The Seven Sisters: Who Really Controls the World's Oil

For most of the twentieth century, seven Western companies ran the global oil business like it was their private club. They decided how much oil was pumped, where it went, and what it cost. Then, country by country, the club got kicked out. Chapter 26 of Torsten Dennin’s “From Tulips to Bitcoins” tells how the old Seven Sisters lost their grip and a new set of state-owned giants took over.

The Original Seven Sisters

Back in the 1950s, someone coined the term “Seven Sisters” to describe the group of Western oil companies that basically owned the world’s energy supply. The lineup was:

• Standard Oil of New Jersey
• Standard Oil of New York
• Standard Oil of California
• Gulf Oil
• Texaco
• Royal Dutch Shell
• Anglo-Persian Oil Company

If some of those names sound like fragments of the same company, that is because they are. Most of them descended from John D. Rockefeller’s Standard Oil, the monopoly that was broken up by the US government in 1911. The breakup was supposed to create competition. Instead, the pieces just formed a slightly looser cartel that controlled 85% of the world’s oil reserves.

Eighty-five percent. Seven companies. Think about that for a second. Almost every barrel of oil on the planet was under the control of a handful of boardrooms in New York, London, and The Hague.

The Nationalizations

Then the producing countries got fed up.

It started in the 1970s. Algeria nationalized its oil industry in 1971. Libya followed shortly after. Iraq nationalized in 1972. Iran did the same in 1973. Country after country looked at these Western companies pumping their oil, keeping most of the profits, and decided enough was enough.

OPEC had been founded in 1960, but it took the nationalizations of the 1970s for it to become a real force. As the Seven Sisters lost their oil fields, OPEC members gained them. The power did not disappear. It just changed hands.

If you read Chapter 11 of this series about the 1973 oil crisis, you already saw what happened when OPEC flexed that power. Empty highways in Germany. Prices tripling in months. The world waking up to the fact that oil was now controlled by a very different group of people.

Mergers: From Seven to Four

The original Seven Sisters did not go quietly. They could not hold onto the oil fields anymore, but they still had technology, refining capacity, distribution networks, and enormous amounts of cash. So they started merging.

Exxon and Mobil merged in 1999 to form ExxonMobil. That is two Standard Oil descendants reuniting, which Rockefeller’s ghost probably enjoyed.

Chevron (formerly Standard Oil of California) absorbed Gulf Oil in 1985 and then Texaco in 2001. Three of the original Seven Sisters folded into one company.

Anglo-Persian Oil Company had already renamed itself British Petroleum, then just BP. In 2000, BP acquired Amoco and Atlantic Richfield, becoming one of the biggest oil companies on earth.

Royal Dutch Shell stayed Royal Dutch Shell. Some things do not change.

So out of the original seven, four survived in some form: ExxonMobil, Chevron, BP, and Royal Dutch Shell. Together with Total (which merged with Petrofina in 1999) and ConocoPhillips (merged in 2002), they became the six “super-majors” of Big Oil.

Sounds impressive. But here is the catch. These six super-majors now control less than 10% of global oil and gas production. Less than 10%. Down from 85%. The mergers made them bigger individually, but the world had moved on without them.

The New Seven Sisters

In 2007, the Financial Times published an article naming the “New Seven Sisters.” These were the state-owned companies that had taken over where the old ones left off:

1. Saudi Aramco (Saudi Arabia)
2. Gazprom (Russia)
3. CNPC (China)
4. National Iranian Oil Company (Iran)
5. Petroleos de Venezuela (Venezuela)
6. Petrobras (Brazil)
7. Petronas (Malaysia)

Together, these seven control roughly one-third of the world’s oil and gas production. And about one-third of total reserves.

The biggest of them is Saudi Aramco. It produces around 12 million barrels per day and sits on approximately 260 billion barrels in reserves. It operates Ghawar, the largest oil field on the planet. To put that in perspective, ExxonMobil, the mightiest of the old guard, is a small player compared to Saudi Aramco.

OPEC as a whole now supplies about 40% of the world’s crude oil and controls around 75% of proven reserves. The old Seven Sisters had 85% of reserves. OPEC now has 75%. The numbers are similar, but the owners are completely different.

The Power Shift

Dennin’s chapter is really about one thing: power moves.

For decades, the story of oil was Western companies going to other people’s countries, extracting their resources, and bringing the profits home. The producing nations were just the places where the oil happened to be underground. They got a cut, but the real money and the real decisions stayed in London and New York.

The nationalizations flipped this. Now the countries that own the oil also own the companies that extract it. Saudi Arabia does not lease its oil fields to Exxon. It runs them through Aramco. Iran does not need BP anymore. Russia has Gazprom. China has CNPC.

The Western super-majors are still huge businesses. They still have the best technology and the deepest engineering talent. But they are tenants now, not landlords. They operate where they are invited and on terms set by the host countries.

What Stays With Me

This chapter connects back to several earlier stories in the book. The Rockefeller chapter (Chapter 5) showed how Standard Oil built the original monopoly. The 1970s oil crisis chapter (Chapter 11) showed OPEC discovering its power. This chapter shows the final result: the complete inversion of who controls the oil.

What gets me is how fast 85% became less than 10%. In historical terms, it took about thirty years. One generation. The Seven Sisters went from controlling nearly everything to controlling almost nothing. And it was not because they made bad business decisions. It was because governments decided to take back what was under their own soil.

The new Seven Sisters are not private companies answering to shareholders. They are state-owned enterprises answering to governments. That changes everything about how oil markets work. When Saudi Aramco decides to cut production, it is not a business decision. It is a political one. When Gazprom adjusts gas supply to Europe, that is foreign policy, not quarterly earnings.

Oil stopped being just a commodity a long time ago. It became a tool of statecraft. The old Seven Sisters learned that the hard way. The new ones already know it.

Previous: Lakshmi Mittal: From Small Steel Plant to World’s Biggest Steel Empire

Next up: Australia’s Millennium Drought and the Wheat Price Explosion

This is part of my From Tulips to Bitcoins book retelling series. New posts every week.