The Prize: The Epic Quest for Oil, Money, and Power

Chapter 17 focuses on the critical role of synthetic fuels in Nazi Germany’s preparation for World War II. In June 1932, two officials from I.G. Farben, a German chemical company, met Adolf Hitler, who was then the leader of the National Socialist party but was not yet Chancellor. The officials aimed to end Nazi attacks on their company and promote their synthetic fuels project, which was intended to reduce Germany’s dependency on foreign oil. Because Hitler envisioned a motorized Germany, he supported their project, seeing it as essential for national independence and future military ambitions.

Germany’s synthetic fuel development had begun before World War I and was led by chemist Friedrich Bergius, who developed the hydrogenation process to convert coal into liquid fuel. Another process, Fischer-Tropsch, emerged later, but Bergius’s method was supported by I.G. Farben and deemed superior. By 1932, despite substantial investment and government support, Germany’s synthetic fuel project struggled financially and relied on state protection to remain viable. When Hitler became Chancellor in 1933, he integrated the synthetic fuel initiative into his broader economic and military plans. He also launched projects like the autobahn and the Volkswagen to motorize Germany, and these initiatives would later support his aggressive military expansion. By 1936, with the Four-Year Plan, Hitler aimed to make Germany self-sufficient in fuel production in order to support his war machine.

I.G. Farben’s synthetic fuel production overcame technical and financial challenges to become a central part of Germany’s war strategy. By 1939, several hydrogenation plants were operational and produced significant amounts of fuel, which were crucial for military operations and especially for aviation. This production enabled the Luftwaffe to operate despite Germany’s limited natural oil resources.

Yergin details Japan’s strategic reliance on oil and the consequences it faced during World War II. In December 1941, Japan’s surprise attack on Pearl Harbor marked the beginning of its aggressive campaign to secure oil resources in Southeast Asia. By January 1942, Japanese forces targeted Balikpapan, a key oil refinery that Shell managed in Borneo. To prevent the Japanese from seizing the refinery, Shell employees meticulously planned its destruction and set the refinery ablaze, creating a dramatic inferno that was visible for miles. They then fled into the jungle, but only a few managed to escape.

Japan’s rapid conquest of Southeast Asia, including the Dutch East Indies, provided access to substantial oil reserves. By mid-1942, Japan controlled these vital resources and gained crucial fuel supplies to support its war effort. However, the Japanese overestimated their ability to transport oil back to the Home Islands due to a critical oversight: the vulnerability of their shipping lanes to American submarines. The Battle of the Marus demonstrated this vulnerability. American submarines utilized improved torpedoes to target Japanese merchant ships and oil tankers. This campaign severely disrupted Japan’s supply lines, leading to a catastrophic decline in oil imports. By 1944, tanker losses far exceeded the construction of new ships, causing a drastic reduction in oil shipments to Japan. The situation worsened in 1945 when oil imports ceased entirely.

In response, Japan resorted to desperate measures and attempted to transport oil in various makeshift containers, even in submarines. They also initiated a massive campaign to produce synthetic fuels and alternative sources like pine root oil, which proved inefficient and largely ineffective. The oil shortage severely limited Japan’s military operations. Fuel scarcity influenced strategic decisions, such as in the Battle of Leyte Gulf, during which the Japanese fleet failed to fully engage due to insufficient oil. Additionally, Japan’s air force struggled with inadequate training and inferior fuel, leading to high aircraft losses.

Ultimately, the shortage of oil contributed significantly to Japan’s defeat, and the American strategic bombing campaign further crippled Japan’s ability to continue the war. By mid-1945, Japan faced immense hardships, with the economy and military nearly paralyzed. The lack of oil underscored the critical role that energy resources play in warfare, shaping the outcome of the Pacific conflict.

Chapter 19 focuses on the Allies’ strategic use of oil during World War II and highlights Winston Churchill’s understanding of the critical role of oil in warfare. When Churchill became Prime Minister in 1940, he inherited a bleak situation, with Germany dominating Europe. However, Britain’s pre-war analysis led to a decision to rely on imported oil rather than on expensive domestic synthetic oil derived from coal. Britain trusted its international oil companies, Shell and Anglo-Iranian, to maintain a steady supply. Churchill’s era saw Britain prepare for war by merging its oil companies into the Petroleum Board, creating a national monopoly to ensure efficient resource management. This organization was pivotal in maintaining the supply chain under wartime conditions. The immediate concern was securing oil from the United States, which controlled two-thirds of global production.

In December 1940, President Franklin Roosevelt announced that America would become the “arsenal of democracy.” This led to the Lend-Lease Act in March 1941, allowing Britain to receive essential supplies without immediate payment. Oil tankers were rerouted from the American East Coast to aid Britain, ensuring its survival during its darkest hour. As German U-boats targeted Allied tankers in the Atlantic, Britain faced severe oil shortages. The appointment of Harold Ickes as Petroleum Coordinator for National Defense marked a shift towards maximizing American oil output. Ickes, despite initial industry distrust, effectively collaborated with oil companies to increase production and manage supply.

The Battle of the Atlantic was crucial, with German U-boats posing a significant threat to oil shipments. The Allies eventually gained the upper hand through improved technology, intelligence, and tactics, ensuring a steady flow of oil to support military operations. Domestically, Ickes worked to boost production and faced bureaucratic challenges and industry resistance. Despite this, American oil output increased significantly from 3.7 million barrels per day in 1940 to 4.7 million barrels per day in 1945. Rationing and conservation efforts were also implemented to manage civilian consumption and ensure adequate military supply.