OIL SUPPLY 229
prices fell and oil industry profits declined, until in 1882, John D.
Rockefeller had devised a solution to the problem of competition
in the oil fields: the Standard Oil Trust. This brought together 40
of the nation's leading refiners and through its control of refining,
Standard Oil was able to control the price of oil.
During the early 20th century, oil production continued to climb.
By 1920, oil production reached 450 million barrels, prompting fear
that the nation was about to run out of oil. Government officials
predicted that the nation's oil reserves would last just ten years.
Up until the 1910s, the United States produced between 60 and 70%
of the world's oil supply. As fear grew that American oil reserves
were dangerously depleted, the search for oil turned worldwide.
Oil was discovered in Mexico at the beginning of the 20th century,
in Iran in 1908, in Venezuela during World War I, and in Iraq in
1927. Many of the new oil discoveries occurred in areas dominated
by Britain and the Netherlands: in the Dutch East Indies, Iran, and
British mandates in the Middle East. By 1919, Britain controlled
50% of the world's proven oil reserves.
After World War I, a bitter struggle for control of world oil reserves
erupted. The British, Dutch, and French excluded American companies from purchasing oil fields in territories under their control.
Congress retaliated in 1920 by adopting the Mineral Leasing Act,
which denied access to American oil reserves to any foreign country that restricted American access to its reserves. The dispute was
ultimately resolved during the 1920s when American oil companies were finally allowed to drill in the British Middle East and the
Dutch East Indies.
The fear that American oil reserves were nearly exhausted
ended abruptly in 1924, with the discovery of enormous new oil
fields in Texas, Oklahoma, and California. These discoveries, along
with production from new fields in Mexico, the Soviet Union, and
Venezuela, combined to drastically depress oil prices. By 1931,
with crude oil selling for 10 cents a barrel, domestic oil producers demanded restrictions on production in order to raise prices.
Texas and Oklahoma passed state laws and stationed militia units
at oil fields to prevent drillers from exceeding production quotas.
Despite these measures, prices continued to fall.
In a final bid to solve the problem of overproduction, the federal government stepped in. Under the National Recovery
Administration, the federal government imposed production
restraints, import restrictions, and price regulations. After the
prices fell and oil industry profits declined, until in 1882, John D.
Rockefeller had devised a solution to the problem of competition
in the oil fields: the Standard Oil Trust. This brought together 40
of the nation's leading refiners and through its control of refining,
Standard Oil was able to control the price of oil.
During the early 20th century, oil production continued to climb.
By 1920, oil production reached 450 million barrels, prompting fear
that the nation was about to run out of oil. Government officials
predicted that the nation's oil reserves would last just ten years.
Up until the 1910s, the United States produced between 60 and 70%
of the world's oil supply. As fear grew that American oil reserves
were dangerously depleted, the search for oil turned worldwide.
Oil was discovered in Mexico at the beginning of the 20th century,
in Iran in 1908, in Venezuela during World War I, and in Iraq in
1927. Many of the new oil discoveries occurred in areas dominated
by Britain and the Netherlands: in the Dutch East Indies, Iran, and
British mandates in the Middle East. By 1919, Britain controlled
50% of the world's proven oil reserves.
After World War I, a bitter struggle for control of world oil reserves
erupted. The British, Dutch, and French excluded American companies from purchasing oil fields in territories under their control.
Congress retaliated in 1920 by adopting the Mineral Leasing Act,
which denied access to American oil reserves to any foreign country that restricted American access to its reserves. The dispute was
ultimately resolved during the 1920s when American oil companies were finally allowed to drill in the British Middle East and the
Dutch East Indies.
The fear that American oil reserves were nearly exhausted
ended abruptly in 1924, with the discovery of enormous new oil
fields in Texas, Oklahoma, and California. These discoveries, along
with production from new fields in Mexico, the Soviet Union, and
Venezuela, combined to drastically depress oil prices. By 1931,
with crude oil selling for 10 cents a barrel, domestic oil producers demanded restrictions on production in order to raise prices.
Texas and Oklahoma passed state laws and stationed militia units
at oil fields to prevent drillers from exceeding production quotas.
Despite these measures, prices continued to fall.
In a final bid to solve the problem of overproduction, the federal government stepped in. Under the National Recovery
Administration, the federal government imposed production
restraints, import restrictions, and price regulations. After the