The Prize: The Epic Quest for Oil, Money, & Power
ISBN:9780671799328 read summary

Daniel Yergin's monster of a book was completed in 1990, right at the start of the first Gulf War and before the fall of the USSR. That means that you only get to learn about 1859--1989 while reading his 780 pp history of the oil business.

This book has been on my "to do" list for a long time, and I am glad that I read it. I now know a lot more about the oil business (and oil politics!). That knowledge provides useful insights into the the present and gives me some idea of what will happen in the future.

I will not give you a long summary of the book. For that, start with wikipedia. The short version of the book is:

1. Americans started the oil industry with lighting; it was run by rough, smart, aggressive characters.
2. Electricity killed the lighting market (kerosene), but the fuel market (diesel and gasoline) took its place.
3. Before WWII, most oil was controlled by US and UK firms that worked all over the world; the US was the biggest producer.
4. Mexico was first to nationalize its oil (breaking contacts with foreign companies) in 1938.
5. Oil was important in WWI, when it helped machines replace horses. It was critical in WWII, when its absence choked the Nazis and a shortage nearly ended Britain's resistance.
6. After WWII, supply outran demand, and prices dropped.
7. Iran (under the Shah) fought with Saudi Arabia for title of biggest exporter. These "beggar thy neighbor" races for market share hurt everyone, in an echo of the same overpumping that harmed oil US producers in the 1920s.
8. It was not until the 1980s that oil prices were really set in transparent markets; before then, they were set in long-term contracts, in bilateral negotiations that sometimes had nothing to do with economics.

In addition to this outline of trends, I made the following notes:

* Water is not even CLOSE to oil in significance for military or political actions. It's VERY unlikely that an army would lose a battle for lack of water or a nation be invaded for its water supplies. That's because water is everywhere, but oil is not.
* There were a lot of VERY smart people in the oil business. Global competition forced the best to the top. No such competition exists in the water world, either in terms of measured talent or productivity nor in terms of the size of the market or incentives to succeed or fail.
* The Office of Price Administration (J.K. Galbraith was on staff and on topic) opposed raising prices in WWII, making it more likely that the US would have fuel shortages and the military would not have enough oil to fight. Vacations to Florida were making it more likely that the Axis would be the owners of Disney World.
* The US was involved in Saudi Arabia from the start, and that involvement meant that the US was not too critical of mistakes or misrule in Saudi.
* The first oil concessions favored capitalist companies. Producing countries then unilaterally rewrote contracts for 50/50 profit splits. New-comers offered more to get into the game. After awhile, most concessions were nationalized.
* Everything changed in 1973, when the Arab -- not OPEC -- embargo against Israeli allies during the Yom Kippur War raised prices to levels never before seen. It's important to note that Small is Beautiful and Limits to Growth were in the public consciousness at the time. With the intellectual background in place, people saw the advantages to using less. It was a total change compared to use more more more...

In the United States, the shortfall struck at fundamental beliefs in the endless abundance of resources, convictions so deeply rooted in the American character and experience that a large part of the public did not even know, up to October 1973, that the United States imported any oil at all. But, in a matter of months, American motorists saw retail gasoline prices climb by 40 percent -- for reasons that they did not understand... The embargo and the shortage it caused were an abrupt break with America's past, and the experience would severely undermine America's confidence in the future. [pp 616-7]

* Oil exploration, production and distribution takes a lot of money, talent and coordination. The oil market was run like a big bureaucracy for many years, but many surprises and mistakes increased the cost of handling complexity. The rise of markets removed a lot of those problems, or at least minimized their harm.

This book provides an excellent background to how the oil business grew and changed the world. For more on the (financial, environmental and political) damage that oil causes us today, read Crude World.

Bottom Line: I give The Prize five stars for its clear and thorough exposition of an industry that gave us the good life today -- and the industry whose unsustainable product threatens to take that prosperity away.

The book is written from the perspective of someone who loves capitalism and thinks that the oil economy is the best thing since sliced bread (ie someone about as far from me politically as it's possible to get), but that hasn't stopped me from reading and re-reading this book and recommending to dozens of people. All history is biased, I can deal with that. What makes this book great is that the author is very clear about his perspective so you don't have to guess where he's coming from or who's story he's advocating and because he tells his story with style and with an incredible attention to details, facts, and historical context. Interested in WWII? Read this book. Curious about Robber Baron Capitalism? Read this book. Looking for insights into British policy in the middle east or American foreign policy around the world? Read this book. It's an astonishing work in its breadth, its depth, and its attention to detail. Highly recommended.

I have read this book 5 times in the 10 years since purchasing. I reference it often. New trinkets of information are found every time I re-read this excellent story (historical reference) of the oil industry.

Propaganda, no matter how couched in research is still propaganda. The author seems gung-ho on the archievements of "the industry" and its dominant actors and never expresses dismay at the wanton destruction it has and continues to perpetuate. Right from the premise, when he had reported on the greed which the inceptions of the industry created/fed upon, I found myself wishing he would take a moral stance and say something against what could only be disastrous for all in the long-term. But, alas, nothing there, and yet, robber barons like Rockefeller were touted to no end. Goes to show you that Yergin is his industry's man.

Mr. Yergin's book is a superbly written account of the impact of oil upon our global economy and way of life.

I never knew oil would be so essential towards economic and strategic concerns. The one fact that burned into my brain is the energy content of oil versus coal for warships during World War I. Ships burning oil instead of coal had more powerful engines while saving space and man-power. I don't recollect the figure, but it was staggering to realize an oil-fueled ship, say a British cruiser, could have as much firepower (after deducting weight and space for the bigger ship) as a coal-fueled German battleship. Oil is the stuff of victory. Akin to Frank Herbert's literary object "Spice" in his Dune series, alliances and treaties mean nothing to nations when struggling for a secure source of oil.

To understand the importance of oil is to also understand how vulnerable oil-dependent countries are against suppliers, dwindling supply, and the politics involved in protecting the flow of oil products.

Realizing the implications of oil-dependency should be an important part of our future public education cirriculum.