ROYAL DUTCH SHELL - EVIDENCE OF MARKET MANIPULATION
New York Times: URGES US TO JOIN WORLD OIL CARTEL: 11 March 1932
Royal Dutch Shell Official Would Have United States Confine Share to Export Regulation. "Advocating a world program to end the overproduction of petroleum, J.B. A. Kessler, joint managing director of the Royal Dutch Shell group of companies, proposes that the Unites States, because of the anti-trust laws of this country, participate in the suggested international cartel...."
New York Times: "REICH OIL MONOPOLY SOUGHT BY DETERDING": 26 October 1934
(“LONDON, Oct. 25.-It is reported confidentially from Berlin that the object of Sir Henry Deterding’s recent visit to Chancellor Hitler at Berchtesgaden, where he stayed for four days, was to discuss the conditions for granting a monopoly to the Royal Dutch and Shell Companies of petrol distribution in Germany for a long period of years.)
New York Times: N.J. STANDARD OIL 0.6% REICH-OWNED: 9 June 1941
EXTRACTS
Tells How Cartel Was Formed
The account also gave an intimate picture of some of the arrangements by which the great oil producers of the world formed a world cartel in the twenties and Thirties to prevent the hydrogenation process from disrupting the industry.
Hydrogenation Patent Rights
Standard Catalytic no longer controls any of the hydrogenation patent rights. The Lamp continues, " these having passed to International Hydrogenation Patents Company for use outside the United States and to Hydro Patents Company for the United States. Shortly before the invasion of Holland, International Hydrogenation Patents Company, which belongs to us jointly with the Royal Dutch Shell Company, moved its seat from Holland to the Dutch West Indies colony of Curacao.
"The German authorities have refused to recognise this transfer, however, and maintain that the I. H. P. is still seated in The Hague, where a German Commissar is now administrering its affairs," the article continues.
The Seven Sisters: By Anthony Sampson: Published by Hodder and Stoughton Limited ISBN 034021323 X
Page 81 extract
Deterding and Teagle fascinated each other. The acquaintance began at a famous encounter in 1907 when Deterding had just taken over the merged Royal Dutch Shell and came to see Standard Oil in New York to try to persuade them to abandon their price- cutting wars. Deterding realised that price-cutting was not true competition at all but 'throat-cutting', and he tried to persuade the directors of Standard including Archbold and young Teagle to agree to stable prices. Deterding's precept inherited from his old boss Kessler was the Dutch proverb Eendracht maakt macht - co-operation gives power - and he was always searching for a global agreement or cartel.
Page 92/93/ extracts
But the Big Three, with local allies, could often make deals in individual countries. One of the most effective was Britain, where Shell and BP collaborated with Exxon to fix prices, and also formed a joint British marketing company called Shell-Mex BP (which remained together until the mid-seventies, when it was dissolved after long and painful negotiations). Another was in Sweden, where the market was carved up between Exxon, Shell, BP and Texaco and two other companies. They met each week in the Shell offices in Stockholm to ensure that no company undercut another-which was not fully revealed until investigated by a Swedish parliamentary committee in 1947.16
The big companies held successive meetings in the early 'thirties to try to enforce the cartel, and in 1932 six of the seven sisters met to adopt more flexible quotas. The last and most important meeting was in April 1934, when Exxon, Shell and BP met secretly in London to reformulate the Achnacarry Agreement. Together they produced a Draft Memorandum of Principles, to operate throughout the world except where the law forbade it, in the United States. The Memorandum laid down rules for restricting competition and sharing profits from outsiders, including a system of penalties to be enforced by a special 'London Committee' (London, then as later, was the natural venue for cartel discussions). This agreement was ended, according to Exxon's later evidence, in early 1938; but in Sweden at least, from the evidence uncovered it continued through the war.
Most of the world's oil resources were in the hands of the big companies, and the agreements. succeeded in their main object of maintaining stable prices at the American levels, and of limiting competition inside each country. The monopoly of Rockefeller had evolved, with apparent inevitability, into a global cartel.
TRIUMPH AND TREASON
Through the 'twenties and 'thirties, Teagle and Deterding were the 'Titans' of world oil, and each voyage across the Atlantic was surrounded by speculation. After the cartel agreement at the Castle their position seemed still more secure, as they covered the world with secret agreements and played producers against each other.
WINSTON CHURCHILL COMMENTS ABOUT ROYAL DUTCH SHELL
Extracts from pages 68/69
Churchill, urged by Fisher, talked to the Shell leaders. He was distrustful of Samuel but fascinated by Deterding-though it was Deterding who was the foreigner, and the more ruthless business- man. Fisher insisted that Deterding was becoming rapidly Anglicised and urged Churchill to knight him ('He has a son at Rugby or Eton and bought a big property in Norfolk and is building a castle! Bind him to the land of his adoption!'). Churchill, however, was increasingly suspicious of Shell, the more so as the price of oil fuel went rapidly up, and Samuel forecast further increases. Churchill, in tune with the anti-monopolist mood of the Liberals, denounced the price increases, with some over-simplification, as the result of secret price-rigging between the oil monopolies.6
In June, Churchill made a historic speech to parliament explaining his decision with a mixture of jingoism and foresight. He described how the two giants, Shell and Standard Oil, shared the world between them (ignoring the fact that Standard,Oil had been broken up three years before) and made much of the power of the monopolies. 'Against this, amongst British companies who have maintained an independent existence, the Burmah Oil company, with its offshoot the Anglo-Persian Oil Company, is almost the only noticeable feature.' He warned how, in the face of the giant companies, the buyer of oil may be forced to pay an artificial price, and he developed what was in effect a devastating attack on Shell:
It is their policy-what is the good of blinking at it -to acquire control of the sources and means of supply, and then to regulate the production and the market price ... We have no quarrel with Shell. We have always found them courteous, considerate, ready to oblige, anxious to serve the Admiralty and to promote the interests of the British Navy and the British Empire -at a price.
Samuel smarted under Churchill's innuendoes against Shell's loyalties and business methods, which some people suspected were tinged with anti-semitism.7
The Prize: By Daniel Yergin: Published 1992
WINSTON CHURCHILL COMMENTS ABOUT ROYAL DUTCH SHELL
EXTRACTS FROM PAGE 161/162/163
On June 17, 1914, Churchill rose in the House of Commons to introduce a historic measure. The bill he proposed had two essential elements: First, the government would invest £2.2 million in Anglo-Persian, acquiring in tum 51 percent board.
Also present in the Commons was the member from Wandsworth, one Samuel Samuel, who, working for many years by the side of his brother, Marcus Samuel, had helped to create Shell-and who, that day, became increasingly fidgety and aggravated as Churchill spoke.15
"This afternoon we have to deal, not with the policy of building oil-driven ships or of using oil as an ancillary fuel in coal-driven ships," Churchill began, "but with the consequence of that policy." The oil consumer, he declaimed, had freedom of choice neither in regard to fuels nor in regard to sources of supply. "Look out upon the wide expanse of the oil regions of the world. Two gigantic corporations-one in either hemisphere-stand out predominantly. In the New World there is the Standard Oil. ... In the Old World the great combination of the Shell and the Royal Dutch, with all their subsidiary and ancillary branches, has practically covered the whole ground, even reached out into the New World." Churchill proceeded to argue that the Admiralty, along with all private consumers, had been subjected to "a long steady squeeze by the oil trusts all over the world." Early in the debate, Samuel Samuel popped up three times to object to Churchill's characterizations of Royal Dutch/Shell. He was ruled out of order. "He had better hear the case for the prosecution," Churchill acidly said after the third interruption, "before he offers an argument for the defense." Samuel resumed his seat but not his composure. "For many years," Churchill went on, "it has been the policy of the Foreign Office, the Admiralty, and the Indian Government to preserve the independent British oil interests of the Persian oil-field, to help that field to develop as well as we could and, above all, to prevent it being swallowed up by the Shell or by any foreign or cosmopolitan companies." Since the government was going to give such a boost to Anglo-Persian, it was but reasonable, he added, that it share in the rewards. And "over the whole of these enormous regions we obtain the power to regulate developments according to naval and national interest." Declaring that "all the criticisms" of such a plan "so far, have flowed from one fountain," Churchill then launched an attack on that fountain-Royal Dutch/ Shell and Marcus Samuel-though adding, "I do not wish to make any attack upon the Shell or the Royal Dutch Company."
"Not the least!" Samuel Samuel called out from the back bench. Churchill's oratory was full of sarcasm. Were the bill to fail, he said, Anglo- Persian would become part of Shell. "We have no quarrel with the 'Shell.' We have always found them courteous, considerate, ready to oblige, anxious to serve the Admiralty, and to promote the interests of the British Navy and the British Empire-at a price. The only difficulty has been price." With the leverage of Persian oil "at our disposal, we do not think we shall be treated with less courtesy, or less consideration, or shall we find these gentlemen less obliging, less public spirited, or less patriotic than before. On the contrary, if that slight difference of opinion which has hitherto existed about prices-I am obliged to return to that vicious and sordid matter of prices-were removed, our relations would be better; they would become ... the sweeter, because no longer leav- ened with the sense of injustice." Samuel finally had his chance, later in the debate, to reply. "I do protest most strongly on behalf of one of the greatest British commercial industrial companies, that the attacks that have been made are wholly unjustifiable." He catalogued Shell's services to the Navy and its championing of oil-powered propulsion. He asked the government to make public the prices that Shell had charged, which had been kept secret, and which, he said, would prove that the company had never gouged the Admiralty. "The attack we have heard had nothing on earth to do with the question before the Committee," said another M.P., Watson Rutherford. Criticizing Churchill for raising the specter of monopoly and for "Jew-baiting,"
THE TIMES: COMPANY MEETINGS: "SHELL" TRANSPORT AND TRADING CO. (LTD). 23 June 1913
(SECTION OF THE "SHELL" TRANSPORT AND TRADING CO. (LTD). COMPANY MEETING REPORT REPLYING TO COMMENTS MADE IN THE HOUSE OF COMMONS BY WINSTON CHURCHILL, ALLEGING SHELL HAD ENGAGED IN OIL PRICE FIXING)
MOGULS AND MANDARINS: By Marian Kent: First published in 1993 by FRANK CASS CO. LTD. ISBN 0-7146--4504--4
Extract from pages 43/44
A question considered carefully by both the Royal Commission and the Admiralty was that of forward contracts. Churchill declared that this was because:
So far the British Admiralty has adhered to the system of annual contracts. To continue longer on such a system is to make sure of being mercilessly fleeced at every purchase, and to run a very great risk of not being able to secure on any particular occasion supplies of a fuel which will be as vital to the Navy as ammunition itself.36
The question of forward contacts was indeed inseparable from that of oil prices. The prime factor in Churchill's reasoning was undoubtedly the steady rise in fuel oil prices quoted on the London market: between January 1911 and January 1913 they doubled, from 37s. 6d. to 77s. 6d. a ton.37 This great rise was due in large part to excessive freight charges, though also in part to the inevitable effects of market forces on a commodity for which the demand exceeded the supply. There was also another reason: Sir Marcus Samuel's frequent and open prediction of continuing price rises greatly irked Churchill, who denounced the increases as evidence of secret price-rigging by the great oil interests. He was wrong in his reasoning.
Extract from item 9, page 60
9. Evidence of HMG's opinion on Shell’s Middle East oil interests can be seen in some highly secret correspondence between that company and the APOC, Oct. 1912, sent none the less to the FO by the latter, and which produced the comment from Mallet that 'It is clear from the printed correspondence... that the Shell group are aiming at the extinction of the... (APOC) ... as a competitor, - one of their objects being tio control the price of liquid fuel for the British Navy...' memo. 6 Nov. 1912, ibid., No. 47846.
Extract from item 40, page 62
That this price was admitted within the Admiralty to be more favourable that the Persian rate should be pointed out in view of Churchill's attack in the house of commons, two months later, on Shell prices and the company's Jewish directorate, an attack widely regarded as gratuitous and provocative.
Extract from page 153
The discussions and plans for increasing synthetic aviation fuel production and particularly the Shell scheme of mid-late 1939 (for replacing one of the Air Ministry's projected synthesisation plants with one to he built, managed and updated by the company itself in return for government financial assistance24) showed a close level of mutual dependence and co-operation. This was underlined by the private letter of 2 September 1939 from Frederick Godber (later Lord Godber) a managing director of Shell, to the Director of the Petroleum Department, F. C. Starling, explaining how, if the United States were to be unfriendly', his company could still supply British needs from American sources simply through the device of purchasing through one of its American companies, 'losing' the oil in its huge stocks at Curacao, and reshipping it from there to England.25
WHO FINANCED HITLER By James E. Pool III and Suzanne Pool: Macdonald and Jane's Publishers Limited: ISBN 0 354 04395 1
Extract from page 323
Some said Sir Henri gave the Nazis money in exchange for their agreement to give him preferred standing in the German oil market when they came to power.85 In 1931, it was reported that Deterding made a loan of £30 million to Hitler in return for a promise of a petroleum monopoly. Some claimed the loan was as much as £55 million.86 Louis Lochner, former foreign correspondent and authority on the relation between Hitler and big business, mentioned an alleged "ten million marks" contribution by the Dutch oil lord to the Nazis.87 With so many sources agreeing on the matter, there can be little doubt that Deterding financed Hitler.
PATENTS FOR HITLER By Guenter Reimann Copyright 1942 by Guenter Reimann PRINTED IN GREAT BRITAlN BY RICHARD CLAY AND COMPANY, LTD., BUNGAY, SUFFOLK.
Extracts from pages79, 80 & 81
I. H. P. was expected to play a great role; for it was intended to control the exploitation of I. G.'s synthetic-oil patents in the entire world, outside of Germany and of America. This long- term speculation did not materialize. For the only assets of I. H. P. were the I. G. hydrogenation patents. They were "sold" by Standard-I. G. to the new company in Liechtenstein for the sum of $ I I ,500,299. I0. At the same time Shell became the third partner in I. H. P. Thus the two biggest oil concerns in the world joined hands with I. G. in the control of the synthetic-oil patents. As producers of and traders in natural oil they were, of course, interested in curbing rather than promoting the new synthetic processes for production of gasoline from materials other than crude oil.
The core of the problem was how to secure effective control of the entire field, Mr. Howard reported to the Executive Committee of Standard Oil on October 28, I 938 : "The high points of the matter are that Jersey and Shell acquire sufficient effective control of the hydrocarbon synthesis process in the world outside of the United States so that their position as leaders in the entire tield of synthetic petroleum production is assured."
Thus we see that whenever new processes for synthetic oil were discovered, Standard Oil and I. G. tried to bring the corresponding patents under their control and prevent the construction of competitive plants. All synthetic processes for oil were finally pooled, so that the new industry, even before it had come into existence, was already under complete control of one single group, with Standard Oil, I. G., and Shell as the dominant forces.
The most powerful man in the world: The Life of Sir Henri Deterding: By Glyn Roberts: Published in 1938 by Covici Friede Publishers, New York ISBN 0-88355-301-5
Extract from page 69
Deterding was enamored, as early as this, of a policy of rationalization of the oil industry by which producers and sellers would come to a voluntary agreement to fix prices among themselves (pretty high, of course) and to create some means of penalizing anyone who broke the agreement. Already, at just over thirty, and after only a year or two with the oil business, this obscure merchant was toying with grandiose and complex conceptions of monopoly. He claims, with pride, that "we of the Royal Dutch became probably the first oil company in the world to determine that henceforth, whenever and wherever possible, a definite system of cooperation with smaller trade rivals must be made an essential part of business policy; in fact, our main working plank."
Extracts from page 98/99
Deterding was obsessed by his idea of "simplification" in the oil industry. He had the fanatical energy of the evangelist the single-mindedness of a neurotic dominated by an idee fixe) the persuasiveness of a man possessed by a great ideal. He talked about a scheme which was to bring increased profit to shareholders in oil enterprises by driving up prices as if it was a grand humanitarian project calculated to augment the net sum of human happiness.
He saw no obstacle to rounding off the scheme he had worked out for simplification of the oil trade by control of production and stabilization of prices at a nice and profitably high level. The altruistic ends he vaguely professed boiled down in practice to his conviction that much greater profits would come to every company in the businessn if they would only come to terms about prices, and not, at all costs, start price wars to cut each other out. He wanted to eliminate competition.
Even before the industry has reached the final stage of unification, price agreements and understandings of the kind Sir Henri has continually been trying to fix up with Standard bring the "competitors" very close together, with the result that the purchaser is faced by a united front of producers who have agreed to exploit him to their mutual advantage- for a time, at any rate.
Hell's Cartel: IG Farben and the Making of Hitler's War Machine: By Diarmuid Jeffreys: ISBN 9780747596554
Page 225
In 1929, for example, joined up with Norsk Hydro in the IG-dominated Nitrogen Syndicate and in 1930 it signed an IG/Standard Oil/Royal Dutch Shell agreement designed to contain the spread of synthetic oil technology.
Shell.com website May 2010: Extract from webpage headed "The early 20th century"
But the price of oil proved to be volatile and efforts to control the market by price-cutting or through an informal cartel with other oil majors were doomed to failure.
Tragedy and Hope: A History of the World in Our Time by Carol Quigley
Extract from page 879
This world oil cartel had developed from a tripartite agreement signed on September 17, 1928 by Royal Dutch-Shell, Anglo-Iranian, and Standard Oil. The three signers were Sir Henri Deterding of Shell, Sir John (later Lord) Cadman of AIOC, and Walter C. Teagle of Esso. These agreed to manage oil prices on the world market by charging an agreed fixed price plus freight costs, and to store surplus oil which might weaken the fixed price level. By 1949 the cartel had as members the seven greatest oil companies of the world Anglo-Iranian, Royal Dutch-Shell, Esso, Calso, Socony-Vacuum, Gulf, and Texaco). Excluding the United States domestic market, the Soviet Union, and Mexico, it controlled 92 percent of the world's reserves of oil, 88 percent of the world's production, 77 percent of the world's refining capacity, and 7o percent of the world's tonnage in ocean tankers.
Royal Dutch Shell Price Fixing
New York Times: "Shell to Pay $180 Million" (Price fixing case): 3 Jan 1987
New York Times: "California Oil Price-Fixing Case Settled": 17 August 1991
New York Times: Settlement for Coral Power: 15 November 2003
Bloomberg: Shell, Unipetrol, Bayer Are Sued Over Rubber Cartel (Update2): 20 May 2008
May 20 (Bloomberg) -- Cooper Tire & Rubber Co., the second- largest U.S. tiremaker, and 25 other companies sued Unipetrol AS, units of Royal Dutch Shell Plc, Bayer AG, and as many as 20 others over an alleged rubber cartel in Europe.
Unipetrol and units of Shell, Dow Chemical Co., Eni SpA and Trade-Stomil Sp were fined a total of 519 million euros ($813 million) in a 2006 European Union antitrust case over material used to make tires and shoes. The companies are appealing.
The Times: Supermarkets and tobacco firm are fined £173m for price fixing: 12 July 2008
Asda and Somerfield have admitted fixing the price of cigarettes and overcharging customers under a secret deal with the manufacturer of brands including Benson & Hedges and Silk Cut. The Office of Fair Trading said that a total of £173.3 million in fines and costs had been agreed in one of the biggest settlements of its kind.
Other firms that admitted colluding in the pricing scam include the owner of Threshers, the off-licence chain, and One Stop convenience stores, which must contribute towards the settlement. But the lion’s share of the fine — £93 million — will be paid by Gallaher, owned by Japan Tobacco.
Other accused firms are fighting the allegations. These are Imperial Tobacco, which owns the Embassy, John Player and Golden Virginia brands, Tesco, Morrisons, Safeway (now taken over by Morrisons), the Co-op and Shell, for its petrol station stores. If they are found guilty of collusion they face serious penalties under the Competition Act.
Reuters: EU fines "paraffin mafia" wax makers' cartel: 1 October 2008
The Times: ‘Paraffin mafia’ comes unstuck after €676m fines: 2 October 2008
Guardian: 'Paraffin mafia' firms given £500m fines for price-fixing: 2 October 2008
Financial Times: Brussels fines paraffin wax cartel: 2 October 2008
The Wall Street Journal: Wax Price-Fixing Is Alleged: 2 October 2008
Occupational Health & Safety: Merit Energy and Shell to lower emissions after clean air violations: 4 October 2008
Financial Post (Canada): GREECE FINES BP, SHELL $80M FOR PRICE-FIXING: 26 November 2008
ChannelNewsAsia: Greece fines BP, Shell for price-fixing: 26 November 2008
International Herald Tribune: Greece: BP, Shell fined for competition breaches: 25 November 2008
Bloomberg: Chevron, Total, Exxon, Shell Fined on Air France Fuel: price fixing cartel: 4 Dec 2008 (Exxon Mobil Corp., Royal Dutch Shell PLC, Chevron fined 41.1 million euros ($52 million) by the French antitrust authority for fixing the price of fuel for certain Air France-KLM Group flights.)