The 1928 Achnacarry As Is Agreement: An Overview
The 1928 Achnacarry As Is Agreement, also known as the Achnacarry Agreement, was a pivotal moment in the history of the global oil industry. This agreement, which was signed by seven of the world’s largest oil companies, established a system of production quotas and profit sharing that would shape the industry for decades to come.
Background
The Achnacarry Agreement was the brainchild of Sir Henri Deterding, the head of Royal Dutch Shell. Deterding had long been frustrated with the chaotic nature of the oil market, with companies competing fiercely against each other and driving prices down to unsustainable levels. He believed that the best way to stabilize the market was to establish a collaboration between the biggest players in the industry.
To that end, Deterding arranged a secret meeting at Achnacarry Castle in Scotland in 1928. The attendees were representatives of Royal Dutch Shell, Anglo-Persian Oil Company (now BP), Gulf Oil, Standard Oil of New Jersey (now ExxonMobil), Standard Oil Company of New York (now Mobil), Texaco, and the French firm Compagnie Francaise des Petroles (now Total).
The Agreement
The Achnacarry Agreement contained several key provisions that would govern the oil industry for years to come. These included:
– Production quotas: Each company was assigned a production quota that was meant to ensure that the total output of oil did not exceed demand. This would prevent a glut of oil on the market, which would lead to lower prices and reduced profits for everyone.
– Price stabilization: The companies agreed to maintain a stable price for oil, with a minimum price set at $2.50 per barrel.
– Profit sharing: The companies would share profits from oil production according to their production quotas. This meant that larger companies would receive a larger share of the profits, but smaller companies would still benefit from the stability provided by the agreement.
Impact
The Achnacarry Agreement was a major success, at least in the short term. Oil prices stabilized and the companies involved in the agreement were able to avoid the fierce competition that had characterized the industry in the past.
However, the agreement also had some negative consequences. Critics argued that it was anti-competitive and that it allowed the largest companies to control the market. In addition, it did not take long for other companies to start producing oil outside of the agreement, which weakened its effectiveness.
The Achnacarry Agreement was eventually superseded by the creation of OPEC (the Organization of the Petroleum Exporting Countries) in 1960. However, its influence can still be felt in the way that the oil industry operates today.
Conclusion
The 1928 Achnacarry As Is Agreement was a landmark moment in the history of the oil industry. It established a system of collaboration between the world’s largest oil companies that stabilized prices and ensured that production did not exceed demand. While the agreement had its limitations, it paved the way for future collaborations and paved the way for the creation of OPEC and other bodies that continue to shape the industry today.