1960 – Ends and Beginnings
One of the best known quotes about the future is that the only thing you can predict is that you can’t predict the future! I tell this to managers on executive programs, although I am not sure if they take it on board. Back in 1960, there were two major events that marked a shift, and the appearance of new possibilities. At the time there were many claims about what these new directions would mean. Most were wrong, a few turned out to be correct; lucky guesses, not insightful predictions. Today we know both initiated a cycle of change, new beginnings, only to end one day. In one case the cycle was over quickly; in the other, it is still being played out.
Now, I realise these claims about two major events in 1960 are no more than a personal view, so immediately I must admit there are some other matters of moment in 1960 that I am not going to cover. Lest we forget, this was the year Chubby Checker encouraged us with his line ‘Let’s Twist Again’: I tried, failed, and therefore will let that one go. In October, Nikita Khrushchev took off his shoe and banged it on his desk at a meeting of the UN General Assembly: I can’t remember why he did it, but a politician behaving badly has a long history, so I’m letting that one go, too. In November, Dimitri Shostakovich premiered his 8th String Quartet in Leningrad, on the heels of his 7th: An astonishing work I listen to quite often, but I’m not informed enough to say much about his music. It was a signal moment, but another one I will let go. I could list all the sporting triumphs at the Tokyo Olympics, and others in golf, tennis, cricket and baseball and other sports in another year of records, but all these, too, I will let go.
Instead, the two events I’ve chosen concern an organisation and a person. The organisation was the Organization of Petroleum Exporting Countries, OPEC, a cartel of countries in the upstream oil business, established to control output and prices. It would be some thirteen years before this new body really flexed its muscles, but the possibilities of the alliance seemed clear, offering a way to shift power back to producers and away from refiners and distributors. Formally agreed in September 1960, in Baghdad, OPEC would turn out to have a major influence on global oil prices, at least for a while, which previously had been determined by the Seven Sisters: Anglo-Iranian (to become BP); Shell; Standard Oil California, Gulf and Texaco (these three to form Chevron); and Standard Oil New Jersey and Standard Oil New York (now ExxonMobil).
To put this into perspective, a brief factual background. The price of a barrel of oil changed little between 1948 and 1960, usually a little under $3.00, and it was to remain there until 1965, as those ‘sisters’ continued to control the market. The Six-Day war in 1967 saw an unsuccessful attempt by OPEC to impose an oil embargo, but the price did start to creep up, reaching $3.60 by 1972. It was in 1973’s Yom Kippur War that saw OPEC institute a successful supply slowdown. By 1974 crude oil was selling at $9.35 a barrel, and from 1979-1985, it was up in the $24-38 range. I had joined Shell in 1979, which was a time of mixed blessings for the company. On the one hand it was battling these increased prices. At the same time, it was a little smug: as the early developers and exponents of scenario planning, Shell had imagined a future where crude prices increased dramatically, and developed contingency plans to deal with such an unlikely possibility. As a result, when prices did go up, Shell fared better than its competitors.
That shift in prices was to continue. In 1986 the cost of crude plummeted, and then slowly increased until 2003 when it hit $27.69. Five years later, the price began to rise again, quickly, and by 2011 it was in the $85-95 range. [i] Bored with numbers? You knew all that. You knew about the embargo in 1973-74, and you knew about the second oil shock in 2010, following the Global Financial Crisis. However, looking at inflation adjusted prices, the after effects of the first oil shock was a real shocker: the adjusted price of oil was $100+ a barrel by 1980.
I wonder what scenarios Shell had in place at the end of 2019? Had it envisioned a rather different picture of the future than the one they had drawn up for 1973? Then it was about prices going up. A rather different scenario, about prices falling, would have helped them and OPEC deal with the demand for oil falling to a 30-year low in the second quarter of 2020. Of course, that possibility had been real for a decade, with the use of solar energy and other technologies seeing a shift away from oil, at the same time as battery powered cars became more common.
If we escape from all those facts and figures, the creation and rise of OPEC is revealing. OPEC is a cartel, set up to redraw the balance between suppliers and the refining and distribution cartel (those seven sisters). Cartels are tricky, especially as they are usually illegal. Claiming to be independent of each other, the major oil companies publicly defend the autonomy of their refining and distribution activities. When I worked for Shell, I saw what a nonsense that was. Business is about profits. Refineries are expensive real estate, and, in a small country like Australia, there was no place for seven separate refineries: demand was too low, the cost would be too great. However, each company needed fuel to sell. Visiting the Shell refinery in Victoria, I saw how it worked. Each day crude oil was processed, and each day tankers left loaded with fuel. Many were for Shell, but some were for others. It was an unpublicised arrangement.
Refined supply was one issue. So was pricing. I was told that back in the 1960s, oil company CEOs would meet regularly (in Soho, it was rumoured), where they would discuss supply and pricing issues. Without any written record, there would be an agreement it would be acceptable to increase the price of naphtha, say, by 1%. Apocryphal or true? It didn’t matter. The point of the story was clear: those seven companies came to collective agreements, at least some of the time. What wasn’t subject to that kind of price fixing led to another major activity, competitor price monitoring. Staff in the retail areas of each company would spend time on the road, checking pump prices at competitors’ outlets. If one company decided to drop prices, to increase sales volumes, that would be known almost immediately. Then senior management would decide whether to copy the competitor or ignore it. Careers prospered on constantly making good bets: would the company keep the price and margin high this time, or would it drop lower than the competitors, lose margin but grow volume. I can’t remember clearly, but I think the price changes almost always came on a Thursday, pay day, and just before any weekend travel!
OPEC didn’t need to worry about price fixing. Indeed, they could operate openly as a cartel, protected by the doctrine of state immunity under international law; their role, “to coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.” [ii] Whew!! However, the future was unpredictable, and the task of keeping members in line meant its very existence was often threatened. Major squabbles began with the Six Day War and have continued, most recently in the Niger Delta (ongoing from 2004), and the international oil embargo against Iran (2012-6). Major OPEC supply disruptions are often matched by rule breaking deals behind the scenes: OPEC’s agreements paper over national tensions that will eventually tear it apart. Its end is inevitable, even if it’s killed by declining oil use.
Perhaps we could consider OPEC a large and inherently unstable family, and it is a family that is my second example of an event in 1960 that marked an end to the way things were, introducing new and exciting possibilities for the future. The family is the Kennedys, and the event was John Fitzgerald Kennedy’s election as President, in a close election pitted against Richard Nixon.
To set that election in perspective, we need to go back to an earlier stage in the Kennedy story. The Kennedys arrived in the USA from Ireland in 1849, when Patrick Kennedy and his wife Bridget Murphy landed in Boston. They had five children. The youngest, Patrick Joseph (heralding a long line of Kennedys called Patrick or Joseph) was a businessman and also a politician in the Massachusetts’ state legislature. Patrick and his wife had four children, the oldest Joseph Patrick Kennedy. Joseph Patrick had a fascinating career. He started in banking and trading on the stock exchange, survived the Great Depression (getting out before the crash), then moved into real estate, importing (whisky) and the movie business (during which time he had a three year affair with Gloria Swanson!). Roosevelt appointed him the first Chairman of the Securities and Exchange Commission, and in 1938 he was appointed Ambassador to the UK. There he favoured seeking a compromise with Hitler, and argued against US support for the UK as the Second World war began. Recalled, he later became involved with the infamous Senator Joseph McCarthy, supporting him through thick and thin. A colourful and controversial man.
Joseph Patrick Kennedy and his wife Rose had nine children. Following his disgraced recall from London, Kennedy had to give up on a political career, and instead worked to promote his children. The oldest child was Joseph Patrick (surprise!), who he intended to run for president. Sadly, Joseph Patrick Jr died in 1944, blown up flying a US Navy bomber plane over the English Channel. Next in line was John Fitzgerald, the second son, and now he was the focus of Joseph Sr’s plans. John (aka JFK) had also served in the war, and was injured, with back problems that would continue to haunt him. With his father’s money for support, he ran for Congress in 1947, and after six years ran for Senate. He was a Senator for Massachusetts from 1953-1960.
On January 2, 1960, Kennedy announced he was running to become the Democratic Party’s nominee for the US Presidency. For Joe Sr, this was the moment he had hoped for. Although Kennedy was relatively young and inexperienced, he was already known as a charismatic and eloquent politician. There were concerns over his family’s Catholic background. Deftly, JFK managed to both emphasise the separation of church and state while gaining the enthusiastic support of many Catholic voters. His campaign was a family affair, funded by his father, while his younger brother Robert was his campaign manager. With the money to do so, he travelled all over the country to build support, winning several primaries. Arriving at the party convention, he had more delegates than any other contender, but not enough to guarantee his nomination, where he was up against Adlai Stevenson (The other main contender, Humphrey was out of the running, having lost to Kennedy in some key primaries). However, dad’s money ensured his campaign was well organised, and he went on to win at the first ballot. The family was ready.
The campaign for the presidency saw a significant innovation. Between September and October, Kennedy debated Nixon on television, the first time this had happened. Presidential nominee debates would never be the same. It was the perfect medium for Kennedy, who looked relaxed and confident, while Nixon, who had injured his leg and was perspiring, looked uncomfortable and tense. On television, Kennedy was a clear winner, although on radio Nixon seemed to have the edge. Charisma and popular appeal won out. Kennedy went on to defeat Nixon in one of the closest presidential elections of the 20th century, ahead by a tiny margin, but with 303 Electoral College votes to Nixon’s 219 (269 needed to win). Winning by popular support: hmm, familiar?
Kennedy as President was widely seen as ushering in a new era. The older generation was on the way out, brushed aside by a telegenic younger man and Jacqueline, his attractive and stylish wife. The media gushed over the changes. Jacqueline later referenced a line from the Lerner and Loewe musical to describe the era: “Don’t let it be forgot, that once there was a spot, for one brief shining moment, that was known as Camelot.” She said it was one of Kennedy’s favorite lyrics from the musical and added, “there’ll be great Presidents again, but there’ll never be another Camelot … It will never be that way again.” [iii] She made the White House a centre for style and the arts. Although she claimed her priority was to take care of JFK and their children, she dedicated much her time to promoting American arts, culture and history. Restoring the White House was a major initiative, but she was a catalyst, hosting events to bring key people together from politics and the arts. If JFK had lived, envy might have killed Camelot!
Meanwhile, in just three years, Kennedy was thrust into several critical issues. Some reflected the US obsession with communism. He increased the country’s role in Vietnam, tried to oust Castro from Cuba, managed the Cuban missile crisis, and signed the first international nuclear weapons treaty. He also set up the Peace Corps, established the goal of landing a man on the moon, and supported initiatives in civil rights. It was over all too soon. Assassinated in late 1963, he remains a popular President, but one whose real impact exists only as a ‘maybe’.
There was another kind of ending hovering over Kennedy, the so-called ‘Kennedy curse’. No less than four of Joseph Snr’s children died young. Joseph Jnr in 1944, Kathleen in a plane crash in 1948, John’s assassination in 1963, and Robert murdered in 1968, just after his win in the Californian presidential primary. Eight other young members of the family died between 1963 and 2020, at least two from drug overdoses. Whether there was a curse or not, one thing became clear: JFK was the culmination of Joseph Sr’s hopes, and with his death those dreams came to a sudden end, Joe’s later lingering attempts to push other Kennedys into politics notwithstanding.
Both OPEC and John Kennedy were turning points in 1960. In both cases, previous activities were pushed aside, changing the character of the once familiar world. The seven sisters lost their control over crude oil, and faced a cartel seeking to control them. Kennedy brought a new style to the US presidency, one of youthful exuberance despite his health problems, as he danced between domestic and international issues, took risks, and promoted new approaches. Not everything was new: this was still the era of patrician elites running the country, exemplifying ‘noblesse oblige’, and JFK certainly enjoyed the ‘droit du seigneur’! Both beginnings contained the seeds of endings. OPEC’s continuing internal disputes herald its eventual collapse, while the vision of Camelot ended suddenly, in 1963, when Kennedy was shot in Dallas: ave atque vale.
[i] The figures come from https://inflationdata.com/articles/inflation-adjusted-prices/historical-crude-oil-prices-table/
[ii] Still stated in its mission: https://www.opec.org/opec_web/en/about_us/23.htm
[iii] Jacqueline Kennedy, interviewed by Theodore H White, Life, 6 December 1963
