The Seven Sisters: The Great Oil Companies and the World They Shaped

“Oilmen are like cats; you can never tell from the sound of them whether they are fighting or making love” – Calouste Gulbenkian

1. Anglo-Iranian Oil Company (now BP)
2. Gulf Oil (later part of Chevron)
3. Royal Dutch Shell
4. Standard Oil Company of California (now Chevron)
5. Standard Oil Company of New Jersey (Esso, later Exxon, now ExxonMobil)
6. Standard Oil Company of New York (Socony, later Mobil, also now part of ExxonMobil)
7. Texaco (later merged into Chevron)

These seven companies – five American, one British, one Anglo-Dutch – had all become major powers in the oil industry before the ‘twenties. There were many others, including the other offspring of the Rockefeller’s Standard Oil, that were to play important roles. But it was the seven ‘majors’ who were to dominate the world oil business in the following decades, and to become new kinds of industrial organization – in some respects the forerunners of the modern multinational corporation. Each of them soon developed into an ‘integrated oil company’ controlling not only its own production, but also transportation, distribution and marketing. With their own fleets of tankers, they could soon operate across the world in every sector of the industry, from the ‘upstream’ business of drilling and producing at the oilfields, to the ‘downstream’ activity of distributing and selling at the pumps or the factories. And each company strove, with varying success, to be self-sufficient at both ends, so that their oil could flow into their tankers through their refineries to their filling-stations.

There were plenty of signs that the seven companies were competing, often ferociously, to sell their precious fuel: and nowhere was the competition more evident than in the promotion of the new product gasoline for the new automobiles. The names Standard, Gulf or Texaco, first on cans, then on filling-stations, then on the bright signs sticking up from the landscape were visible symbols of choice facing the consumer. Yet the competition also had striking limitations. It was not just that the product, as far as any consumer could detect, was identical – much more identical than cars or soaps. Nor that the new garages and filling-stations seemed to huddle in clusters on the roadside as if they dreaded to stick their tall necks out alone. More seriously disturbing for the advocates of free enterprise was the tendency of the giant companies, as they ventured further abroad, to cling together in consortia and to reach hidden understandings with each other in their attempts to bring order to the volatile market. The name the Seven Sisters, that came to be applied to them and which they so much resented, was not altogether inappropriate. Like the classical sisters, who were translated by Zeus into stars, they seemed to have acquired immortality. But also like mortal sisters, they fought and competed with each other, while still preserving a family likeness and closing ranks when challenged by outsiders.

The American companies had begun with their production safely based in their own home country, and their government was more concerned with protecting the consumer than with national security. But as the future of American oil became more uncertain, the companies began to look abroad for their supplies and thus to become much more deeply involved with diplomacy. The relationships between the company headquarters and Washington thus became both closer and more barbed.

The First World War made all Western governments painfully aware of the importance of oil for survival, and led to the development of what was called ‘oleaginous diplomacy.’ The dependence on oil for survival became obvious as the war extended – fought with planes, cars, and tanks – and the oil tankers were critical for supplies. ‘Oil,’ said Clemenceau, ‘is as necessary as blood.’ ‘We must have oil,’ said Foch, ‘or we shall lose the war.’ ‘The allies,’ said Lord Curzon in a phrase much quoted by oilmen, ‘floated to victory on a wave of oil.’ The Germans were desperately short of oil, while Britain had access to the Persian oil from BP at Abadan, and to Shell oil from Mexico and the East Indies. But still by far the biggest source of supply was America and 80 percent of all Allied oil supplies came from the United States. A quarter of all the allies’ oil came from a single company: Exxon.

After the war the United States was still easily the leading oil producer in the world and far the biggest consumer. In the post-war years there was a new rush of consumption, with the multiplication of automobiles and the building of a new lifestyle based on cheap oil. The right to travel cheaply, to have cheap electricity and cheap heating, became regarded as part of American democracy and the whole landscape was already being transformed by the product. As the two English authors Davenport and Cooke described it in 1923:

Travel but a little in the country and you will gain the impression that the modernism of the United States flowed from its oil wells. Outwardly, oil occupies there the place which coal occupies in Great Britain. The oilfield derrick is as familiar a landmark to the American as the pithead wheels to the workers in our ‘black country’. The oil-tank car is as ubiquitous on his railroads as the coal-truck on ours. The oil-tin litters his waste places. His wayside is dotted with the petrol pump and at night illuminated oil ‘filling stations’ make his streets beautiful. A network of oil pile-lines underlies his country, more extensive than the network or railways overlying ours… Does not the American partly live in oil? Certainly, he cannot move without it. Every tenth man owns an automobile, and the rest are saving up to buy one.

But now there was once again the nightmare of a world shortage. The American Secretary for War, Josephus Daniels, who had confronted Socal over the Californian naval reserves, was appalled by the rapid depletion; and in 1920 the Director of the U.S. Geological Survey pronounced that the American oil situation ‘can best be characterized as precarious.’

Both Americans and Europeans began a new scramble for oil, with new bitterness between the haves and the have-nots. The British and French tried ruthlessly to establish their own sources of oil in the Middle East, which they regarded as their own equivalent of Texas. They were determined to exclude America, which had its own oil anyway. But the Americans argued that it was quite wrong that they should provide the world our of their dwindling reserves, while they were shut out of foreign oil. They had helped to win the war, and were entitled to its spoils. In the post-war years, both companies and governments came into sharper conflict. The State Department supported more closely the interests of oil companies abroad, and the new intimacy was further encouraged by the administration of President Harding (whose benign attitude to oilmen eventually extended into the Teapot Dome Scandal). The relationships were often confusing. Ostensibly the companies were the boxers in the big fights, and the governments were the seconds, providing encouragement or reproof. This meant that when the fight was most critical, the governments were out of the ring. The companies – as we shall see – usually had their own way in the end. But it was never quite clear who was using whom.

To radical critics, it looked as if the State Department had simply abdicated the whole process of oil diplomacy to the oilmen. The government, however much they might distrust the oilmen, were not prepared to set up their own organization. They preferred to use the oil companies, at a discreet distance, as the instruments of national security and foreign policy. The British government, being totally dependent on imported oil, had closer relationships, as we have seen, with the two oil companies. But they preferred not to be closely involved with such a controversial commodity, and, in Britain, too, the heads of the companies began to play important roles in forming foreign policy.

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Anthony Sampson was a British writer and journalist. His award-winning book, The Seven Sisters, was written in 1975.  Originally suggested by Tudor, Pickering & Holt.

(Excerpt from Chapter 4, pp. 58-61)

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