The world’s richest man and the world’s largest oil firm dominated the petroleum market in Norway lengthy earlier than landmark finds on the Norwegian continental shelf and the Norwegian oil fund.
Though it would appear to be it, Norway’s oil historical past didn’t start with the foremost Ekofisk discovery in 1969 by Phillips Petroleum Co. It didn’t even start with the Balder discovery a few years earlier, or Norway’s declare to giant areas within the North Sea in 1963.
A greater place to search for a form of starting is on the finish of the 19th century. The story includes one of many richest males of all time, John D. Rockefeller, and his large firm Normal Oil.
It’s additionally the story of how governments in small nations wrestle to combat financial giants.
“Within the first section beginning in 1890, the Norwegian, Swedish and Danish oil markets have been dominated by the big world oil firm Normal Oil, which didn’t maintain again from utilizing fairly heavy-handed ways to manage the market,” says Espen Storli a professor at NTNU’s Division of Fashionable Historical past and Society.
This side of Norwegian and Scandinavian oil historical past has not been studied that a lot thus far, however Storli and his colleague Pål Thonstad Sandvik deal with the interval in an article within the Scandinavian Financial Historical past Assessment.
“Normal Oil’s method is a typical instance of how giant corporations attempt to achieve benefits and monopolies by leveraging their monetary energy and taking management of worth chains,” Sandvik says.
World’s richest non-public particular person
When it comes to cash, each Normal Oil and the corporate’s well-known proprietor, John D. Rockefeller, had greater than sufficient.
In case you don’t embrace royals and dictators who dominated complete nations, Rockefeller stands out as maybe the richest particular person in historical past. He grew to become the primary billionaire in america, at a time when an unusual industrial employee had an annual wage of about US $500. Comparatively talking, Rockefeller was far richer than Amazon’s Jeff Bezos, the world’s richest residing particular person right this moment.
Ron Chernow, who wrote a biography about Rockefeller, described him like this:
“He could possibly be terribly violent when he wished to pressure opponents to submit. However on the similar time he didn’t exert this stress casually, and the place attainable, most popular endurance and argumentation fairly than intimidation.”
Rockefeller’s wealth got here largely from his oil firm Normal Oil, which he helped begin in 1870. By way of ingenuity, crafty, acquisitions and a not-so-little use of muscle, the corporate grew to become fully dominant within the nationwide and world oil sector. Finally, this utilized to all components of the worth chain.
Initially of the final century, few European nations had identified petroleum reserves. As a consequence, oil corporations in Norway competed most for entry to the sale of merchandise like kerosene and petrol, and never for extraction rights or different components of the worth chain.
“Product gross sales have been additionally the place the oil corporations collided most straight. The necessity for regulation rapidly grew to become clear to the authorities,” says Sandvik.
However this activity was removed from simple for inexperienced politicians and officers. Their opponent used diversified ways and had way more expertise and cash.
Danish firm grew to become a pawn
In Scandinavia, Normal Oil used the corporate Det Danske Petroleums Aktieselskab (DDPA) as a pawn. Normal Oil purchased into DDPA as early as 1891, and later owned half of its inventory.
In observe, DDPA grew to become a subdivision of Normal Oil, as a result of the administration in Denmark needed to seek the advice of with the American firm in all essential selections.
The Danes already had a strong place in Scandinavia earlier than Normal Oil got here in, however solely with American cash did issues actually flip round. Typically the strategies have been ingenious.
For instance, DDPA had long-term contracts with sellers of petroleum merchandise. These sellers weren’t allowed to promote merchandise from suppliers apart from DDPA. If the sellers broke these contracts, they needed to pay giant fines, to not DDPA, however to native charities. This was in all probability a clever technique, as a result of protesting in opposition to an organization that seemed to be working a charity was tougher.
DDPA and Normal Oil finally succeeded in taking on giant components of the market, however they by no means secured an entire monopoly. Actors such because the Europäische Petroleum Union and Pure Oil gave them strong competitors at instances, even when they have been proportionally a lot smaller corporations.
Most individuals nervous
Normal Oil’s dominant place steadily grew to become a priority for extra than simply the authorities and opponents.
“The controversy about Normal Oil steadily grew, however it wasn’t simple for the authorities to do something given the corporate’s energy. For small nations with restricted assets, it was tough to answer cartel actions and cooperation between corporations that exploited their place within the oil market,” says Storli.
However the firm wasn’t capable of maintain its place with out Norwegian politicians being absolutely concerned.
“Normal Oil’s grip on the Scandinavian oil market steadily weakened because of competing corporations,” Sandvik says.
This was partly because of the truth that the corporate couldn’t proceed working in the identical approach following a court docket choice within the USA.
Grew too huge
Normal Oil grew too giant, and in 1911 the Supreme Court docket of america had had sufficient. The court docket sought to dissolve the corporate as a result of it had used unlawful strategies to achieve a monopoly-like energy over the US oil market. Normal Oil was then cut up into 34 totally different corporations.
Normal Oil’s successors have been additionally huge in Scandinavia till 1939, if not as dominant as earlier than. A number of the corporations that stemmed from this cut up are nonetheless among the many world’s largest, similar to Amoco, ExxonMobil, Marathon and Chevron.
Rockefeller himself steadily withdrew from enterprise life beginning in 1896 and finally concentrated totally on philanthropic actions. He died in 1937, virtually 98 years outdated.
Lingering results right this moment
The consequences of the sturdy oil dominance at the moment may be seen even right this moment.
“The oil corporations’ abuse of market energy was precisely what Norwegian politicians wished to keep away from. This expertise was essential when Norway’s parliament handed strict competitors laws and complete regulation of Norwegian pure assets similar to hydropower, forests and minerals,” says Sandvik.
“This expertise was essential when Norway’s parliament handed strict competitors laws and complete regulation of Norwegian pure assets.”
These laws would turn out to be useful just a few many years later, when Norway itself proved to be sitting on giant petroleum riches. In contrast to many different nations, the nation has largely managed to retain giant components of those riches, to a terrific extent as a result of the Norwegian authorities already had in depth expertise in regulating pure assets.
“Norwegian politicians and bureaucrats have been effectively knowledgeable concerning the phenomenon of market energy within the oil trade. This affected how they associated to the big overseas oil corporations in each the 1960s and 1970s,” Storli says.
“After all, it’s at all times tough to say the place politicians and officers draw their notion of actuality from, however it isn’t stunning that home experiences have been an essential issue,” he says.
Reference: “The hunt for a non-competitive market: Normal oil, the worldwide oil trade and the Scandinavian states, 1890–1939” by Päl Thonstad Sandvik and Espen Storli, 2 August 2020, Scandinavian Financial Historical past Assessment.