Seven Sisters (oil companies)

By the 1930s, the Seven Sisters dominated oil production in the world.[2] The companies owned nearly all rights to the oil in the territories of modern Iran, Iraq, Saudi Arabia and the Gulf.[2] 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).[2] 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.[2] After the 1940s, the companies continued to collude.[2] 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.[2] However, control of 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.[2]

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.[2] 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.[2] 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.[2] 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.[2]

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 the nationalized oil production (as Mohammad Mossadegh was when he nationalized the Iranian oil industry).[2]

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.[9]

In 1959, the Seven Sisters reduced the price of oil for Venezuela and Middle Eastern producers, which provoked anger among oil-producing governments.[10] This prompted the oil-producing governments to take the initial steps to establish OPEC.[10] The Seven Sisters threatened the OPEC founders that they would lose market access if they went ahead with their plans.[10]

The head of the Italian state oil company (Eni), Enrico Mattei, sought membership for his company, but was rejected by what he dubbed the "Seven Sisters", the American and British companies that largely controlled the Middle East's oil production after World War II.[4][11] 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.[3] The term for the oil cartel was further popularized, along with a fictional logo, in Mad Max 2: The Road Warrior, a 1981 film about apocalyptic fuel shortages.[12]

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.[4] Despite their market power, the Seven Sisters kept prices stable at moderate levels.[13] This was done to not incentivize governments in both the consumer and producer countries to impose regulations on the oil industry.[13]

In recent decades, the dominance of the Seven Sisters and their successor companies has been challenged by the following trends:[4]

• the increasing influence of the OPEC cartel (formed in 1960 and expanded steadily through 1975),
• the declining share of world oil and gas reserves held by OECD countries, and
• the emergence of powerful state-owned oil companies in emerging-market economies.

As of 2017, the surviving companies from the Seven Sisters are BP, Chevron, ExxonMobil and Shell, which form four members of the "supermajors" group.[14]

Original seven sisters

Company	Country	Details
Anglo-Iranian Oil Company	United Kingdom	This company became BP. Following the takeover of Amoco (which in turn was formerly Standard Oil of Indiana) and Atlantic Richfield by British Petroleum, the name was shortened to BP in 2000.
Gulf Oil	United States	In 1984, most of Gulf was acquired by SoCal and the enlarged SoCal entity became Chevron.[15] The smaller parts of Gulf Oil were acquired by BP and Cumberland Farms. A network of service stations largely in the northeastern United States still bears the Gulf name.
Royal Dutch Shell	Netherlands /  United Kingdom	In 2021, Shell announced that the company would relocate its headquarters to the United Kingdom, end its dual share structure, and later renamed from Royal Dutch Shell plc to Shell plc.[16]
Standard Oil of California (SoCal)	United States	Became Chevron in 1984 when SoCal acquired Gulf Oil.
Standard Oil Co. of New Jersey (Esso)		Became Exxon, which renamed itself ExxonMobil following the acquisition of Mobil in 1999.
Standard Oil Co. of New York (Socony)		Became Mobil, which was acquired by Exxon in 1999 to form ExxonMobil.
Texaco		Acquired by Chevron in 2001.

• Fossil fuel
• Fossil fuels lobby
• List of oil exploration and production companies
• Monopoly

• Ammann, Daniel. The King of Oil: The Secret Lives of Marc Rich. New York: St. Martin's Press, 2009, ISBN 0-312-57074-0
• Noguera, José. "The Seven Sisters versus OPEC: Solving the mystery of the petroleum market structure." Energy Economics 64 (2017): 298-305.
• Sampson, Anthony (1975). The Seven Sisters: The Great Oil Companies and the World They Shaped. New York: Viking Press. Expanded 4th edition 1991
• Wood, Aaron D., Charles F. Mason, and David Finnoff. "OPEC, the Seven Sisters, and oil market dominance: An evolutionary game theory and agent-based modeling approach." Journal of Economic Behavior & Organization 132 (2016): 66-78. online

• Yergin, Daniel. The Prize: The Epic Quest for Oil, Money and Power. New York: Simon & Schuster, 1991, ISBN 0-671-50248-4

• The Secret of the Seven Sisters. Al Jazeera English, 26 April 2013