Lest We Forget the Role of Crude Oil in World War II
the Plug #25 | On the Strategic Benefits of Commodity Supply
“Whoever controls oil controls much more than oil." - John McCain
In 1941, U.S. President Franklin D. Roosevelt faced an incredibly challenging decision.
To what extent should the United States involve itself in World War II (WWII)?
War had been raging in Europe for more than a year. But the thought of sending troops abroad remained unfathomable. Trepidation was steadfast in the hearts and minds of American citizens.
Fortunately for Roosevelt, boots on the ground weren’t the only means by which the United States could contribute to the Allied Forces’ combat efforts.
The Americans had an ace up their sleeve: plentiful domestic oil reserves, alongside the world’s most capable oil production industry.
On May 28th, 1941, President Roosevelt established the U.S. Petroleum Administration for War (PAW). The agency enlisted the help of 72 leaders across the U.S. oil industry to assist in crude oil exploration, production and distribution for delivery to the Allied Forces.
This strategy would allow the U.S. to support its allies in combat while also profiting from its domestic oil industry; all without setting foot in Europe. Seemingly, a win-win for both Roosevelt and his political allies.
But, as Mike Tyson once said, “Everyone has a plan until they get punched in the face.”
Later that year, on December 7th, 1941, the Japanese military launched its infamous surprise attack on a U.S. Naval Base in Hawaii’s Pearl Harbour. The American response was swift and unanimous: U.S. troops, and the country’s oil industry, were going to war.
🛢️An Indispensable Resource for Warfare
In the late 1930s, leading up to WWII, the U.S. was the world’s dominant producer of crude oil.
While reliable wartime data on global oil production is sparse, it’s believed that in 1940, the U.S. produced over 60% of the world’s crude oil. Notably, the United States was also the only Western country with large-scale gasoline production capabilities. It was reported that in 1940, the Yankees produced ~85% of crude petroleum amongst the Allied superpowers.
Dominance, indeed.
To understand the importance of crude oil, it’s worth remembering that the battles fought in WWII were predominantly motorized in nature. Most notably, via the supremacy of airpower.
Just as water and food were critical to fuel the Allied troops, gasoline was the lifeblood of its equipment and machinery.
Beyond its importance in fueling trucks, tanks, jeeps and airplanes, crude oil was also a critical input for many other essential combat supplies used throughout the war:
Making toluene, the main component of TNT, for bombs
Manufacturing synthetic rubber for tires
Laying runways
Lubricant for guns and machinery
.
The Americans understood the strategic importance of its domestic oil production and made it clear to U.S. citizens through propaganda efforts.
Some posters focused directly on the role that gasoline played in fueling airplanes. Others highlighted the importance of energy conservation, emphasizing the need to carpool and restrict home heating.
Notably, many of those same messages are worth remembering today during peacetime ….
🦖 The Influence Wielded by Commodity Control
During WWII, which stretched from 1939 to 1945, it’s purported that American fuel production amounted to roughly six billion barrels out of a total of seven billion barrels of crude oil consumed by the Allied Forces.
Admittedly, that stat has been stubbornly challenging to corroborate.
But, irrespective of the quantity of oil that travelled across the Atlantic during WWII, it seems safe to say that without the prodigious supply of American oil, the war could have ended much differently.
And, with a different conclusion to WWII, the world we live in today would likely be unrecognizable.
The role that American crude oil production played in determining the outcome of WWII often goes unmentioned. But I believe that today, an important lesson learned from WWII is worth remembering.
The American’s oily contribution to the Allied victory in WWII serves as a unique (and admittedly dramatic) example of the relationship between:
A country’s control of strategic commodities, and
Its ability to wield international influence
.
In WWII, American influence stemmed in no small part from its crude oil reserves. It exerted that influence through military force. But, then and now, the strategic benefits of controlling critical commodity supply extend well beyond the capacity to facilitate war-waging.
Saudi Arabia, the world’s preeminent influence in today’s global oil markets, can certainly attest to that reality.
In trying to understand what the future will look like for North American fossil fuel producers, I’ve recently found myself reflecting on that lesson.
Fossil fuel demand may decline in the decades to come, but it will indeed not cease to exist. As was the case throughout WWII, the countries that control the supply of fossil fuels today and tomorrow will benefit from strategic influence globally.
To what extent will the United States, a county with bountiful supplies of cheap, accessible fossil fuels, capitalize on that opportunity in the future?
🚢America’s Fossil Fuel Flotilla
A recently published Bloomberg article reminded me of the role that U.S. oil production played in WWII. An image therein displays U.S. liquified natural gas (LNG) cargoes leaving American shores to travel across the Atlantic for delivery in Europe.
I couldn’t help but see the similarities to the U.S. tankers that supplied the Allied Forces with crude oil throughout WWII.
Across Europe, natural gas prices and electricity prices have spiked this winter. The outcome has been described repeatedly as an “energy crisis.”
This crisis was prompted, in part, by insufficient natural gas supply. And, in part, by a lack of renewable electricity generation due to adverse weather conditions. But, regardless of the cause, rising energy prices and the negative reactions from European citizens don’t bode well for European politicians.
A journalist for Bloomberg, Sergio Chapa, shared an updated photo on December 29th as those same LNG vessels approached their final destinations throughout the European continent.
And, in response to the abundance of LNG shipments to Europe, natural gas prices have now begun to cool off.
Please make no mistake; I don’t intend to equate the severity of Europe’s energy shortage with World War II. But I do want to highlight the role played by American fossil fuel producers in providing international support through commodity exports.
Undoubtedly, European politicians today are once again expressing their relief at the delivery of American fossil fuels.
🌭Independence & International Influence
Before Japan attacked Pearl Harbor, I’d guess that U.S. President Roosevelt saw at least two obvious benefits from his decision to mobilize U.S. oil production in support of the war effort:
Influence: The U.S. had an opportunity to support the war effort, thus maintaining diplomatic ties and strategic power with its allies without sending Americans overseas
Profitability: The Allied Forces needed a lot of oil, the sale of which would generate profitability for American companies and tax revenue for the U.S. government
.
Japan foolishly created a third incentive for the United States oil industry.
American independence.
While American independence may no longer be at stake today, there remain countless strategic benefits to the United States fossil fuel production capabilities. Those benefits are both domestic and international in nature.
Amidst the push to decarbonize, those benefits should not be forgotten.
Love getting these in my inbox. Clearly you are putting in a lot of hours for each issue. Thanks for making these complex issues so digestible (and fun to read). Happy New Year Adam!