabia, to the Mediterranean Sea, a distance of 753 miles. The line is owned by four American oil companies, as follows: Standard Oil Co.(New Jersey), 30 percent; the Texas Co., 30 percent; Standard Oil Co. of California, 30 percent; and Socony-Vacuum Oil Co., Inc., 10 percent.

7. In Venezuela, Creole Petroleum Corp., a subsidiary of Standard Oil Co. (New Jersey), in conjunction with one or more of the other large oil companies, operates a 143-mile crude-oil line, which extends from Lake Maracaibo in Venezuela to Amuay Bay on the Caribbean Sea.

8. The Bahrein Petroleum Co., Ltd., and the Arabian American Oil Co. jointly own a 34-mile crude line which connects tbe Dammam field of Saudi Arabia with a refinery on Bahrein Island. The Bahrein Petroleum Co., Ltd., is owned jointly by the Texas Co. and Standard Oil Co. of California, while Arabian American Oil Co. is owned 30 percent by Standard Oil Co. (New Jersey), 30 percent by Standard Oil Co. of California, 30 percent by the Texas Co., and 10 percent by Socony-Vacuum Oil Co., Inc.

9. The Sociedad Anonima Petrolera las Mercedes, which is owned jointly by the Texas Co. and Caracas Petroleum S. A., has a 157-mile crude line extending from producing fields in Venezuela to a deep-sea terminal at Pamatacual. Caracas Petroleum S. A. is controlled by British interests.

10. In Canada, Interprovincial Pipeline Co., Ltd., is constructing a crude line from Edmonton, Alberta, to Superior, Wis., a distance of about 1,100 miles. Interprovincial Pipeline Co., Lt.d., is a subsidiary of Imperial Oil, Ltd., which, in turn, is owned by Standard Oil Co. (New Jersey).

11. in Venezuela, Creole Petroleum Corp. (a subsidiary of Standard Oil Co. (New Jersey)) and Shell Caribbean Petroleum Co. (of the Royal Dutch-Shell group) are cooperating in the installation of an 8-inch products line from the seacoast of Catia la Mar to Caracas. 21

In addition to the above lines, Middle East Pipelines, Ltd., has proposed the construction of a large crude-oil pipeline from Iran to the Mediterranean Sea. Middle East Pipelines, Ltd., is owned 60.9 percent by Anglo-Iranian Oil Co., Ltd.; 24.7 percent by Standard Oil Co. (New Jersey); and 14.4 percent by Socony-Vacuum.

Thus, outside of the United States, every important pipe line in existence or even proposed is controlled by the seven principal international oil companies, individually or jointly.

Control over marketing.--Perhaps in no other raw material industry is the control over marketing so highly concentrated as in petroleum. All seven of the large international conwanies market, either jointly or severally, petroleum products through various subsidiaries and affiliates in all important consuming areas of the world except the U. S. S. R. and its satellite countries. Each of the major petroleum companies is integrated, from crude production through refining, transportation, storage terminals, and docks, to wholesale and retail distributing and dispensing equipment. It is the rule, rather than the exception, for petroleum products to move from producer to consumer by company-owned facilities within one corporate hierarchy.

While a detailed analysis cannot be given, due to the scarcity of statistical information, it would appear that the seven international oil companies are dominant forces in nearly all foreign markets. Illustrative examples of their control of the market in the 1930's are given in the case studies of marketing arrangements in chapter IX, not only in such important markets as the United Kingdom and France but also in such lesser markets as Norway, Chile, and Jamaica. This control of particular marketing areas in all parts of the world would appear to have continued into the post-World War II period. 22

In any event it does not appear necessary to develop any elaborate statistical argument to support the conclusion that the seven international oil companies have a highly concentrated control over marketing. Such control would seem to be inevitable for the simple reason that there are no other companies operating in international markets capable of supplying petroleum products in substantial quantities, as has been amply suggested by the information given in this chapter on all divisions of the petroleum industry. Upon the secure basis of their control over production, refining, and transportation, the seven international oil companies have built extensive marketing organizations reaching into consuming areas in all parts of the world. The power of these major companies is so substantial as to be virtually unchallengeable, except, perhaps, in particular local marketing areas.


In the preceding sections, data were presented showing the extent to which the international petroleum industry is owned and controlled by seven large companies. The influence of these companies on the world's oil business is increased by close corporate relations existing between them.

Joint ownership of subsidiary and affiliated companies.--Outside the United States, Mexico, and Russia, the operations of the seven international petroleum companies are combined through various intercompany holdings in subsidiary and affiliated companies. These holdings constitute partnerships in various areas of the world. Each of the companies has pyramids of subsidiary and affiliated companies in which ownership is shared with one or more of the other large companies. Such a maze of joint ownership obviously provides opportunity, and even necessity, for joint action. With decision-making thus concentrated in the hands of a small number of persons, a common policy may be easily enforced.

The principal foreign companies jointly owned at the end of 1949 by two or more of the seven international oil companies are shown 23 on the accompanying charts for the Middle East, Europe, Latin America, the Far East, and the United States and Canada.

To summarize briefly, the principal facts revealed by these charts are the clusters or complexes of corporate interrelations effected through jointly-owned subsidiaries and affiliates. For example, in the Middle East, Jersey Standard, Soconv, Royal Dutch-Shell, and Anglo-Iranian are linked through their joint holdings in Iraq Petroleum Co. and its nest of subsidiaries; Gulf and Anglo-Iranian jointly own Kuwait Oil; Standard of California and Texas Co. have many joint relations through the California-Texas complex of companies and are tied to Jersey Standard and Socony through Arabian American Oil Co. and Trans-Arabian Pipe Line Co.

In Europe, again there is the California-Texas cluster of companies linking together Standard of California and Texas Co.; Anglo-Iranian, Royal Dutch-Shell, Socony, and Jersey Standard jointly own Companhia Africana de Petroleo; while Gulf and Jersey Standard are tied through their holdings in United Petroleum Securities Corp. In Latin America, a major complex of holdings links Socony, Standard of California, and Texas; while another brings together Jersey Standard, Gulf, and Royal Dutch.Shell.

The most important single complex in the Far East is the coinbination of Jersey Standard, Socony, Texas, Standard of California, and Royal Dutch-Shell through N. V. Nederlandsche Nieuw Guinee Petroleum Maatschappij. The California-Texas combine also operates in the Far East, as does Standard-Vacuum, which is one of the important companies linking together Jersey Standard and Socony-Vacuum; and Anglo-Iranian and Royal Dutch-Shell jointly conduct extensive operations in the Far East as well as Europe.

The principal international companies also conduct many joint operations in the United States and Canada, and have established a corporate network of joint holdings with major domestic oil companies. These interconnections are primarily through jointly owned pipe lines, technical processing and licensing companies. The Texas Co., for instance, through its share holdings in Great Lakes Pipe Line Co., is connected with seven important domestic oil companies. Shell Oil Co., owned by the Royal Dutch-Shell group, shares ownership in the Bayou Pipe Line System with Jersey Standard and four domestic oil companies. The Texas Co., Pure Oil, and Standard of Indiana jointly own Gray Process Corp.; Jtrsey Standard and Standard of California have a joint exploration Canada, while Socony, Texas Co., and Standard of Indiana are linked through their joint ownership of Wyco Pipe Line Co.

The joint-ownership companies shown on the above charts by no means represent an exhaustive listing; nor do they necessarily include all the important joint ownerships. It has not been possible to compile a complete list. However, the indicated joint-ownership relations are sufficient to show that the international oil companies are not only interlocked in their operations in the United States and Canada, but also are engaged in joint operations with many other large domestic oil companies.


These intercorporate relations are important in that they expand the area of potential control that may be exercised by the seven international oil companies. But also important is the type of company through which the joint-ownership relations are effected. The fact that pipeline corñpanies and companies concerned with patents and technological processes are common among the jointly owned companies is not without significance. Technology and transportation are strategic points in the oil industry for exerting the maximum of control.

Interlocking directorates among the international petroleum companies.--The boards of directors that manage the labyrinth of foreign corporations, which are jointly owned by the major international oil companies, provide organizational opportunities for joint action and the establishment of a common oil policy throughout the world. Of course, not all interlocking directorates are significant; some may be fortuitous. Nonetheless the fact that they exist on such a widespread scale in the petroleum industry makes it possible for a small group of individuals to exercise unusual influence on the industry's operations and behavior. A few examples of the more important directorships held by various key individuals, in 1949, will illustrate the manner in which a thread of interconnections is woven by directorates between the major companies. 24

As an example of a common "meeting ground," the board of directors which determines the policies of the Arabian American Oil Co. (Aramco) is composed of three members each from the boards of the Standard Oil Co. (N. J.), Standard Oil Co. of California, and Texas Co.; one member from the board of Socony-Vacuum Oil Co., Inc., and one member with no listed affiliation. 25

The extent of tile interlocking directorships among the major oil companies is indicated on chart 18. This chart reveals that a considerable number of the directors of the international companies hold multiple directorships in subsidiary companies. For example, the directors of Standard of New Jersey and Socony-Vacuum, who determine the policies of Arabian American Oil Co., are the same men who help to shape the behavior of Iraq Petroleum Co. The directors of Anglo-Iranian who assist in making high oil policy for Iraq and Iran, participate, along with the directors from Gulf, in planning the price and production policies of Kuwait. It must be kept in mind that the chart shows only the directorships in Middle East subsidiaries held by directors of the parent companies and, because they are directors of the parent companies, these same individuals are able to influence decisions with respect to operations in the Far East, Europe, Venezuela, and the United States.

Chart 19 shows some of the indirect interlocking relations between international oil companies operating in the United States and some major domestic companies. Thus directors of Standard of California interlock through intermediate corporations with directors of the Union Oil Co. of California (in four cases), of the Standard Oil Co. (Indiana), and of the Continental Oil Co. Directors of the Gulf Oil Corp. interlock with directors of the latter two companies and with directors of the Pure Oil Co., Panhandle Producing & Refining Co., Tidewater Associated Oil Co., Phillips Petroleum Co., and Shamrock Oil & Gas Corp. Interlocking relations similarly exist between directors of Shell Oil Co. and Texas Co. and directors of many domestic oil companies. These indirect relations provide opportunities for the international companies to harmonize any conflicting interests that might develop between the international companies and major domestic èompanies. It is an organizational device that could be used in the event it was needed.

As will be noted from the charts, Standard Oil of New Jersey and Socony-Vacuum are the only two major international companies operating in the United States which did not have interlocking relations with other oil companies. Both of these firms, however, conduct many domestic as well as foreign operations on a partnership basis among themselves and with other oil companies. 26

These relationships by no means exhaust the interlocking directorates existing in the petroleum industry, since they do not include directorships of the subsidiary and affiliated companies, both foreign and domestic, controlled by the seven international companies. But since most of the oil business out.side the United States is conducted directly or indirectly by the seven major companies themselves, the expansion of their area of potential influence through interlocking relations with other oil companies is limited primarily to companies operating in the United States.


The international oil industry, in a physical sense, is composed of four distinct and separate divisions: production (and exploration), transportation, refining, and marketing. However, by vertical integration, the operations in all divisions are performed by large integrated companies.

Control over the international oil industry is largely in the hands of seven integrated companies. Outside the United States and the Soviet Union, they control the bulk of production and marketing of oil moving in international commerce. Many pairings and groupings of these seven companies and their affiliates conduct joint operations in most parts of the world. Four of them own over 70 percent of the shares of Iraq Petroleum Co., Ltd., which, in turn, controls all the oil of Iraq, Qatar, the Trucial coast, and other less important areas in the Middle East; four of them own all the shares of Arabian American Oil Co., which controls all the oil in Saudi Arabia, and two of these four own the Bahrein Petroleum Co., Ltd., which, in turn, controls the oil resources of Bahrein Island; one has exclusive control of all the oil in Iran, and in partnership with another of the seven companies, controls all the oil in Kuwait; three of the seven, in partnership and in separate operations, control most of the oil resources of Venezuela and other Latin American countries, except those with state monopolies; five of them, operating as three corporate entities, control most of the oil resources of the Netherlands East Indies.

These seven international companies operate through layers of jointly owned subsidiaries and affiliated companies. Through this corporate complex of companies. they control not only most of the oil but also most of the world's foreign petroleum refining, cracking, transportation, and marketing facilities. Thus, control of the oil from the well to ultimate consumer is retained in one corporate family or group of families.

Joint ownership of affiliated companies is probably more widespread in the international petroleum industry than in any other field of enterprise. The major international oil companies use the joint-ownership technique not only in conducting foreign operations but also in their operations in the United States and Canada. This is particularly true with respect to control of pipe lines and companies holding patents on technological processes. Thus, the international coinpanes, operating in the United States and Canada, are joined with the large domestic oil companies in the two operations where control is likely to exert the maximum of influence on the industry.

Also, the boards of directors that manage the myriad of jointly owned corporations may, in effect, be private planning boards where differences are resolved and where an oil policy for time world can be established. Under any circumstances, it would be difficult to overlook the significance of the meeting together of directors of the major international oil companies to determine the price and production policies of companies whose operations must inevitably affect the oil industry throughout the world.

Control through the joint-ownership device is further centralized and unified by the fact that directors of the major companies also serve as directors of some of the more important affiliated companies. This close association of policy-making officials can readily result in a unified management of the various combinations of interests, and thus tends to lessen the opportunity for effective competition between the major companies in their foreign operations.

The international companies have also extended their spheres of potential influence over the United States oil industry through indirect interlocking directorates. Although the association of the directors of the international companies with the directors of important domestic oil companies on the board of a third compan may not be significant in and of itself, it at least provides the opportunity for reconciling difrerences that may arise between the international and the domestic companies.

The significance of this high degree of concentration for the cartel problem lies in the fact that concentration facilitates the development and observance of international agreements regarding price and production policies. Indeed, the concentration of an industry into a few hands may be regarded as the sine qua non of effective cartel operations.

Go to Chapter 3 of The International Petroleum Cartel, "Development of Joint Control over Foreign Oil," pp.37-46.


1. World Oil, July 15, 1950, p. 104.

2. Ibid, p. 112.

3. Ibid., p. 139.

4. World Petroleum Annual Refinery Review, 1940, vol. 21, No. 8, p. 100.

5. International's exemption from paying royalties resulted from a decision in 1922 by the International Court of Appeals.

6. The parent companies of the group are the Royal Dutch Petroleum Co. and the Shell Transport & Trading Co. These two participate iii all interests of the group with shares, respectively, of 60 and 40 percent.

6a. Any estimate of world reserves is subject to a considerable margin of error, hut the important point here is not the absolute amounts but the relative proportions. From World Oil, December 1948, p. 38, ff, it is possible to show that the seven large companies held 98 percent of the crude reserves outside the United States, Mexico, and Russia.

7. Some of the data used are for 1948, resulting in an understatement of the degree of control.

8. It should be noted that neither the United States, which now must import petroleum to satisfy its needs, nor the U. S. S. R., which consumes all it produces, is in a position to add to the supplies of petroleum for foreign markets.

9. While 1949 data are used lu a few cases in table 10, this does not alter the table significantly.

10. Annual Report to Stockholders, December 31, 1940, Anglo-Iranian Oil Co., Ltd.

11. Royal Dutch Petroleum Co., Report for 1949.

12. Annual Report 1949, Standard Oil Co. (New Jersey).

13. Annual Report 1949, Gulf Oil Corp.

14. The Petroleum Data Book, second edition, 1948.

15. Ibid.

16. Ibid.

17. Tonnage owned by some foreign subsidiaries and affiliates is probably not included. Also, long-term charter tonnage and the increase between February 1918 and the end of 1949 in the tonnage held by Texas, Socony. and Standard Oi1 of California would need to be included.

18. Government-owned or controlled tonnage is of significance in this regard only where it is utilised in commercial traffic, and where it is not leased by the seven large oil companies, i.e., when it is made available to their competitors.

19. Estirnated from statistics in Petroleum Data Book, 1948.

20. Source: Moody's Industrials, 1950; Petroleum Register, 1949; company Prospectuses and Annual Reports to Stockholders.

21. World Petroleum, April 1950, p. 63.

22. While only limited data on marketing operations of the major oil companies in the post-world War It period are available, data for Brazil throw some light on the extent of market dominance. In 1936 according to records of the Standard Oil Co. (New Jersey), three of the international oil eompanies--Standard (New Jersey), Royal Dutch-Shell. and Texas Co--together with the Atlantic Refining Co., controlled the following proportions of the principal products marketed in Brazil: Gasoline, 98 percent; kerosene, 91 percent; fuel oil, 100 percent; gas and Diesel oil, 99 percent; and asphalt, 99 percent. In the postwar period, it was estimated that these companies and the Gulf Oil Corp. held about 100 percent of the combined markets for all petroleum products in Brazil. The respective shares of the companies were approximately as follows: Standard (New Jersey), 39 percent; Royal Dutch-Shell, 17 percent; Texas Co., 11 percent; Gulf, 4 percent; and Atlantic, 26 percent. Although not indicated, it would appear that the data given are for 1949; World Petroleum, June 1950, p. 41.

23. Sources: Moody's Industrials, 1950; company Prospectuses and Annual Reports to Stockholders, 1949-50: World Oil, 1949-50; World Petroleum, 1949-50; Petroleum Register, 1949; and The Oil and Gas Journal, 1950.

24. The information on directors, named in this section, was obtained from Poor's Register of Directors and Executives, 1950; Minutes of Meetings of Boards of Directors of Iraq Petroleum Co., Ltd., Trans-Arabian Pipe Line Co., Arabian American Oil Co., and Middle East Pipe Lines, Ltd., 1949; Petroleum Register, 1949: compiny prospectuses and annual reports to stockholders, 1949-50; and Moody's Industrials, 1950.

25. In 1949. the following individuals served on the board of directors of Arabian American Oil Co.: S. P. Coleman, director, Standard Oil Co., (N. J.); Orville Harden, director, Standard Oil Co. (N. J.); John .Suman, director, Standard Oil Co. (N. J.); H. D. Collier, director, Standard Oil Co. of California: R. G. Follis, director, Standard Oil Co. of California; B. W. Letcher, director, Standard Oil Co. of California; W. S. S. Rodgers. director, the Texas Co.; A. C. Long, director, the Texas Co.; H.. T. Klein, director, the Texas Co.; C. L. Harding, director, Socony-Vacoum Oil Co., Inc.; and W. F. Moore, president of Aramco; his other affiliations. if any, are not known.

Ownership of Arabian American Oil Co. and Trans-Arabian Pipe Line Co., is divided between Jersey Standard, Texas, Standard of California (each holding a 30-percent share), and Socony-Vacuum (a 10-Percent interest).

26. See preceding section on "Operations of jointly owned affiliates and subsidiaries."

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