Prize , Oil History

Simon and Schuster, 1230 Avenue of the Americas, New York, NY 10020 • 1991 • 877 pages • $24.95 cloth

Oil has often been referred to as the lifeblood of any economy. While this is an overstatement, oil has been the most critical, nonhuman economic resource throughout most of the 20th century. Daniel Yergin illustrates the economic, political, societal, and geo-strategic importance of this commodity.

Yergin takes the reader on an enjoyable and thorough journey through the history of oil, from the drilling of the first well by Colonel Edwin Drake in Pennsylvania in 1859 up to Saddam Hussein’s invasion of Kuwait in a mad grab for wealth and oil in August 1990. Yergin explores oil’s role in war, describes the ever-changing structure of the oil industry, and discusses the prominent and often colorful petroleum players. The Prize is a well-written and well-researched addition to a branch of history that, until very recently, had been sadly neglected—business history.

My sole criticism of Yergin’s effort is his periodic indifference to the role of markets in the oil industry. At times he acknowledges the benefits of innovation, entrepreneurship, productivity, organization, and the price system that markets bring to bear. However, he also issues caveats relating to the old “instability” straw man as it pertains to free markets.

For instance, Yergin declares in the book’s epilogue that “The years of past oil crises have demonstrated that, given time, markets will adjust and allocate.” Earlier, he even summarizes the development of the oil pricing system as it led to today’s futures markets: “Once it had been Standard Oil that had set the price. Then it had been the Texas Railroad Commission system in the United States and the majors in the rest of the world. Then it was OPEC. Now price was being established, every day, instantaneously, on the open market, in the interaction of the floor traders on the Nymex [New York Mercantile Exchange] with buyers and sellers...