BLACK GOLD -- COMMONLY USED TERM FOR OIL

       A.  August 28, 1859 - Oil was discovered in 1859 in Titusville, Pennsylvania by E. L. Drake. Drake was financed by the Pennsylvania Rock Oil Company of Connecticut and later by a New Haven banker, James M. Townsend. Townsend spent the last of the funding, believing that the project would soon be abandoned. Oil was finally discovered, some 69 feet below the earth's surface, some two years after drilling had begun.

       B.  January 2, 1882 - The Standard Oil Trust Agreement was drawn up and signed by 41 stockholders of Standard of Ohio and 3 trustees who had held stock or equities in some 40 specifically named companies associated with Standard. The value of the properties put into the trust was set at $70 million, with 700,000 trust certificates issued to the stockholders of Standard of Ohio at $100 each. The trust was formed so that they could legally run properties and businesses in various locations under one system of established policy and communication. The agreement also called for the formation of corporations with the Standard Oil name in New York, New Jersey, and in other places where necessary. Standard Oil of New Jersey and New York were incorporated in 1882, followed by Standard of Indiana, Iowa, Kentucky and California.

       Standard's innovation marked a great change in American industry as other industrialists found a legal way of doing business that had thus far been prohibited. Control over major policy decisions in Standard Oil still stood with John D. and William Rockefeller, H. M. Flagler, S. V. Harkness, and Oliver H. Payne, who combined owned over half of the shares outstanding in the trust. The Standard Oil Trust at this time controls over 90% of the nation's oil refining capacity.

       C.  May 15, 1911 - Standard Oil Co. of New Jersey ordered dissolved by the United States Supreme Court in an anti-trust suit. Of the top eight oil companies today, four of them were originally members of the Standard Oil trust. Standard of New Jersey later became Humble Oil Co. marketing its products under the "Esso" trademark and finally becoming EXXON. Standard of New York (Socony) merged with Vacuum Oil Co. of Rochester, New York becoming Socony-Vacuum and later Socony-Mobil. Today, they are known as Mobil Oil. Standard of Indiana and Standard of California retained their same corporate names. Three of these four companies (EXXON-MOBIL and STANDARD OF CALIFORNIA) are members of what are sometimes referred to as the "Seven Sisters." The other four companies, or sisters, are Texaco, Gulf, Royal Dutch Shell and British Petroleum.

     D.  March 25, 1913 - On this date, final ratification was given to the 16th Amendment to the Constitution, giving Congress the right to collect taxes on income from whatever source derived. The original income tax law contained a provision which allowed a deduction on depletion of up to 3% of the original cost of the property or its market value. The Revenue Act of 1918 further expanded this depletion allowance and, seven years later, Congress finally settled for a 27.5% tax break known as "discovery value depletion." Fifty years later, in the Tax Reduction Act of 1975, Congress began to phase out the depletion allowance for large oil companies which many times allowed them savings amounting to billions of dollars in a single year. While the corporate tax rate is about 500, it has been very rare that the majors have paid more than 5% in taxes. In 1974, Federal Income Tax paid by the twenty largest oil companies was less than 8% of their income before taxes.

     E.  July 31, 1928 - Exxon and Mobil became partners (23.75% between them), with British Petroleum (23.75%), Shell (23.75%), Compagnie Francaise (23.75%) and Gulbenkian (5%) in the Iraq Petroleum Company. The IPC was formed originally in 1914. These were the first American companies participating in Mid-East production. Later Standard of California and The Texas Co. would become involved in Saudi Arabia and Bahrein, Gulf in Kuwait, and other companies in Iran and other countries.

     F.  September 17, 1928 - On this date a document known as the "As Is Agreement of 1928" or the "Achnacarry Agreement” was agreed to by Walter C. Teagle (Exxon), Sir John Cadman (Anglo-Persian Oil-British Petroleum), and Sir Henri Deterding (Shell). The document, consisting of

seven principles, resulted from a price war that had developed between Royal Dutch Shell and Standard of New York (Mobil). The agreement served as general principles and guidelines for operating procedures in the distribution of oil.

     G.  January 20, 1930 - On this date, the Memorandum for European Markets was issued. It stated "It is agreed between the parties that they shall maintain at least the total trade which they held during the basic period, and to this end prices and selling conditions shall be fully and frankly discussed between local representatives. In the event of disagreement between the parties, the matter shall be settled by a simple majority vote, each party having one vote for each complete one per cent of quota."

     H.  April 15, 1930- President Hoover, by executive order, shut down oil shale conversion experiments.

     I.  November 12, 1932 - The Texas State Legislature passed the "Market Demand Act". It was, in effect, a means of restricting production to control prices. State Senator Joe Hill said, "It is the rankest hypocrisy for a man to stand on this floor and say the purpose of pro-ration is anything other than price fixing. I sit here in utter amazement and see men get up and talk about market demand as an abstract proposition and contending that it has got no relation to price fixing."

     J.  December 15, 1932 - The Heads of Agreement for Distribution was adopted by Exxon, Mobil, Texaco, Gulf, Atlantic, British Petroleum, and Shell. Knowing their business well, they realized that oil must be consumed at the level of production. Aware that a small amount of uncontrolled supply could disrupt the market, the Heads of Agreement sought to avoid problems by keeping the market stable. When control over the control of oil was threatened by the invasion of an industrious independent, it became policy to simply purchase the company causing the problem.

     K.  February 22, 1935 - On this date the Federal Government passed a law which stopped interstate shipments of oil produced in excess of state law. The Connally Act, named for the Texas Senator, was devised so that interstate shipments could not be made and disrupt the system major oil companies had developed for distributing oil.

     L.  1945 - Price estimates per barrel in Bahrein, Kuwait, Saudi Arabia, Iran, and Iraq range from a dime to 20 cents a barrel. There are

approximately 40 gallons of oil, or some derivative of oil, to be gained from a barrel of crude after refining.

     M.  March 12, 1947 - On this date Standard of California and Texas Co. (Texaco) formally signed documents making Standard of New Jersey (Exxon) and Socony-Vacuum (Mobil) partners in Aramco, and the marketing of Saudi Arabian oil. While obviously costing Southern California and Texas Co. big bucks, the deal was made for two reasons. First, there would be a problem with forcing this oil into the market place without an orderly pattern; and secondly, the Rockefeller family had working control over three of the four companies involved.

     During 1946 Aramco crude was selling for about 90 cents per barrel. However, when Exxon and Mobil joined Aramco they wished to bring this cheaper price more in line with the competitive market price of $1.40 per barrel. From Texaco files, marked "Personal and Confidential": "If the crude price is determined by agreement among Aramco Directors and not on a cost-plus basis, there may be danger of violation of U.S. Anti-trust laws, it may be contended that any agreement as to price arrived at by the Aramco Directors, who are also directors of four large oil companies doing business in the United States, is in effect, an agreement in restraint of trade with the United States."

     N.  March 1951 - In March 1951, upon the urging of Dr. Muhammed Mossadeq, the Iranian government passed a nationalization bill. In the United States, we go by the "rule of capture": that is that subsoil rights below the ground belong to the owner of the property. In most of the world, subsoil rights belong either to the people or those who rule the country. In May 1951, Dr. Mossadeq was Prime Minister, and the British were told to leave Iran. In order to discourage further attempts at nationalization, the oil companies boycotted Iranian crude. Oil exports for Iran dropped from over $400 million in 1950 to under $2 million for the two years from 1951 to 1953. Production was increased in other countries to offset the boycott. Despite the fact that Dr. Mossadeq had the popular support of the Iranian people, he was overthrown in 1953 by the Shah, with considerable help from the United States Central Intelligence Agency.

     0.  June 23, 1952 - On this date, President Harry S. Truman wrote the following to his Secretaries of Commerce, Defense, Interior and State: "I have requested the Attorney General to institute appropriate legal proceedings with respect to the operations of the International Oil Cartel. I would like for you to cooperate with him in gathering the evidence required for these proceedings." Heading up the investigation was Leonard Emmerglick. On January 12, 1953, just eight days before he was

to leave office, President Truman ordered the Attorney General to replace the criminal suit with a civil case. Emmerglick, upon the President's request, came to the White House. He was informed by Truman that he had made the decision, with great reluctance, solely on the assurance of General Omar Bradley, who said that National Security called for that decision. When instituted, the case hoped to bring a halt to:

(1)  The continuing monopoly in foreign markets.

(2)  The controlling of domestic production to maintain desired
       domestic and world prices.

(3)  Quotas to limit foreign market sales.

(4)  Limits on U.S. imports and exports.

(5)  Exclusion of access to independents wishing to deal in
       foreign sources.


     P.  1953 - Robert Cutter, Special Assistant to President Eisenhower, sent the following to Secretary of State Dulles: "It will be assumed that enforcement of the Antitrust laws of the United States against the Western Oil companies operating in the near east may be deemed secondary to the national security interest..."

     Q.  1958 - In 1958, the Trade Agreements Act is passed. This program began in 1959 and lasted until 1973. It restricted imports to 12.2 per cent of domestic production. Its catastrophic effects are fiercely felt some twenty years later. The costs to the American consumer, which allowed oil companies to pocket billions every year, are incidental compared to the eventual costs the quota would bring in the future. For fourteen years, 88% of the world's largest market was supplied by ourselves from our own resources. Had our automobiles gotten double or triple the mileage we then got, had the laws been different, or if somebody had looked more perceptively ahead, today's alleged crisis might not exist. The selling price of Mid-East oil during this time was less than $2 a barrel. Today it sells from seven to ten times as much. Planning was either very bad or very good; nowhere in between.

     R.  1960 - The Revenue Act of 1960 was another piece of legislation that greatly benefited the engery companies and burdened the American taxpayer. It was at this same time, oddly enough, that the Organization of Petroleum Exporting Countries was formed. The seven Arab nations and

four others, then comprising OPEC in 1960 (now 13), were consistently disappointed with the details of the various splits they had been getting for the past thirty years. It is truly amazing that it took this long for action on their part. Some nations began to revise their tax structures in order to retain more profits from the oil companies doing business in their countries. The Revenue Act of 1960, for all intents and purposes, was a way of shifting the paying of taxes to these nations from the oil companies to the American people. Money paid to other governments would work as a foreign tax credit and was used to the energy conglomerates' advantage. Thirteen years later, OPEC would begin to flex its muscles, taking advantage of the Congressional law which depleted U.S. reserves until 1973.

     S. 1962 - Enrico Mattei was head of Italy's state owned energy company. He was an innovator who brought changes to the oil business. He constructed bigger service stations, with better rest room facilities, and originated the use of adjoining snack bars and motels, so popular today.

In addition, he made considerable price cuts at the gas pump. Mattei also favored construction of local oil refineries which would have drastically affected the distribution of oil. Mattei had started doing business with Japan, India, Africa, and Asia and was con¬templating another price cut when he died on October 27, 1962 in a plane crash.

     T.  1968 - Until 1968, North America led the Mid-East and the world in oil production. Knowing that we possessed about 10% of the world's reserves, this was either a very stupid or very smart policy, depending on your perspective.

     U.  September 1, 1969 - On this date, King Idris of Libya was overthrown by Army officers led by Colonel Muamar al-Khadaffi. Prior to this, Libya did over 50% of its business with independent oil companies. The country had increased production from less than 200,000 barrels a day in the early sixties to about 3 million barrels a day by the close of the decade. Colonel Khadaffi, who received his military training in the United States and Great Britain, lost no time in raising oil prices, and, to the independents' dismay, curtailing production.

     V.  1969 - 1972 - The major oil companies suffer a decrease in their share of the market in gallons sold. For the first time, a decrease in domestic earnings is registered, as independent retailers, using self-service stations and offering lower prices, begin to compete with the majors.

     W.  October 16, 1973- On this date, ten days after Egypt and Syria invaded Israel, OPEC announced a 70% hike in prices from $3.00 a barrel to $5.11. Less than three months later, on January 1, 1974, the price per barrel was raised to $11.65. In October 1975, the barrel price was raised to $12.38. The leading supporter of the price increase was the Shah of Iran.

     X.  1973 - 1974 ? Arab Oil Embargo ? When the Arab Oil Embargo began is impossible to say since figures seem to indicate that more oil was imported to the U.S. during the alleged shortage. However, we do know that, after the price raise on January 1, 1974, OPEC prices remained the same until November, when the barrel price was reduced to $11.25.

     Y.  1975 - In 1975, OPEC cut back on oil production. This was not an embargo, but if production was not cut back, the producers would either have to cut prices or find a place to store their oil: neither alternative was "good business." This cut back, therefore, also was capable of destroying the independent retailer who had jeopardized the majors' profits in the late 60's and early 70's.

     Z.  1979 - CHINA - China has oil. Lots of it. Chinese officials visited Houston long enough to put on cowboy hats, attend a rodeo, and inquire into necessary equipment for further oil production. Whether our government or the energy companies will conduct negotiations in this area concerning oil is not yet known.

     IRAN - The Shah of Iran has fled his country. It is highly unlikely that he will return to power. Because of a cutback in production, we once again hear the oil con¬glomerates using scare tactics to warn of future shortages. With threats of possible rationing, these companies hope to make use of the 3-digit guages they have ordered for the United States. These price hikes amount to nothing more than a ruthless display of their unending greed. Cost of oil should be determined by what it costs to take the oil out of the ground and properly process it -- not by how much we can be forced to pay for it.

     MEXICO - Mexico has oil. Lots of it. President Carter visited Mexico and discussed the oil situation. Whether our government or the energy conglomerates will negotiate for this oil is not yet known.