Trends Shaping The History of Oil Since 1970

Updated: Apr 10, 2020


One of my passions is studying the history of world oil, geopolitics, and economics. I originally wrote this piece as part of a class I took in college. For those that are curious, references are cited and are books I would recommend!


Originally Written May 7, 2012 by Jon Clark


Many trends have characterized and shaped oil history since the 1970s. With the declining supply of petroleum and a fear of “peak oil,” the era from 1970 to 2012 is a distinct one in the history of oil. Since the 1970s, there have been significant increases in frontier exploration for new crude supplies. In the Middle East and Caspian countries, foreign policy has especially played a huge role since the 1970s. Oil negotiations and the importance of the “middle-man” has been a common theme during this era, strongly tied to the type of ownership structure present in a mineral rich country. New environmental concerns have also played a role in the history of petroleum during this period. The following paragraphs will outline three distinct trends in the history of oil since 1970: the search for new supply, impact of ownership structure, and environmental concerns.


The question of oil supply has been frequently raised since Hubbert’s estimate of peak production occurring in 1965-1970. The energy crisis of the 1970s - resulting from shortages in petroleum in the U.S. which was compounded by the Arab Oil Embargo of OAPEC and Iranian Revolution in 1979[1] - fueled a frantic search for new supply. Taking BP for example, “from 1963-1970, BP discovered more than twice as much oil at a lower finding cost per barrel than any comparable company…which was learned from the Company’s early experience as a first mover in Iran.”[2] Companies were acting quickly to be “first-movers” in new exploration frontiers during the 1970s - such as in Nigeria, Libya, South America, The Caribbean, Canada, Alaska, and The North Sea. In fact, BP’s geologic experience in Iran led them to discover oil in Alaska since “BP had been influenced by its longstanding preference for exploring in areas with a geological likeness to the Zagros foothills in Iran,”[3] ultimately leading them to the discovery and production of the giant oil field at Prudhoe Bay in the 1970s. It wasn’t until this time period that the U.S. government identified the need for unified energy planning within the federal government - leading to the creation of the Department of Energy in 1977.[4] Foreign oil policy became even more important - although more complex - during the Arab-Israeli Conflict of the 70s. Major oil companies that had concessions in foreign countries enjoyed the amount of “free reign” that the U.S. government gave the companies in the early part of the 20th Century, because it was one less government to get in the way of their profits. However, when foreign governments demanded higher profits, U.S. foreign policy became more complicated with conflicting support of Arab oil production and Israeli troops. During the wake of OPEC creation, companies lobbied against the U.S. government to influence foreign policy in their favor. “These developments so alarmed the U.S. oil companies that they took up a vigorous campaign to change U.S. foreign policy in the Middle East. They took every opportunity they could to put across to the U.S. government their views that the USA’s pro-Iranian and pro-Israeli policies were radicalizing the moderate Arab states, especially Saudi Arabia.”[5] It was for these reasons that exploration for petroleum outside of the Middle East began - especially exploration for domestic North American crude - and continues today with talks of future arctic drilling in Alaska and Canada as well as Lower 48 shale development.


Second, ownership structure is a noteworthy trend observed in the post-1970s era. Luong writes that the errors associated with the conventional “oil curse” are due to a very broad a scope of view, a generalized time frame, and the assumption that mineral ownership is the primary cause for the curse. However, Luong investigates how fiscal regimes, or ownership structure - rather than just mineral ownership, play a role in the degree of the “curse.” Luong describes four main types of ownership structures - state ownership with control (S1), private domestic ownership (P1), state ownership without control (S2), and private foreign ownership (P2) - which are identified in the Soviet successor states in three unique time periods from 1900 to 1960; 1960 to 1990; and 1990 to 2005. During the early-half of the 1900s as foreign exploration was newly established, private foreign ownership was “unmistakably the most prevalent form of ownership structure - often associated with the rise of such global giants.”[6] Then, from about 1970 until the mid-1990s “the number of countries that adopted state ownership without control surpassed private foreign ownership for the first time, although state ownership with control was the predominant form of ownership structure during this period.”[7] This trend indicates how state control became a trend post-1970, which generally resulted in lower transaction costs - or “transparency”, higher expectations, and a weaker fiscal regime. In other words, during the period after 1970 until about 1990, state governments generally had more control over their oil industry, which led to more corruption and the country as a whole probably felt the impact of the “oil curse” more heavily. However, since the mid-1990s, “private foreign ownership has made a comeback such that it surpassed state ownership with control and rivaled state ownership without control as the most common ownership structure among petroleum-rich countries by 2000.”[8] In this ownership structure, it is likely to see varying levels of state spending, due to what is known as the “obsolescing bargain”, where “governing elites should be able not only to extract a greater share of the proceeds upfront but also to increase the foreign investors’ fiscal burden arbitrarily, thereby unilaterally changing the initial terms of their contracts.”[9] It was during this time period that deal-makers or “middle-men” like John Deuss and Jim Giffen came to prominence as oil negotiations were occurring in the Caspian Countries during the 1990s. Levine writes that “the most intriguing players were the middlemen - shrewd American and European dealmakers without whose blessings few foreign companies could gain access to an oil field” [10]which is also depicted in the film Syriana.


Third, environmental concerns and renewable energies have been heavily trending topics since the 1970s. “Environmental consciousness has expanded massively since the first Earth Day in 1970…and climate change has become a dominant political issue central to the future of energy.”[11] Some argue that the increase in greenhouse gas emissions resulting from burning fossil fuels is a valid reason for expanding the role of new energy options. “The energy crises of the 1970s had combined with rising environmental consciousness to give birth to a range of new energy options, known first as alternative energy and then, more lastingly, as renewables.”[12] Such renewables cover a vast array - including wind, solar, biomass, geothermal, nuclear, etc - and in light of the energy crises of the 1970s, policies have been attempted to promote these alternative sources of energy. In some ways, energy policies of the 1970s and the dynamics of the marketplace were successful in reducing reliance on fossil fuels slightly - in the form of energy efficiency. “In the face of much skepticism, energy efficiency - conservation - had turned out to be a much more vigorous contributor to the energy mix than most had anticipated.”[13] However, the focus for a sustainable global energy future will lie in renewable energy. As underdeveloped countries grow and consumption increases, increases in renewable energy sources will be necessary to bridge the gap in increasing consumption. The main question is what kind of energy mix will meet global demand without conflict. Yergin writes that we are quite possibly in “an era of energy transition” in which the “$6 trillion global energy market is contestable;”[14] up for grabs among fossil fuel and renewable energy sources that want a portion of the market. “A transition on this scale, if it does happen, has great significance for emissions, for the wider economy, for geopolitics, and for the position of nations.”[15]


With the energy crisis at its peak in the 1970s, there are many trends that have characterized and shaped the history of oil during this era. At the heart of it is declining supply and fear of exhausting a non-renewable natural resource for which everyone needs. Since the 1970s, this has led to a desperate search for new supply, resulting in new exploration outside of the Middle East and the increasing importance for a strong U.S. foreign oil policy. Ownership structures have also changed since the 1970s, as in the Caspian, from private-dominated foreign ownership to state-dominated ownership in the 1990s, and in some cases back to private ownership - which has changed the “transparency” of negotiations and impacted the amount of corruption and deal-making. New environmental concerns have also characterized the history of oil during this era. Concerns about smog have been transcended by fear of the impacts of greenhouse gases and climate change. This fear, compounded with the fear of fossil fuel shortages, has led to research in renewable energies like wind, solar, and biofuels. As Yergin writes, this trend may continue in the future with a possible “era of energy transition” between fossil fuels and renewables. Not only were these trends - new exploration, ownership structure, and environmental concerns - a common theme since the 1970s, but they will continue to be prevalent well beyond present-day.



[1] Lifset, Robert. Oil in World History Class Discussion, 4/3/12

[2] Bamberg, James H. British Petroleum and Global Oil, 1950-1975: The Challenge of Nationalism. 2000. Cambridge: Cambridge University Press, 2000, p. 205

[3] Bamberg, British Petroleum and Global Oil, 1950-1975: The Challenge of Nationalism, p. 190

[4] Relyea, Harold; Thomas P. Carr. The Executive Branch, Creation and Reorganization. Hauppauge: Nova Publishers, 2003, p. 29.

[5] Bamberg, British Petroleum and Global Oil, 1950-1975: The Challenge of Nationalism, p. 183

[6] Luong, Oil Is Not a Curse, Ownership Structure and Institutions in Soviet Successor States, p. 46

[7] Luong, Oil Is Not a Curse, Ownership Structure and Institutions in Soviet Successor States, p. 46

[8] Luong, Oil Is Not a Curse, Ownership Structure and Institutions in Soviet Successor States, p. 182

[9] Luong, Pauline and Erika Weinthal, Oil Is Not a Curse, Ownership Structure and Institutions in Soviet Successor States. Cambridge: Cambridge University Press, 2010, p. 14

[10] LeVine, Steve, The Oil and the Glory: The Pursuit of Empire and Fortune on the Caspian Sea. New York: Random House, 2007, p. xii

[11] Yergin, Daniel, The Quest: Energy, Security and the Remaking of the Modern World. New York: Penguin Press, 2011, p. 5

[12] Yergin, The Quest: Energy, Security and the Remaking of the Modern World, p. 13

[13] Yergin, The Quest: Energy, Security and the Remaking of the Modern World, p. 14

[14] Yergin, The Quest: Energy, Security and the Remaking of the Modern World, p. 5

[15] Yergin, The Quest: Energy, Security and the Remaking of the Modern World, p. 5

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