Word: crude
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...began, the upheaval in the business that started with the Arab embargo of 1973 threatened to end this reign. Flushed with their success in quintupling the price of petroleum, the OPEC countries were about to nationalize their oilfields, which would strip the Sisters of ownership of much of their crude reserves. Some governments talked aggressively of also muscling in on the companies' "downstream" refining and marketing operations. In the consuming countries, meanwhile, the Sisters faced painful marketing adjustments brought on by high prices and, in the U.S., a strong congressional drive to bust the oil majors into many smaller...
Soon after nationalization, the OPEC countries realized they could not compete against the Sisters' global distribution networks; the prospects of Kuwaiti refineries in Rotterdam and Saudi gas stations in Illinois evaporated quickly. Indeed, those countries that had their national oil companies sell crude directly to the world market were usually disappointed with the prices they got and the quantities they moved. So the OPEC countries have negotiated pacts under which the Sisters continue to pump the oil, for a fee, take a guaranteed share for themselves, and buy most of the rest at a fixed price...
...cozy arrangement for both sides. The companies to a limited extent can shop around for crude, rather than being tied to the countries where they have wangled concessions. But they still get to sell the oil from those former concessions, and without having to put any money into new wells and pipelines. Case in point: Saudi Arabia, which has bought 60% of Aramco from the firms that created it 45 years ago, Exxon, Mobil, Texaco and SoCal. But the main result, as SoCal Chairman Harold J. Haynes describes it, is that "capital investment will be supplied by the Saudis...
...greater sales. Of all the Sisters, Shell seems best suited to benefit from the trend toward getting a larger share of profit from refining and marketing. The firm has long concentrated on those areas, to the point that outside the U.S. it buys around 60% of its crude from other companies. Says Shell's European coordinator Jan Choufoer: "Adding value to bought crude is the name of our game...
...that end, Shell has gone farther than any of the Sisters toward "whitening" its production-that is, squeezing more high-profit gasoline, kerosene and other light fuels out of each barrel of crude. It is also profiting handsomely from its 30% interest in the large natural-gas fields in The Netherlands...