3. The support of the British Government.
4. The fact that the Royal Dutch had not a market close at hand to absorb its production, in the Dutch Indies, as the Standard had in the United States.
5. The readiness of the Dutch and British to prospect over-seas.
It is a combination of these forces—personal, political, and economic—which has resulted in the formation of the Royal Dutch-Shell group, now a world-power. Under the laws of the United States, a similar group would be impossible.
"Deterding is a plunger," said an American oil-man, who has often been a competitor of his in various parts of the world. "He plunges with other people's money, not his own; that is why he takes such risks. For instance, he paid five times what any one else would have paid to gain a footing in Egypt, and he has lost a great deal there. However, he pays in shares for the properties he buys, and this gives him an advantage over the Standard, which has always paid in cash. In spite of everything, he merits great praise for having started from nothing and having built up the great organization which he directs."
Deterding's profession of faith, so to speak, is summarized in a memorable declaration which he made to the Committee of Imperial Defence in March 1913:—
"Oil is the most extraordinary article in the commercial world, and the only thing which retards its sale is its production. There is no other article in the world of which you can guarantee the consumption as long as you can produce it. In the case of oil, begin by guaranteeing the production and consumption will look after itself. There is no need to bother about consumption, and as a seller, it is useless to make contracts in advance, because oil sells itself. All that you need is a well-filled purse, so that you are dependent upon no one, and can say to the people who will not buy to-day, 'Very well. I am going to spend £1,000,000 in building reservoirs, and in future you will have to pay much more!' The great point for the Navy is to make certain of oil from a group which can draw its supplies from many different geographical points, because one cannot count on any particular oil-field. My experience is that districts which have regularly produced 18,000 barrels a day, have dropped to 3,000 without any previous warning."
Since its alliance with the Shell, the Royal Dutch has undergone a world-wide expansion. Deterding concluded long-term contracts with the famous British State-subsidized company, the Anglo-Persian Oil, guaranteeing it the greater part of the Persian output until 1922. But his cleverest stroke was certainly to acquire an interest in the management of the Mexican Eagle. Owing to this, the output of the Royal Dutch-Shell group increased by more than 50 per cent., rising from thirty to more than fifty million barrels a year. The purchase of shares from Lord Cowdray cost Deterding a thousand million francs.
Deterding conducts his business like a soldier. He accepts or refuses a proposition once and for all. It is often dangerous not to fall in with his wishes. The New Schibaïeff Petroleum Corporation has had experience of this. Reconstituted in 1913, with a capital of £1,150,000, it set itself against the will of Deterding. He fought, and at the end of the struggle the £1 shares were worth 6-1/2d., at which price the Royal Dutch bought them up, at the same time condescending to accept control of the company.
The establishment of close relations between the Royal Dutch-Shell and the British Government was one of the most noticeable activities of the oil-world. It has not been proved that the British Government really controls the Royal Dutch, although well-informed people believe it. If there has been any change in the direction of the Royal Dutch, which, according to the constitution of the company, should remain in Dutch hands, it must have been effected as a result of agreements between the Dutch and British Governments, for the shares of the Royal Dutch were held by interests closely connected with the Royal Family of the Netherlands. An alliance of this nature would have great advantages. Besides, since the British Government has purchased the control of the Anglo-Persian, Sir Marcus Samuel has made great efforts to induce it to take an interest in the Royal Dutch-Shell group. The Royal Dutch has become more British than ever since 1922, when it ceded the greater part of its share in the Shell to the purely British consortium directed by the bank of Cull and Company. Deterding would find it difficult to do without the support of British foreign policy. He knew this very well when he transferred his offices from The Hague to London.