Some confused customers show up at service stations in the Orlando area not expecting to participate in Sun Oil Co.’s experiment with a revolutionary new method of selling gasoline. The stations are selling five grades of Sunoco gasoline dispensed from the same pump. The different octane mixtures are blended in the nozzle of the hose before entering the auto fuel tank. (Displacing the age-old controversy over how much vermouth should go into a martini will now be a debate over how much high-octane juice to add to basic gasoline.) Quite a few research labs of the larger oil companies are reportedly entering the atomic age by experimenting with betatrons, cyclotrons, neutron accelerators, and space guns to see what happens when their emanations are blasted at hydrocarbons in various combinations. A once- waste petroleum product is being used to turn a waste plant into tasty feed for wasted cattle. With propane torches in hand, jeep-riding cowboys in arid southwest Texas burn the spines off of cacti leaving the succulent plant bare of its natural defense and a tasty morsel for hungry and thirsty cattle.
East Texas crude oil—$2.90/bbl
U.S. active rig count—2,686
U.S. active rig count—2,686
Soviet Premier Brezhnev tells the Communist Party Congress that the Soviets will continue to export western Siberian crude oil but will reduce domestic oil consumption in favor of expanded utilization of coal, gas, and nuclear energy. With but two more decades to go in the twentieth century, the U.S. Geological Survey pegs U.S. recoverable resources at 594 trillion cu ft of gas and 83 billion bbl of oil, up substantially in gas but very modestly in oil since its last study in 1975. Peter Grace, president of WR Grace & Co., suggests the formation of CROPEC (Crop Exporting Countries) in response to rising oil prices. It would put grain exports on a parity with oil imports. He charges that the United States has no right to burn almost half the world’s gasoline while its population is only 5% of the world’s total, and he urges adding a surcharge to the price of gasoline to curb demand. (We’ll get back to you on that, Pete.)
U.S. active rig count—3,563
Saddam Hussein again displays his compassion and forgiveness, as extended to two former key figures in his regime, Hussein Kamel and Saddam Kamel. The two had defected to Jordan last year and were promised clemency if they returned. They were both killed within days of their return to Iraq. With approximately 60% of the active U.S. rigs currently drilling for gas, that percentage is expected to grow in coming months, given the softening of oil prices and the firming of gas prices. By increasing capital spending by $1 billion per year, BP plc’s Sir John Browne informs analysts of his profit goal of $4.5 billion by the year 2000. Meanwhile, Amoco Corp.’s Chairman Lawrence Fuller forecasts greater than 100% replacement of the company’s annual production through the year 2000. (Sir John may have something to say about that, Larry.)
Light sweet crude oil—$19.67/bbl
U.S. active rig count—719
U.S. active rig count—719
The Rest of the Yarn
For the next few months, this column will examine the history of the world’s most powerful oil cartel, the Organization of Petroleum Exporting Countries (OPEC), and showcase some of its founding fathers.
OPEC was created in 1960, led by two oil ministers. The cartel was founded after producers’ meetings in Egypt and Iraq, held in response to unilateral price cuts made by The Standard Oil Co. of New Jersey (Exxon Corp.) in 1959. These cuts did not sit well with major exporters.
In 1945, the radical party Accion Democratica came to power in Venezuela and with it a scholarly economist named Juan Pablo Perez Alfonso, who really understood the economics of oil. He viewed Venezuela’s problems within the larger perspective of world oil supplies in future decades. He was to become the chief architect of OPEC.
Born to a well-to-do family in Caracas, Perez Alfonso studied medicine at Johns Hopkins University in Baltimore. When he returned to Caracas, he began to study law, and as the eldest of 11 brothers, assumed the burden of providing for the family. As a result, conservation and planning became part of his character. Eventually, he became a member of the Chamber of Deputies and an expert on the oil industry.
Alfonso insisted that the Venezuelan government should have a 50% share in oil profits. Thus, a law was passed in November 1948 establishing the government as a partner of the oil companies. The 50-50 arrangement quickly spread to other producing nations, including those in the Persian Gulf.
The new oil advisor in Saudi Arabia at the time was Abdullah Tariki, a radical who was determined to unite the oil producers. Tariki was educated at the University of Texas and had been a trainee at Texaco Inc. He later said that while in Texas, he had studied the Texas Railroad Commission’s regulatory and conservation activities with great interest.
The oil price reduction in 1959, implemented by the oil companies of the West, spurred unity among producers. The first Arab Petroleum Congress convened in Cairo and included observers from Iran and Venezuela. The Congress recommended that there be no reduction in the posted price of oil without prior consultation with the various governments.
Meanwhile, private talks between Alfonso and Tariki led to a secret agreement that, according to Alfonso, constituted the first seed of the creation of OPEC.
In an upcoming column, a second price reduction, led by Exxon, kindles the flames of reform among the producing nations.
Readers are encouraged to submit brief, ostensibly true stories about notable personalities from our industry’s storied past. Please e-mail your submissions to email@example.com.
This month we offer a word quiz targeting the senior refiners (if there are any) in our readership. In a refinery, what was the role of a “sweaterman?”
If you would like to participate in this month’s quiz, e-mail your answer to firstname.lastname@example.org by noon, March 15. The winner, who will be chosen randomly from all correct answers, will receive a gift certificate to a nice restaurant.
Answer to February’s Quiz
One of the earliest forms of a “water frac” began being pumped in the San Juan Basin in the mid 1950s. Owing to the fact that these early water fracs consisted of angular river sand pumped at low concentrations in San Juan River water, they were nicknamed “river fracs.”
Answer to January’s Quiz
Assuming the acceptability of the contraction of the word fracture to “frac,” established English linguistic rules indicate the corresponding contraction of the word fracturing would be “fracking.” Congratulations to January’s winner— Scott Campbell with EnerVest Operating LLC.