Microsoft & the Texas Railroad Commission by Joel Fluker
Let's back up a couple of decades, to the energy crises of the 1970s and early 1980s. Those events-- oil shortages, long lines at gas stations, rising prices, etc.-- were actually "oil company crises." To understand how that happened, and how it relates to the Microsoft monopoly, a fascinating bit of little-known history behind the oil cartel: For several years, during the energy crises, OPEC (the Organization of Petroleum-exporting Countries) was a global villain. Everybody loved to hate OPEC, because OPEC was controlling the global oil supply and global oil prices, and thus having a big effect on not only the global economy, but also directly on Joe and Jane Lifestyle, who really disliked waiting an hour in line to get gas. It turned out that OPEC learned pretty fast about the danger of overt, unbridled greed. You reduce oil production, the price goes up, up, up, next thing you know, not only does consumption go down (Bulletin! Detroit starts building more efficient cars!), but people began developing alternative energy sources. OPEC got smart and settled on production rates that kept a lot of money rolling in without upsetting the (for OPEC very desirable) global dependence on oil. That's all recent history. What few people realize is that OPEC itself was modeled on an earlier organization which for decades had quietly and very effectively controlled global oil prices. What was it? You're thinking, maybe it was John D. Rockefeller's old Standard Oil. Well, Rockefeller had made a run at monopoly, but the government got him good. No, from about 1920 to 1970 global oil supply and price was controlled by (get ready) the Texas Railroad Commission. RAILROAD Commission. !!!??? Yep. How did that happen? It was not until the 1950s that the vast petroleum reserves in the Middle East became available to the world. Before that, the equally vast Texas oil fields had been the primary source of oil. The Texas Railroad Commission, set up like similar agencies in other states in the 19th century to regulate rail commerce, was in 1917 given the power to regulate oil pipelines, which were held to be "common carriers," like railroads. The TRC was further empowered to take steps to prevent the "waste" of oil and gas. By 1931, the commission had so expanded its power that it began making a monthly "production allowance" announcement, which dictated what percent of maximum production the wells in Texas could pump in that month. Which meant that, because oil from Texas at that time amounted to more than half of the world supply, this little state agency had absolute control over the global price of oil. Naturally, the TRC and the oil industry got to know each other very well. After all, what was good for the oil industry was good for Texas, and vice-versa. When the Middle East in the 1950s and 1960s replaced Texas as the primary source of oil, the newly rich producing countries saw a need for some type of communal action, since it was in all their interests to have a stable market with the highest possible production and price. In searching for a model, they had to look no farther than Texas and the TRC. (A neat sidelight: the Texas Railroad Commission still exists, still meets, and still issues its monthly production allowance, but, because of the overwhelming power of OPEC, these are empty gestures, hollow reminders of a powerful, greedy past.) To get back to our point here: Until the 1970s, OPEC had mostly been an obedient tool of the oil companies, subserviently following the guidelines laid down by the companies and the TRC. Then, with the rise of Middle East nationalism, OPEC woke up to the fact that it, not the oil companies, actually owned the oceans of oil in that part of the world. Oh, the howls of anguish that came out of the Houston headquarters of the oil companies as OPEC exerted control. "WE'RE the ones," the oil companies screamed, "who spent so much exploring for oil, invested huge sums in drilling, laying pipelines, building refineries. WE'RE the ones who spent billions on research and innovation in exploration, drilling, and production techniques. How can you do this to US? We've always had your best interests at heart. What will happen to exploration and production in the future if you do this to us?" And so on. Sound familiar? Change a few of the oil-related nouns to words like "software," "operating system," and "browser" and you get the sound of Seattle/Redmond 2000. Let Microsoft/Exxon rule the world and we'll all be happier for it. What I find especially sad is this: Oil field types have a certain stereotyped image (Jett Rink in Giant), so you sort of expect this kind of behavior from them. But to hear this same self-justifying, expedient glop coming from the best and brightest of a young, highly educated, extremely creative generation, the generation that has given us the miracle of the Internet? Sad? No, tragic is more like it. It's an old, old lesson, one that we keep repeating with no sign that we've learned anything. Power corrupts; absolute power corrupts absolutely. But greed blinds; and absolute greed blinds completely. END
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To someone living in Texas, the words coming out of Seattle as the
breakup of Microsoft proceeds sound all too familiar. Microsoft's whiny
self-justifications for years of abhorrent, exploitative behavior have filled the media
for months. Of course, what all the arguments came down to, as usual, was: What's good for
