Oil and American Diplomacy in 1950

Updated: Apr 10, 2020

Trends in Oil Diplomacy After World War II




A Lesson in Oil History


"After World War I, the 1940’s and early 1950’s served as an important time period for U.S. foreign oil policy. Foreign oil was important for the United States to offset declining supply, strengthen political power, and to guarantee reserves in case of war."

After World War I, the importance of oil in the global market was significant, especially for the United States. This was mainly due to the “importance of oil to modern warfare, fears of the pending exhaustion of U.S. reserves, and the needs of U.S. oil companies with foreign markets for additional sources of supply.”[1] The U.S. government had to balance between “corporate domination of the U.S. economy” and the “dangers of statist regimentation,” which Painter defines as corporatism, or “the cooperative use of public and private power in pluralistic, democratic societies.”[2] U.S. diplomats utilized private industry to “protect and promote the national interest in foreign sources of petroleum.”[3] However, even though private interests were mainly responsible for employing American foreign oil policy, “the U.S. government was nonetheless deeply involved in maintaining an international environment which private companies could operate with security and profit.”[4] During the 1940’s and early 1950’s, the degree of government involvement varied depending on the country it was dealing with. On one hand you have Venezuela, in which the U.S. government didn’t really have to do anything to successfully exploit the country’s resources; then there’s Mexico, where the government literally couldn’t do anything; and Saudi Arabia, in which the government was able balanced public and private cooperation. The following paragraphs will discuss the American diplomacy that was employed in Venezuela, Mexico, and Saudi Arabia.


U.S. oil companies and government had a strong relationship with Venezuela while Juan Vicente Gomez was in power. A potential clash was averted by consciously reducing tensions between U.S. oil companies and the Venezuelan government; foreign policy strategy that was heavily stressed by the U.S. government.[5] However, the amicable relationship between the U.S. and Venezuela came at a cost, and the 1943 oil law “royalties were raised to a uniform 16.66 percent (the 1922 oil law had set royalties of 7.5 to 11 percent).”[6] The Venezuelans needed the technical and managerial skills the U.S. oil companies had to offer, but the U.S. oil companies and government also understood that nationalization of Venezuelan oil could happen at any time, so they were willing to pay increased concessions to maintain a friendly relationship. “Close cooperation between the government and the oil companies worked in the case of Venezuela because the government and the companies shared the same goal - maintaining U.S. control of Venezuelan oil.” The fact that private oil companies had strong control of Venezuela’s oil production meant that the U.S. government intervention was not necessary, and a “hands-off” approach worked successfully.


Oil in the Caribbean was important to the United States during the 1940’s and 50’s, because it was a stable product of the Western Hemisphere, produced by “friendly” neighbors, and far from communist countries. “Latin America’s oil, including Mexico’s, was crucial to U.S. security and prosperity.”[7] However, the difficulty with foreign policy in Mexico was that “there were no U.S. oil companies to work through since they had been expropriated in 1938.” Some, like Harold Ickes, argued that “the United States had a national interest in Mexican oil separate from the interests of the oil companies,” and that the U.S. should approach foreign oil policy “from a nationalistic point of view.”[8] However, Mexico didn’t budge on reversing their nationalization, and public U.S. oil companies weren’t allowed to produce in their country. However, President Roosevelt didn’t want to create tension and was “determined not to let the oil issue disturb mutually beneficial wartime cooperation between the United States and Mexico.”[9] Wartime politics played into foreign oil policy and decisions made by the U.S. government.


After World War II, the U.S. government decided to “take an active interest in oil matters and to consider the potential significance of Middle East oil to U.S. security.”[10] One idea was that “U.S. government ownership of overseas oil reserves was necessary to maintain U.S. access and control” and the other train of thought “feared that government ownership of foreign oil reserves would encourage similar measures by other countries.”[11] Thus, a solution had to be worked out that successfully balanced public and private ownership of Saudi Arabian oil. Post-World War II, “King Ibn Saud demanded $6 million from the California Arabian Standard Oil Company (CASOC), and the company was forced to turn to the U.S. government for financial assistance to maintain its concessions.”[12] “CASOC was able to reach the highest levels of the government with its message that without financial assistance Saudi Arabia ‘and perhaps with it the entire Arab world will be thrown into chaos.’”[13] Thus, the U.S. government protected its interest in Middle East oil by giving lend-lease aid and balancing public and private cooperation.


After World War I, the 1940’s and early 1950’s served as an important time period for U.S. foreign oil policy. Foreign oil was important for the United States to offset declining supply, strengthen political power, and to guarantee reserves in case of war. The U.S was unable to fully flex its muscles in foreign oil policy due to regulations of other governments, competition by private independent oil companies, and the threat of nationalization by foreign countries. However, as in the lend-lease agreements in Saudi Arabia, a balance of private and public policy was able to be negotiated, and seemed to be an effective method of foreign diplomacy at the time.

[1] Painter, Private Power and Public Policy, p. 4


[2] Painter, Private Power and Public Policy, p. 2


[3] Painter, Private Power and Public Policy, p. 1


[4] Painter, Private Power and Public Policy, p. 1


[5] Painter, Private Power and Public Policy, p. 18


[6] Painter, Private Power and Public Policy, p. 21


[7] Painter, Private Power and Public Policy, p. 24


[8] Painter, Private Power and Public Policy, p. 25


[9] Painter, Private Power and Public Policy, p. 31


[10] Painter, Private Power and Public Policy, p. 32


[11] Painter, Private Power and Public Policy, p. 32


[12] Painter, Private Power and Public Policy, p. 32


[13] Painter, Private Power and Public Policy, p. 33

5 views0 comments

Recent Posts

See All
  • Black Facebook Icon
  • Black Twitter Icon
  • Black LinkedIn Icon

© 2019 Clark Energy Consulting