Editorial: The struggle or oil

The countries of the world are faced with the vital problem of obtaining sufficient oil to meet the expanding demands of transport, industry and mechanised agriculture. Oil is also needed in vast quantities for armies, navies and air forces, and the problem is not only that of obtaining sufficient in peace time but of knowing that the supply will continue in time of war. During the second world war Germany obtained the bulk of her supplies by developing chemical processes for producing oil from coal. Mr. A. D. Cummings, M.Sc., writing in “Discovery” (February, 1948), states that none of the known processes can yet compete commercially with natural oil.

“As now used, these processes are not an economically successful solution to the problem . . . the petrol obtained from them still costs at least twice as much as the natural oil, which has been refined and transported to its destination. Using hard coal it takes nearly 5 tons of coal to make a ton of petrol; using brown coal it takes 17 tons of raw coal from the mine; moreover, the capital cost of oil-from-coal plants is enormous. Only a country whose need was desperate would contemplate using them in the present circumstances. The processes have no future until natural oil resources dwindle even more rapidly than they are doing at present.”

A small amount of synthetic oil was being produced in this country before the war, but according to Mr. Cummings the British Government decided then against developing it for the needs of the coming war, preferring to rely on supplies of natural oil from abroad. Efforts are now being made to improve the processes and it is of course possible that they may become competitors with natural oil if oil prices continue to rise.

In the meantime consumption of petrol is increasing by leaps and bounds, and the problem of securing increased production and of controlling the petroleum regions becomes more acute. U.S.A. is still by far the greatest producer. In 1947 the United States oil wells produced nearly two-thirds of total world production, but so great is (he consumption that the U.S. is now an importer of oil.

According to figures published in the last annual report of the Shell Transport and Trading Co., United States production in 19-47 was about 2,000 million barrels. Next comes Venezuela with 435 million, the Russia with 200 million, Iran 155 million, Arabia 90 million and Mexico 56 million.

It will be observed that Russia, with a population greater than that of U.S.A., produces only one-tenth as much petrol. Even if production in Rumania, Hungary and other countries on Russia’s western border is added to Russia’s own resources, the total is still only about 240 million barrels compared with U.S.A.’s 2,000 million. It is true that in Russia very little is used in private motoring, and that every effort is made to develop coal and hydro-electric schemes and thus reduce the demand for petrol, but notwithstanding these alternatives Russia’s need of oil is acute and growing; which explains their anxiety to gain control of further supplies in Iran and other countries. But America too is vitally interested in oil from the Middle East. it is not merely that America needs more oil at home, but that American capital invested in Arabia, Iran and elsewhere in the Middle East calls for “protection,” and that the American Navy in Mediterranean, waters requires local supplies. In December, 1916, when American interests were negotiating for oil concessions in Saudi Arabia, it was stated that the major part of the oil produced in Arabia by the Arabian-American Oil. Co. “is going directly to the United States Navy” (Daily Telegraph, 12/12/46).

Western European countries, including Britain, are more than ever dependant on Middle East oil. As Elizabeth Monroe states in the Observer (11/7/48), “the chief interest of Western Europe is no longer the Suez Canal. The main post-war interests of the Western Powers lie further east. The prime one is to preserve the great oil fields on the Persian Gulf and Tigris from falling into hands that would deny their output to Westerners.”
The “hands” in question are of course those of Russia.

In’ passing it is, however, interesting to note a report from New York “that the United States is negotiating for the purchase of a substantial shareholding in the Suez Canal Co.” (Daily Telegraph, 25/6/48.)

Russia’s interest in trying to prevent American-British domination of Middle East oil resources is obvious. While Middle East production as a whole is still only about 10 per cent. of total world production and only about one-seventh of production in the United States, it is rapidly expanding. If Russia could get into that area, even if Russian activity were to be confined to Northern Iran, her oil problem would be greatly eased. Looking further ahead, there is the certainty that the Middle East will in a few years have doubled or trebled its output.

There have from, time to time been forecasts of the early exhaustion of oil reserves, particularly in U.S.A. According to Sir F. Godber, Chairman of the Shell Co., there is no present danger. Speaking at the annual meeting he said that in the past 20 years continuous discoveries have led to an increase in established world resources, from 23,000 million barrels which was the estimate in 1928, to 72,000 million which is the latest estimate. Even in U.S.A. there is no danger of reserves soon being exhausted. Sir F. Godber says that ” the most conservative estimates -of the American Petroleum Institute show that in the United States, in spite, of the constantly increasing rate of consumption, the ratio of reserves to current production is being maintained.” (Financial Times, 22/6/48.)

Nevertheless the Middle Eastern countries, with their enormous undeveloped oil reserves, their cheapness of production, are destined to be a centre of acute, Imperial rivalries for many years to come.