THE OIL AGE ARRIVES41Mexico ejected the foreigners and handed their businesses to a newly
created government- owned firm, Pemex. It was the first major nation-
alization of foreign oil assets. The seizure made Cardenas an instant
hero; he is still celebrated each year on Oil Expropriation Day, a Mexi-
can holiday. In 1951, Iran did the same with British assets, but a US-
backed coup in 1953 restored a large share of foreign control.
Creeping threats of nationalization made IOC chiefs willing to cut
deals. To avoid full expropriation, they agreed to changes in the origi-
nal concessions. The first of these came in 1943, when Venezuela suc-
ceeded in pushing Standard Oil of New Jersey and Shell to grant it
50 percent of revenues, a huge increase on the previous rate of 15 per-
cent.^33 Improved terms for Venezuela triggered a cascade of similar set-
tlements of 50 percent. In 1950, Aramco granted these terms to Saudi
Arabia.^34 Kuwait and Iraq won 50 percent by 1952.^35
The 50/50 principle lasted for two decades. By the late 1960s, producer
governments began another round of demands. The 1969 coup in Libya,
where young Col. Muammar Qaddafi overthrew the inept King Idris,
proved the catalyst. Qaddafi demanded a 55 percent share from the
US- based Occidental Petroleum. Upping the ante, Qaddafi also insisted
on an increase in the posted price of oil, then stuck at $1.80 per barrel. At
the time, IOCs’ “posted prices” determined only royalty payments to
host governments, not the actual selling price. True contractual terms
of crude oil sales, typically within the Seven Sisters cartel, were secret.
Qaddafi was not alone in understanding posted prices as an IOC scheme
for grabbing a disproportionate share of the rents. Libya’s demands
prompted an identical ultimatum from Iran. The Western IOCs began
making the rounds, giving the same deal to all the producer countries,
lest the profit- sharing calls continue to escalate.
By this time, decades of cheap oil had the industrialized world hooked.
Development based on assumptions of inexpensive energy triggered a
dangerous path dependence, encouraging ever more oil- intensive devel-
opment and locking in high levels of oil demand. Meanwhile, Western
IOC control over the oil trade was being weakened by declining oil
production in the Western Hemisphere. The United States, once self-
sufficient, had quietly become a net oil importer, growing increasingly