March 4, 1938

DHAHRAN, SAUDI ARABIA – An oil well of California Arabian Standard Oil Company (CASOC), a subsidiary of Standard Oil, hit what seems to be the biggest oil reserve in the world today. Standard Oil estimates a single well Dammam No. 7 will produce 1,600 barrels a day.

Half a decade ago, CASOC secured exclusive prospecting rights in Saudi Arabia from King Abdulaziz Ibn Saud for a mere $35,000. Today, as a result of that agreement, the Saudi government is expected to receive only $0.21 per barrel in royalties, while the U.S. government will claim nearly half that amount in income tax.

When No Longer Hot Off the Press asked the King if the royalty percentage seems low in light of average price of a barrel, he replied, “Someday, and that day may never come, I will call upon the U.S. government to do a service for me. But until that day, accept this low royalty rate as a gift.”