Oil and gas industry, Part 2

EDITOR’S NOTE: Rotarian Betty Young, chairman and CEO of Read & Stevens Inc. oil production company in Roswell, on March 17 spoke to the Roswell Rotary Club about the history of the oil and gas industry in Roswell and southeastern New Mexico. The speech, entitled: “Permian Basin: The Heart of America’s Future,” is reproduced in the Roterrier in two parts. This is Part 2.

By BETTY YOUNG

The oil and gas industry in Chaves County was impacted by national and international trends throughout its history.

Late 1948-late 1973

Post World War II 

Lee Harvard and Tom Beall mentioned the Texas Railroad Commission had restrictions on how much you could produce.

According to Wikipedia, from the 1930s to the 1960s, the Texas Railroad Commission largely set world oil prices, but was displaced by OPEC.

Betty Young

At that time, the United States was the world’s largest producer and consumer of oil; and the world market was dominated by a group of multinational companies known as the “Seven Sisters,” five of whom were headquartered in the United States.  Who were the “Seven Sisters?”

• Anglo-Iranian Oil Co. (now BP)

• Gulf Oil (later part of Chevron

• Royal Dutch Shell

• Standard Oil Company of Calif (SoCal, now Chevron)

• Standard Oil Company of New Jersey (Esso, later Exxon, now part of ExxonMobil)

• Standard Oil Company of New York (Socony, later Mobil, also now part of ExxonMobil

• Texaco (later merged into Chevron)

Preceding the 1973 oil crisis, the Seven Sisters controlled around 85% of the world’s petroleum reserves. Then industry dominance shifted to the OPEC cartel and state-owned oil and gas companies such as Saudi Aramco, Russia, China, Iran, Venezuela, Brazil, and Malaysia. These are now called “the new Seven Sisters.”

1969-70

Lee Harvard started Harvard Exploration Co., which is now Harvard Petroleum, LLC. He commented what a terrible time to start the business because of the downturn.

Lee had to convince outside investors to invest in the oil business. Bankers did not have the money to lend. At this time we were importing 60% foreign oil.

The Arab Oil Embargo

1973, the first spike

The 1973 oil crisis began in October 1973 when members of the Arab members of OPEC proclaimed an oil embargo. By the end of March 1974, the price of oil had risen from $3 per bbl to $12 bbl globally. This embargo caused an oil crisis called the “first oil shock.”

1979-80 second spike

Lee and Pat Gratton mentioned the Iranian revolution in 1979 caused the second oil spike.

This revolution refers to the overthrow of the Pahlavi dynasty, which the United States supported. The dynasty was replaced by the Islamic Republic under the Grand Ayatolla Ruhollah Khomeini, who led the revolution, supported by various leftist and Islamist organizations, as well as Iranian student movements.

In the 1980s, Charlie Read and Norm Stevens Inc. got into the drilling business. It was the absolute wrong time. Around 1985 when the price dropped to $29/bbl from $68/bbl, the Penn Square Bank failed and First National Bank of Midland failed. Read & Stevens, got thrown into the FDIC.

Beall was involved in meetings which turned out to be a liquidation with the FDIC. “If FDIC could not liquidate you, they would bankrupt you,” he said.

According to Beall, Charlie got tenacious and didn’t allow the FDIC to bankrupt him. He said Charlie withstood that test.

1990 third spike

Iraq occupied Kuwait for seven months. This led to direct military intervention by U.S.-led forces in the Gulf War and Iraq setting 600 Kuwaiti wells on fire. Iraq accused Kuwait of stealing Iraqi petroleum through slant drilling.

2007-08 Financial Crisis

Known as the global financial crisis, it is considered to be the worst financial crisis since the Great Depression of the 1930s. It began with the crisis in the U.S. subprime mortgage market and developed into a full-blown international banking crisis.

Massive bailouts of banks were performed and policies were employed to prevent the possible collapse of the world’s financial system. The Dodd-Frank regulatory reform bill was enacted in the United States to lessen the chance of recurrence.

Libyan dictator Muammar al-Gaddafi was killed by his own people in October 2011 after a protracted uprising. Libya fell into chaos and factions divided the country. Oil prices became unstable and began to rise again. In 2015, oil started to crash again; there had been no economic growth for 7 to 8 years! 

2015

Saudi Arabia increased production, while the United States quit drilling new wells. The bottom line is peaks are due to war in Arab countries.