Galician California, Galician Hell: The Peril and Promise of Oil Production in Austria-Hungary

bridges vol. 10, June 2006 / Feature Articles
by Alison Frank



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As the location of the headquarters of OPEC and the IAEA, Vienna's connection with the international energy industry and with petroleum is well known. Anyone who has flown into Vienna and driven by the massive complex of OMV refineries that separate Schwechat from the city itself knows that Austria boasts its own refining industry.

 

{access view=guest}Access to the full article is free, but requires you to register. Registration is simple and quick - all we need is your name and a valid e-mail address. We appreciate your interest in bridges.{/access} {access view=!guest}But back in the days when Austria was much larger - and global oil production and consumption were much smaller - Austria was home to as much as 5 percent of global oil production, making it the world's third largest oil-producing country for most of the first half century of the modern global oil industry (1859-1909).1

The oil production occurred almost exclusively in the Kingdom of Galicia and Lodomeria, acquired by the Habsburgs during the first partition of Poland in 1772. (That same territory is split today between Poland and the Ukraine.) The crescent-shaped province marking the northeastern border of the Habsburg Empire was devoted almost exclusively to agriculture, and the land was not kind. Characterized by repeated crop failures, its agricultural yield even in the best of years was the lowest of all Austrian provinces. Overpopulation led to endemic famine, which contemporary critics and historians alike have believed to have caused an estimated 50,000 deaths from malnutrition each year. A wave of emigration that started in the 1880s carried 420,000 Galician Ukrainians and over 390,000 Galician Poles across the Atlantic Ocean by 1914, and still Galicia's population grew by 45 percent between 1869 and 1910. In 1905, only 24 percent of adult male Ruthenian peasants were literate, compared to 95 percent of the empire's Germans and Czechs. Added to growing national tension between Polish landowners and Ruthenian peasants was resentment of the local Jewish population; Galicia knew neither prosperity nor peace. While some historians of Galicia have emphasized the political freedoms that its residents enjoyed as citizens of the Kingdoms and Lands Represented in Parliament (as the "Austrian" half of Austria-Hungary was called after 1867), most insist that the benefits of civil liberties were outweighed by the miseries associated with economic backwardness. This is the image of Galicia that survives today.

full_Boryslaw_caption Given the overwhelming preponderance of agriculture and the centrality of village life, oil derricks and refineries, storage tanks and pipelines have no place in our imagined landscape of Galicia - but they should. Galicia produced over two million tons of crude oil in 1909, accounting for 5 percent of world production, and ranking as the third-largest petroleum producer in the world (after the United States and the Russian Empire). Observers lauded the Galician petroleum industry's great potential - there seemed to be no reason why the apparently unlimited supply of petroleum could not cover domestic demand and even be exported - but it was equally evident that the actual state of the petroleum industry, like that of the province and its inhabitants, was lamentable. While contemporary references to "Galician Hell" and "Galician Sodom" complement modern accounts of malnutrition, illiteracy, and the "idiocy of rural life," the nicknames "Polish Baku," "Eastern European Pennsylvania," "Austrian El Dorado," and "Galician California," more aptly reflect the enthusiasm of the late nineteenth and early twentieth centuries. What all of these appellations share is an invitation to comparison with foreign communities similarly characterized by the excitement of sudden booms and jolting progress upon the discovery of natural riches. Oil, it was hoped, might be the salvation of Galicia, a province otherwise with little raw material from which to develop industry.

But the oil industry failed to bring lasting wealth or significant improvements in the quality of life of the vast majority of those it touched. Contemporaries agreed that the actual benefits brought to Galicia by oil fell fall short of its potential. Who was to blame for the difficulty in capitalizing on Galicia's rich natural resources? This question afforded Polish landowners, Ruthenian socialists, and imperial bureaucrats the opportunity to reflect on Galicia's proper place within the duchies, kingdoms, and margravates that made up the Austrian Empire. L. von Neuendahl, a mining and metallurgical engineer, offered one possible explanation, calling Galicia a land "itself actually quite rich, but stripped of capital and intelligence."2 Often, blame was placed on the shoulders of the province's Jewish businessmen, to whom were attributed responsibility for the industry's "oriental" flavor.3 Austrian officials themselves thought that their own influence could only improve the condition of the region, arguing that the more closely the government monitored the petroleum industry, the better for worker, landowner, and tax collector alike.

On the other hand, Stanisław Szczepanowski, a Polish oil-industrialist and parliamentary representative, did not see Vienna's interference as either benevolent or necessary. He claimed that Galicia's oil producers and refiners had been hamstrung by Viennese centralism. As long as Viennese politicians and bureaucrats, personally unfamiliar with Galicia and maintaining opinions about the province based on rumor and prejudice, were responsible for making laws affecting its fate, he argued, no good could be expected for the local economy.4 What he did not acknowledge was how far-reaching Galicia's autonomy and its responsibility for shaping laws governing the oil industry actually were.

colorcard_caption Unlike many other valuable minerals, which became wards of the state, as it were, and could only be exploited with government concessions, oil was designated the private property of the landowner who could cause it to emerge on his land. (This policy distinguished Galician oil not only from other precious minerals in the Empire, but also from oil in almost all other states, with the notable exception of the United States). The benefits and costs of private property versus state control were the subject of intense debate in the chambers of the provincial and imperial legislatures and on the pages of newspapers and trade journals over the entire seventy-year life span of the Austrian oil industry. In the minds of many contemporary engineers, this legal framework had devastating effects on the Galician oil industry. In Austria, and Galicia in particular, some argued that the state needed to act as the instigator and organizer of industrial development, in the absence of private investors who could fill that role. According to the mining commissioner, it was absurd to leave control over such a valuable substance to the caprice of landholding patterns. He promised myriad benefits that would "emerge from submitting bitumina to the authority of the government." Among those benefits were "extensive mining, which develops this valuable treasure and entrusts it to the public" and "freer competition." Government control would guarantee "an orderly construction" which would in turn save "both human life as well as the surface of the land" from destruction. By eliminating unsafe and unsustainable enterprises, the industry would be left to "large companies and establishments" which would lead to "cheaper production, which goes to the common good, [and] as a consequence of that, a quicker and more general turnover of capital, and thus a fresher and freer movement and prosperity of the population connected to this natural product." What stood in the way of all of these beneficial developments was simply "the purely accidental property boundaries" of private property.5 The mining commissioner proposed, in effect, that rational economic development could not be left to "accident" - that the common good overrode the demands of private property. This rhetoric led to heated conflict with Galician landowners.

In the early decades of its development, representatives of the petroleum industry rejected government assistance or guidance and the interference that it would bring in tow. As a consequence, the industry did not consolidate. Truly every man with access to enough capital to secure a lease of the mineral rights to a diminutive plot of land had the chance to be an oilman. This fragmentation may have given local peasants a feeling of empowerment and made large landowners feel more secure about their own property rights, but it also cost oil producers for decades all the advantages associated with coordinated production. Starting in the 1880s, a growing cadre of industrial pioneers introduced new technologies and new business practices to "backward" Galicia. Prominent among them were the Canadian driller William Henry MacGarvey and the Polish economist Stanisław Szczepanowski. They hoped to find in oil a vehicle for the creation of vast personal fortunes, but at the same time promised to revive the lagging economy of the province as part of a greater national movement for a rejuvenation of Poland.

While some were dreaming of glory for the province and the Polish nation, others were wasting away in dark and dangerous mines and in Galician refineries, inhaling gasoline fumes. Workers, like industrialists, were drawn to the oil basin by optimism and hopes for a better life. They became the targets of socialist agitation, aimed at awakening in them a proletarian consciousness and encouraging them to improve their lives and their working conditions via collective action. Socialist intellectuals such as Ivan Franko began to hope for a restructuring of Galician society with what they perceived to be an emergent oil-proletariat as the primary agent of change. But the oil industry's workforce did not respond to socialism with the enthusiasm that agitators hoped for, and employers and imperial officials feared. Like immigrant villagers turning to industrial centers elsewhere in Eastern Europe, these "worker-peasants" had no intention of breaking off ties to their village communities. Violent expressions of religious tensions, exacerbated by widespread abuse of alcohol and the carefree culture of communities dominated by single men, were more typical of collective action in the oil basin than were explicitly political or economically-motivated activities.

The apex of the Galician oil industry came in the period from 1895 to 1909. Years of unprecedented drilling success revealed to producers and consumers alike that the richness of the soil could bring as much financial ruin as prosperity. Borysław, which had had fewer than 500 residents in the 1860s, had swollen to 12,000 by 1898. By this time, no description of the region could fail to mention the oil production that had become its most notorious trademark. But too much interest on the part of too many discrete investors and producers, combined with a dramatically augmented power to discover and extract previously inaccessible oil deposits, led to disaster. In the early twentieth century, oilmen paid a hefty price for their lack of organization. Overproduction showed to what a great extent independent producers could cause one another to suffer, underbidding their competitors and causing a devastating erosion of oil prices. In 1905, the oil industry entered a period of intense crisis. Following the unexpected discovery of vast new oil deposits, production grew by approximately 50 percent in one year, and nearly trebled in three years. Many of the new wells were "gushers" whose rates of production could not be reined in at will. The prospectors' victory over chance revealed itself to be Pyrrhic, as unprecedented overproduction led directly to unprecedented price collapse. The ensuing crisis brought attention to the fundamental weakness of the oil industry's infrastructure.

Boryslav2000landsc_caption Petroleum producers quickly learned how critical an ally the central government could be. They had lobbied the government for tariff protections in the nineteenth century, but had not seen Vienna as the source of reliable support. Now the government was called on to become a major consumer of the oil that could be neither sold nor stored in the quantities in which it was exploding out of the ground. At the same time, the imperial administration offered military support to quash the oil workers' strikes which, in another case of remarkably bad timing, began in a period in which producers were more than happy to find an excuse to halt production. The administration also introduced discriminatory measures designed to make the transportation and delivery of crude oil to foreign refiners (in particular, Standard Oil's Austrian subsidiary) nearly impossible - at considerable diplomatic risk. Some problems, however, were beyond the power of the imperial government to solve. After reaching its peak in 1909, Galician production suddenly and inexplicably began to drop. Even at its apex, Galician production of about 14,933,000 barrels per year was only a distant third behind the United States, with 183,171,000 barrels, and the Russian Empire, with 65,970 barrels.6 Given that great discrepancy, Galicia could hardly afford any decrease in its production if it wanted to remain competitive. From 1910 to 1918, however, rates of production declined steadily year after year, while consumption increased to unanticipated levels, propelled in part by the mechanization of warfare that came with the First World War. Galicia was the only domestic source of petroleum for the Central Powers, particularly important in periods where access to Romania's oil fields was uncertain or outright impossible. Desperate to keep the industry afloat, the government made it a high priority following the end of a brief but traumatic Russian occupation of the oil basin from September 1914 to May 1915. Confronted with a drawn out European conflict that did not meet their expectations for quick victory over Serbia, Austria's military leaders were incapacitated by a shortage of the very fuel whose excess supply had plagued the Empire's economy only a few years previously. Austria's army and navy, like the armed forces of both its allies and its enemies, had become more dependent on petroleum than ever before, but their foreign supply was cut off and their domestic supply was running dry.

Although oil supplies had become critically low during the war, few recognized that the golden years of the Galician oil industry had come to an end. Only with hindsight does the gulf between foreign expectations for the future of the Polish oil industry and its actual performance in the 1920s become clear. The hopes of politicians, industrialists, and investors alike rested on a period of reconstruction and continued investment that they expected would follow the cessation of conflict. But for residents of Eastern Galicia, 1919 and 1920 were years of continued warfare. For Poles, this was a civil war fought between Polish-speaking and Ukrainian-speaking residents of the new Polish Republic. For Ukrainians, it was a war of liberation fought to repel Polish troops from land occupied by a largely Ukrainian population, in the hopes of carving out an autonomous - if not a fully independent - Ukrainian republic. The Polish-Ukrainian war was fought throughout the territory of Eastern Galicia, but concentrated on two objects of particular value: the regional capital city of Lviv, and the oil fields of the Borysław-Drohobycz basin.

The Polish-Ukrainian War provided the backdrop for negotiations over Poland's boundaries held among the Allies in Paris. Although oil played a significant role in these discussions, the Allies were not prepared to allow financial interests to interfere with their principled resolution of Poland's border question. Ultimately, the Allies had less control than they expected over the determination of Eastern Galicia's final borders, which were decided as much on the battlefields of Eastern Galicia as in the conference rooms of Paris. Nevertheless, the Poles were able to convince the French in particular that a novice Ukrainian government would not know how to manage the oil industry, but would endanger Western investments and reverse the decades of steady progress under the aegis of Polish control. It was the Allies' decision not to punish Polish military incursions into Eastern Galicia that enabled the Poles to regain physical control of the region, presenting its inclusion within the Polish Republic as a fait accompli. The French were rewarded for their steady support of the Polish cause in Eastern Galicia by special treatment for their businesses and investors after Polish control of the region had been secured.

Boryslav2000grassh_caption After the decline of its oil industry, the Galician landscape bore the scars of decades of extraction, marred by cavities large enough to swallow passersby. Long after these holes were filled in the interest of public safety, traces of the industry remained. Some of these traces are linguistic: town names such as Ropica Polska, Ropica Ruska, Ropa (Poland), Ropa (Ukraine), Ropienka, and Ropianka derive from ropa, "oil" in both Polish and Ukrainian. Some of these traces are literary: Ukrainian authors like Ivan Franko immortalized the oil industry in fiction, and authors better known in the West, such as Joseph Roth and Robert Musil, incorporated this industry into their nostalgic portrayals of the former Empire. Still other, physical, traces of the oil industry can be seen in the landscape itself: in the form of monuments to oil pioneers scattered across Polish and Ukrainian Galicia, and in the occasional lonely pump standing in the small gardens of Borysław (now Boryslav) or on the pastures of neighboring Schodnica (now Skhidnytsja).

 

The author, Alison Frank, is assistant professor of history at Harvard University. This article has been adapted and reprinted by permission of the publisher from OIL EMPIRE: VISIONS OF PROSPERTY IN AUSTRIAN GALICIA by Alison Fleig Frank, Cambridge, Mass.: Harvard University Press, Copyright (c) 2005 by the President and Fellows of Harvard College.

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"Oil Empire : Visions of Prosperity in Austrian Galicia" by Alison Fleig Frank is available at Amazon.

Footnotes

1 For a more complete account of the history of the oil industry in Austria Galicia, see my recent monograph: Oil Empire: Visions of Prosperity in Austrian Galicia (Cambridge, MA: Harvard University Press, 2005).
2 Neuendahl, 3.
3 Franz Pošepny, "Die Anwendung des amerikanischen Verfahrens der Petroleum-Gewinnung auf Galizien," Österreichische Zeitschrift für Berg- und Hüttenwesen 13, no. 39 (25 September 1865): 309.
4 Stanisław Szczepanowski, Nafta i praca, złoto i błoto (Lviv: by the author, 1886), 40.
5 H. Wachtel, "Die Naphta und deren Industrie in Ostgalizien vom Standpunkte des Bergregals," Österreichische Zeitung für Berg- und Hüttenwesen 8, no. 16 (16 April 1860): 131.
6 Robert Schwarz, Petroleum-Vademecum: International Petroleum Tables VII edition (Berlin and Vienna: Verlag für Fachliteratur, 1930), 4-5.{/access}