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The Masquerade 335

at cost, so that it could hold out against the Libyans. Esso refused to sell at less
than the market price. As a result, when in the last week of August the Libyans
produced the ultimate threat, nationalization, Occidental was defenceless.
The company capitulated. On 2 September it concluded an agreement with
the Libyan junta which raised the posted price of crude lifted by Occidental
from $2.23 to $2.53 a barrel, effective from September 1970. The price was to
be increased by a further 2 cents a barrel each year for five years, starting on 1
January 1971. The tax rate was to be increased from 50 to 58 per cent, to
compensate, so Occidental was told, for the under-payment of revenues in
previous years. In return for its capitulation, Occidental was to be allowed to
raise its production from 425,000 to 700,000 b/d. ‘Conservation’, it seemed,

had been swept away on the wings of the sirocco.
With Occidental vanquished, the junta turned to the other independents.

Continental, Marathon and Amerada-Hess (the partners with Shell in the
Oasis Consortium) were all forced in the latter half of September to concede a
30 cents a barrel increase, a tax rate of 54 per cent (again to compensate for
alleged under-payment of revenues since January 1965) and a 10 cents per
barrel annual increase for five years. They were allowed no more than a token
restoration (some 5,000 b/d) of the production cut they had suffered in July.
With half of Libya’s oil production now covered by the revised agreements, the
RCC felt strong enough to tackle the majors (Esso, BP, Texaco, Shell,
SOCAL and Mobil) and the remaining independents (Hunt, Arco, Grace and
Gelsenberg). On 22 September Texaco, SOCAL and the four independents
were given five days to accept the new posted prices and tax rates. Esso, Mobil
and BP did not wait for a similar ultimatum but increased their posted prices by
30 cents a barrel on 28 September. This was not good enough for the RCC. It
wanted not only a new 55 per cent tax rate but also a public mea culpa from the
companies in the form of an explicit written acknowledgement that the
increased rate was part compensation for the under-posting of oil prices since
1965. The companies gave in: Texaco, SOCAL and the four independents on
30 September; Esso, Mobil and BP on 8 October. Only Shell had the courage

to refuse, and as a punishment it was forbidden to lift oil from 22 September.
Shell’s refusal was based not only upon principle but also upon the con­
sideration that if Libya got the increases it was demanding and by the methods
it was employing, then the other Middle-Eastern oil-producing states would
make similar demands, using like methods. If these demands were conceded,
Libya was bound to ‘leap-frog’ over them and demand yet further increases,
citing as justification for them the differential freight rate for Libyan oil. The
same thought had, of course, occurred to the other majors, but it would seem
that it was outweighed in their minds by the fear that they would lose their
Libyan concessions altogether if they defied the RCC. The fear was not
without foundation. By subduing the independents the Libyans had assured
themselves of a sufficient level of production and revenue to sit out a shut-down