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When Winston Churchill accused Shell of secret oil price rigging

Comment by Shell director at AGM:

We next come to a sneer by Mr. Winston Churchill which is unworthy of him.

By John Donovan

I have been described by Reuters as “A prominent critic of Royal Dutch Shell“.

I had no idea that I shared this distinction with a great man, Winston Churchill no less.

During a pre-first World War speech in the House of Commons, Churchill, in his then capacity as First Lord of the Admiralty made an attack on Shell, accusing the company of secret oil price rigging.

Extracts from pages 161/162/163 “The Prize” by Daniel Yergin.

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 turn 51 percent of the stock.

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.

“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 leavened 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,”…

And from pages 43/44 of “Moguls and Mandarins” by Marian Kent

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.

Shell launched an equally outspoken response at their next AGM. We have featured some brief extracts. The detailed extensive response can be read by clicking on the link.

COMPANY MEETINGS: “SHELL” TRANSPORT AND TRADING CO. (LTD).

The CHAIRMAN, who was cordially greeted, said:- Ladies and Gentlemen,-Before presenting the balance-sheet to you, a duty devolves upon your directors to rebut the statements of Mr Winston Churchill…

He has stated that there was a combination among various companies so close and binding that there was no free market, and he has implied that the oil trade was controlled by the Standard Oil Company and the Shell Company.

We next come to a sneer by Mr. Winston Churchill which is unworthy of him.

If not well founded at that time, Churchill’s instinct was bang on. Shell has a long track record of market manipulation, stretching from those days onwards, including cartel participation, price fixing,  fictions trades, monopoly, securities fraud etc. Shell was a founding member of the “Seven Sisters“, the first global oil cartel.

There does seem to be a tacit acceptance of cartel activity by Shell on shell.com.

“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.”

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