Lesson 11 Connection Video

Lesson 11 brings us to the end of The Prize. It was a big book, packed with information, but it provided a valuable walk through the history of oil.

At the risk of what may seem like rehashing history, Lesson 11 continues many of the patterns, trends, and events that have occurred since the end of World War II.

The 1980s saw the third oil shock, along with additional price and supply fluctuations. Conflicts also played a role, highlighted by the Persian Gulf War.

You may have seen footage of the burning oil fields in Kuwait that were set on fire by the retreating Iraqi army as defeat became inevitable. This may have reminded you of reading about oil fields being set on fire by retreating armies during World Wars I and II. Some tactics never seem to change.

In Lesson 11, however, we saw an unusual shift in the oil industry. Even though many of the issues appeared similar to those of previous periods, the underlying drivers were very different.

The third oil shock was not triggered by a specific event or conflict. Instead, it was an evolving problem driven primarily by market forces.

This is because Lesson 11 focused on changes in the business side of the oil industry. The industry became increasingly centered on oil trading, commodity pricing, and corporate actions, and less on reserves, technology, or influencing the outcomes of wars.

For example, while the Persian Gulf War was partly about oil, it was not affected by oil in the same way that World War II was.

I don't want to repeat the business concepts covered in Lesson 11. You can review those on your own. However, I do want you to understand that oil can be just as disruptive from a financial perspective as it can be from a supply-and-demand perspective.

The U.S. dollar is a global business currency, and that status is due in large part to its connection with oil.

If the value of oil were to become decoupled from the value of the dollar, our currency could face the same uncertainties and fluctuations that we see in other global currencies.

The business of oil brings stability to global markets. It is a careful balancing act that requires accountants and lawyers just as much as it requires engineers and geologists.

As we conclude our journey through The Prize, we learn that the rush for oil has never stopped since Pennsylvania's oil boom began in 1859.

Since then, oil has had the power to make and break nations, both in times of war and in times of peace. It has brought out both the best and the worst in society, while creating periods of economic boom and bust.

The central and strategic role of oil in national politics, economic systems, and global strategy, combined with its geographic distribution and recurring crises, continues to make it a challenging commodity.

Oil powers our daily lives, helps feed us, and fuels both the global economy and many of the world's struggles.

The fierce search for oil, along with its wealth and power, will continue as long as hydrocarbon man remains dependent upon it.

That power, however, comes at a heavy price.