The Politics of Oil (Origins -1911)

We had a very interesting lecture by Prof. Mudit Kapoor on the politics of oil today and I want to go through the facts he presented one more time before I can analyze the sequence of events any further.

It all began in mid 19th century with the discovery of Kerosene oil as a fuel. Rockefeller with his Standard Oil Company made the best of this new discovery along with the accompanying Gasoline. He went on to become the richest person in human history. In the early years of the 20th century when electric lighting came to be discovered people wondered if oil will lose its importance as a fuel. It didn’t.

In 1911, young Churchill was the firebrand home minister of England and hugely favored ‘butter’ in the legendary ‘guns vs butter’ debate in the parliament. The debate desired to determine whether investment in expanding military prowess was more important compared to that in domestic industry in light of the growing German threat.

Soon after, Germany positioned a gunboat at Morocco and, almost overnight, Churchill changed his political stance from favoring ‘butter’ to favoring ‘guns’. This event is known in history as the ‘Agadir crisis’ and is hailed as one of the finest examples of what’s called ‘gunboat diplomacy’.

The crisis in Agadir also changed his outlook on another debate. This debate was whether to have coal as the primary fuel for the British Navy instead of oil. It is worth mentioning here that while England had huge domestic supplies of coal, it had to depend on foreign sources like Persia to procure oil. The debate was centered around the risks and dependency involved in this transaction. After the ‘Agadir crisis’ Churchill, impressed by the speed of efficiency that oil delivered hailed it as the powerhorse of the British Navy and quoted famously, “Mastery itself was the prize of the venture“. British Petroleum which had just established operations in Iran became the major supplier.