2000 years ago if you were to ask someone what the most precious substance is, an overwhelming majority of people would say gold. Even though gold remains highly valuable, even today, its importance globally has been overshadowed by a much more important commodity – oil. Until the end of the 18th century, a discovery of oil wouldn’t mean much. But it all changed at the dawn of the Industrial Revolution. The Industrial Age saw the development and ingenious creations, whether it be the first ever motor vehicle, the telephone or even the light bulb. Machines of this modern era were built to be quick and efficient. And for this, they needed vast amounts of energy, which they got from Oil. Oil and fossil fuel energy powered steam engines and modern factories and soon became the most sought after commodity. Without having oil, a country could not expect to produce any goods or products efficiently and for the masses, meaning that the nation would be stuck in a more agrarian, primary sector economy. Without industries that ran on fossil fuels, many jobs and employment opportunities that rose in urban metropolitan cities would never have risen. Because it is cheaper and more efficient than other energy sources, oil has boosted global production and reshaped networks by allowing for faster transportation. But oil also has important implications for global politics. Colonialism, decolonization, and economic liberalization have all shaped the history of oil, and oil has reshaped all of them!

The global oil boom really began with World War I. As Britain and Germany competed to build the best navies in the world, the British began converting their ships from coal to oil. Oil allows ships to stay at sea longer and travel faster and farther. But Britain had no domestic oil supply at the time. After the war, Foreign Secretary Lord Curzon said that Britain “won over an oil wave”. Most of that oil has come from the United States, the world’s largest oil producer and largest consumer of oil for most of the century.
The British did not rely solely on their American ally. In 1901, the King of Iran and a British contractor signed an agreement called the D’Arcy Concession. He gave the Anglo-Persian Oil Company the rights to Iranian oil for the next 60 years. In return, Shah received £40,000 and a 16% profit. In 1914, the British government bought a majority stake in the company. For the next 40 years, the British government controlled the extraction, production, distribution and most of Iran’s oil profits.

After World War II, seven oil companies known as the “Seven Sisters” dominated global oil production and distribution. In 1960, the Seven Sisters controlled 85% of the world’s oil. In 1960, Saudi Arabia, Iran, Iraq, Venezuela and Kuwait formed the Organization of the Petroleum Exporting Countries (OPEC). Their goal is to control the nation’s most important resource – guess what: oil. As countries decolonized throughout the 1960s, they sought to nationalize their resources, like Iran’s oil, often controlled by foreign governments or corporations. OPEC grew, and by the 1970s its members controlled half of the world’s oil. As global oil demand grew, OPEC negotiated better terms. Oil prices increased by 45% and the profits of OPEC countries increased by 2,000 to 3,000%. The key to OPEC’s success is their unity. OPEC includes countries of different religions and languages, as well as conflicting Cold War loyalties. And yet, in the 1970s, they successfully collaborated to fix the price of oil. This transfer of power from Western governments and corporations to oil producers in the Middle East is known as the Oil Revolution.

In retaliation for the United States’ support of Israel in the Yom Kippur War, the Arab members of OPEC announced an embargo (trade ban) against the United States and several other countries. In just three months, the price of oil has quadrupled.
The US was able to get oil from other countries, but the panic pushed prices up. Gas stations run out of fuel to sell as cars line up. Oil prices eventually fell, but they never returned to pre-1973 levels. In 1979, the second oil crisis broke out after the Iranian revolution, causing the price of oil to double. The OPEC embargo of 1973 was a short-term success for OPEC. In the long run, however, it shifted power from Middle Eastern oil producers to Western governments and corporations.

The 1970s strengthened and enriched oil-producing nations around the world. Even non-OPEC oil-producing countries, such as Mexico, benefited from their income increases. Countries in Latin America, Africa and the Middle East assumed this was the new normal and started borrowing money to invest in their industries, infrastructure and military. They borrow mainly from American banks. Other countries that are not oil producers, but dependent on oil imports, have also found that they need to borrow money from American banks to offset rising oil costs. The skyrocketing oil prices in the 1970s contributed to the global recession from 1980 to 1982. Industrial production slowed, affecting economic growth and causing unemployment to rise. During a recession, oil prices fall and the incomes of oil-producing countries fall. Many people find themselves heavily indebted, mostly to US banks.
This debt gave the US government leverage over these countries. Americans control the policy of the International Monetary Fund and the World Bank. The United States can grant new loans and cancel old ones, but aid comes at a cost. Debtor countries are expected to open their economies to American companies. Policies of free trade and privatization, particularly beneficial to American companies, have spread around the world. The architects of this system promised that it would help poor countries. Instead, it harms the economies of Latin America, Africa and Asia. Local businesses and markets declined as more power was transferred to Western corporations, which profited from these countries’ labor resources.

The following Gulf War, which was sparked due to Iraq’s anger at Kuwait overproducing oil and the aftermath that followed it, led to the reassertion of Western hegemony over global oil production. Today, in the 21st century, we may face a second oil revolution. Frightened by the oil price shocks of the 1970s, the United States, the world’s largest consumer and once the largest oil producer, focused on domestic oil production. New technologies such as hydraulic fracturing have once again made the US the world’s leading producer. But the future is uncertain. For example, in the spring of 2020, the COVID-19 pandemic caused oil prices to drop to historic lows as people stayed home and traveled less. A possible global recession after the pandemic (note that this article was written in May 2020). If we avoid this, we still face a global climate change crisis, which is caused by our increasing consumption of fossil fuels such as oil. International cooperation has put some pressure on us to change our fossil fuel consumption and the way we produce energy. The future of oil is uncertain, but its powerful impact on 20th-century history continues to blaze on.