History
The expression "Seven Sisters" was coined by the head of the Italian state oil company (Eni), Enrico Mattei,[22]. The history of the supermajors traces back to the seven oil companies which formed the "Consortium for Iran" cartel and dominated the global petroleum industry from the mid-1940s to the 1970s.[23][24] The Seven Sisters were: By the 1930s, the Seven Sisters dominated oil production in the world.[25] The companies owned nearly all rights to the oil in Iran, Iraq, Saudi Arabia, and the Persian Gulf.[25] The companies established jointly owned companies (such as the Iraq Petroleum Company) to legally tie their hands together, facilitate cooperation, and prevent cheating on one another.[25] The companies sought to limit the supply of oil by controlling the speed at which oil fields were developed. From the 1920s to 1940s, they had agreements not to produce oil in the Middle East unless it was in coordination with one another.[25] After the 1940s, the companies continued to collude.[25] The discovery of massive oil fields in Saudi Arabia threatened to scuttle the cartel, as control of the oil fields by two companies could undermine existing supply management schemes.[25] However, the Saudi oil production ultimately became jointly controlled by four of the seven sisters, thus making it easier to maintain coordination between the Seven Sisters.[25]
According to Jeff Colgan, the Seven Sisters faced two major problems. The first revolved around coordinating the activities of the companies so that oil prices would be kept high.[25] The second revolved around cooperation with the governments of the territories containing the oil reserves: the companies sought to minimize the taxes and royalties paid to the governments.[25] In terms of dealing with host governments, the Seven Sisters benefitted from the willingness of British and American governments to pressure and coerce the host governments.[25] The oil companies also slowed down production when taxes and royalties were increased by one host government while ramping up production in other territories with lower taxes and royalties, thus pressuring host governments to keep taxes and royalties low.[25]
Host governments faced a number of hurdles in terms of nationalizing the oil production. First, a number of oil-producing countries did not have independence and were controlled by empires. Second, great powers had installed compliant heads of state in several oil-producing countries, making those leaders reliant on the support of the great powers and unwilling to upset them. Third, a number of oil-producing countries lacked the capital and technical expertise to run the oil production, as well as needed access to North American and European markets. Fourth, oil-producing countries feared that they would be punished by Western governments and firms if they nationalized oil production (as Mohammad Mossadegh was when he nationalized the Iranian oil industry).[25]
In 1951, Iran nationalized its oil industry, previously controlled by the Anglo-Iranian Oil Company (now BP), and Iranian oil was subjected to an international embargo. In an effort to bring Iranian oil production back to international markets, the U.S. State Department suggested the creation of a consortium of major oil companies, several of which were daughter corporations of John D. Rockefeller's original Standard Oil monopoly.[26]
In 1959, the Seven Sisters reduced the price of oil for Venezuela and Middle Eastern producers, which provoked anger among oil-producing governments.[27] This prompted the oil-producing governments to take the initial steps to establish OPEC.[27] The Seven Sisters threatened the OPEC founders that they would lose market access if they went ahead with their plans.[27]
The head of the Italian state oil company (Eni), Enrico Mattei, sought membership for his company, but was rejected and since then spread the expression "Seven Sisters".[28][29] British writer Anthony Sampson took over the term when he wrote the book The Seven Sisters in 1975, to describe the oil cartel that tried its best to eliminate competitors and keep control of the world's oil resource.[30] The term for the oil cartel was further popularized, along with a fictional logo, in Mad Max 2: The Road Warrior, a 1981 post-apocalyptic dystopian action film about apocalyptic fuel shortages.[31]
Being politically influential, vertically integrated, well organized, and able to negotiate cohesively as a cartel, the Seven Sisters were initially able to exert considerable power over Third World oil producers.[28] Despite their market power, the Seven Sisters kept prices stable at moderate levels.[32] This was done to not incentivize governments in both the consumer and producer countries to impose regulations on the oil industry.[32]
1973 oil crisis
Preceding the 1973 oil crisis, the Seven Sisters controlled around 85 percent of the world's petroleum reserves.[33] In the 1970s, many countries with large reserves nationalized holdings of all major oil companies. Since then, industry dominance has shifted to the OPEC cartel and state-owned oil and gas companies in emerging-market economies, such as Saudi Aramco, Gazprom (Russia), China National Petroleum Corporation, National Iranian Oil Company, PDVSA (Venezuela), Petrobras (Brazil), and Petronas (Malaysia). In 2007, the Financial Times called these "the new Seven Sisters".[28]
