Introduction

For one hundred and thirty years, from its establishment in 1880 to 2010, Imperial Oil Company Ltd. was the largest petroleum company in Canada; in 2009, Suncor merged with Petro Canada and Imperial fell to second place. Even so, in 2018 Imperial remained among the top ten non-financial companies in Canada, ranked by revenues and assets. The third ranked company, Enbridge, had been a subsidiary of Imperial when it was the Interprovincial Pipeline Company.1

During those years Imperial Oil was the largest company in terms of assets, revenues, and net earnings, towering over others in the Canadian oil and gas sector. In 1948, for example, even before the impact of the Leduc discovery took effect, Imperial’s sales revenue and net profits were twice the size of its two largest competitors, British-American Oil (later taken over by Gulf) and Texaco Canada (which Imperial acquired in 1991). Even in the 1990s, Imperial’s sales and assets were equal to those its two major rivals, Shell Canada and Petro Canada. Its share of the gasoline market in Canada fell from the 60 per cent position it held in the early 1950s, but it still accounted for one-third of that market.2

Not only was it Canada’s largest petroleum company, it was also in the proximity of—if not always “present at the creation” of—virtually every major event in the industry after 1900. When demand shifted from kerosene to gasoline in the early 1900s, Imperial acquired patents to the most efficient thermal cracking processes. In 1920 the Northwest Company, an Imperial subsidiary, drilled the first oil well in northern Canada. When gas (and some oil) was discovered in the Turner Valley in Alberta, Imperial arrived shortly thereafter, bought up the largest gas company, and its subsidiary, Royalite, made the largest oil find there in 1924. During the Second World War, Imperial developed oil fields and a refinery in the Northwest Territories of Canada as part of the war effort. And all this was before Leduc in 1947.

Imperial built the first oil pipeline linking the Alberta oil fields to central Canada in the early 1950s. At one point the company held between one-third and one-half of the assets of every oil pipeline in the country. When the oil sands began to be exploited in the 1960s–70s, Imperial was a founding member of the Syncrude consortium; a decade later Imperial developed its own project at Cold Lake.

Over this same period—from 1899 to the present—between two-thirds and three-quarters of the equity in Imperial Oil has been held by Standard Oil of New Jersey (later Exxon, now Exxon-Mobil). In 2018 Exxon-Mobil was ranked the second largest company in the United States by Fortune magazine. In terms of revenues it was surpassed only by the discount retail giant, Walmart. In the same year it was ranked the third largest petroleum company in the world, trailing the surging China National Petroleum Company and its erstwhile rival, Royal Dutch Shell. Exxon-Mobil remained a global power in the industry, serving markets on virtually every continent, and even in a world crowded with government-owned oil producers it maintained reserves in North and South America, Africa, East Asia, and Australia.3

Imperial Oil was both one of the largest companies in Canada, which had played a major role in shaping the country’s petroleum industry, and a not inconsequential part of one of the world’s largest multinational companies: in 2018, it accounted for close to 10 per cent of the $205 million (USD) revenues of Exxon-Mobil. The relationship between Imperial and Exxon was also one of the most enduring examples of a parent company and a foreign affiliate. In 1929 Imperial Oil was the third largest non-financial corporation in Canada. Eighty-nine years later, only five of the twenty largest firms had survived at all, and Imperial was the only company whose status as a foreign-owned entity remained virtually unchanged.4

In 1949, Exxon had partially or wholly owned affiliates in virtually every part of the world outside the Soviet Union—many of them larger and more significant to the company than the operations of Imperial Oil in Canada. By the early twenty-first century, although Exxon was ambitiously seeking access to the republics of the former Soviet Union, many of its largest affiliates—particularly in the Middle East and Latin America—had been swept away by nationalizations, and its ventures into new territories in Africa and Asia were fraught with risk, not only in a financial sense but also in terms of the safety of its employees. The survival of Imperial Oil through the (relatively restrained) controversies in Canada over “foreign multinationals” in the 1970s and 1980s contrasted sharply with upheavals in other parts of Exxon’s empire. More recently, however, the emerging scientific consensus linking carbon emissions from fossil fuel production to climate change posed challenges to both companies—and particularly to Imperial Oil, whose future had been tied to the development of Alberta’s oil sands.5

This history of Imperial Oil is intended to address its role as one of the major shapers of Canada’s petroleum industry—arguably as important for the nation’s economic development in the twentieth century as was the Canadian Pacific Railway in the nineteenth century and the Hudson’s Bay Company in the years before Confederation. At the same time I wish to present its dual status as an integrated oil company in Canada and an integral part of the system of continental and then global expansion and dominion that Exxon pursued from its emergence in 1880.

The literature on multinational enterprises is enormous. Even the literature on the history of multinational enterprises is formidable: one recent overview of the field listed over three hundred publications, of varying scope and scale.6 Many of the works on particular companies focus on the development of the parent firm, its reasons for expansion (or contraction), and its perspective on strategies and organizational evolution. There are of course exceptions, including the multivolume history of Standard Oil of New Jersey, which reviews the development of affiliates and subsidiaries in some depth and has been of inestimable value to this study of Imperial Oil.7

Of somewhat more recent vintage are studies that focus on the role and evolution of subsidiaries per se, rather than adjuncts to a larger organization. From this perspective the subsidiary has been analyzed in terms of its relationship to the host country’s political and economic environment, cooperative as well as competitive linkages with local businesses, its role in organizations that feature a networked as well as a hierarchical structure, and the development of subsidiary-specific strategies that extend beyond following the lead or direction of the parent company.8 This approach provides useful insights into the workings of multinational enterprises, but many of these studies reflect analyses of the operations of companies during the 1980s–90s, with features that may be time-bound. In contrast, my approach seeks to view the evolution of a subsidiary over a longer period with changing conditions.

This study is structured as a narrative, tracing the history of the Imperial Oil company and its role in the evolution of the Canadian petroleum industry. At the same time, it seeks to provide an analysis of the relationship between Imperial Oil and the American company that controlled it from 1899 by addressing a series of questions:

• What circumstances led Standard Oil to enter the Canadian market? Since this expansion involved a merger (in effect a takeover) of Imperial Oil, what factors led Imperial to join the American company?
• What was the relationship between Imperial and Standard after the merger? Did it extend beyond financial control through majority ownership? Did Standard exercise control over the management of operations?
• What events marked turning points in the relationship between the companies? Were these the result of strategic decisions made by the parent company (Standard Oil) or developments within the subsidiary (Imperial) or external factors, or a combination of these elements? Did these changes reflect a longer-term alteration of the conditions of the industry as a whole?
• Was there a transfer of technological and managerial capabilities between the parent company and the subsidiary? Were there transfers in the opposite direction? To what extent did Imperial develop its own initiatives and organizational capabilities?
• What was the role and status of Imperial Oil within the larger system of divisions and affiliates controlled by Standard Oil/Jersey Standard/Exxon over time? To what extent was Imperial able to develop and execute strategies for its own objectives separate from those of the parent company?
• To what extent were the operations of Imperial Oil affected by competitive (and other) conditions in the Canadian market? To what extent did developments in the international economy affect the operations and objectives of Standard Oil, Imperial, or the relationship between them?
• In what ways did measures by either the US or the Canadian government (or provincial governments) in such areas as trade, taxation, labour relations, financial rules, and environmental regulation affect the operations of either or both companies and the relationship between them? In what areas did differences in the legal, policy, and political environment between the US and Canada affect the operations of either or both companies?

In tracing the history of Imperial Oil and its relationship with Jersey Standard/Exxon, I have drawn substantially on the records of Imperial Oil at the Glenbow Museum and Archives in Calgary, Alberta. The minutes of the board of directors from 1899 and the executive committee of the board from 1951 were very valuable in providing insights into the perspectives of Imperial’s executives as they dealt with events affecting the Canadian oil and gas industry and the expectations of the majority owner in New York (and more recently, in Texas).

Because of the forty-year rule applied to these particular records, I was unable to access them beyond 1978. My original intention was to end the detailed history in 1980 and provide a brief epilogue with an overview covering events after that time. As I proceeded, however, the need for an expanded epilogue seemed clear, as a number of significant developments affected the company over that forty-year period, including the second energy crisis of 1980–81 and the rise and fall of the Canadian government’s National Energy Policy (NEP); Imperial’s acquisition of one of its main competitors, Texaco Canada, in 1989–90; and the emergence of environmental issues and particularly the controversy over the relationship between carbon emissions and climate change that roiled the industry from the late 1990s on. In this part, I have drawn on the company’s annual reports and related materials, on coverage of developments in the business and petroleum industry media, and works on Exxon, including in particular the history of that company by Joseph Pratt and William Hale that covers the period from 1973 to 2005.9

I have organized the book into four major sections:

• The first part (chapters 1 to 3), covering the period from 1880 to 1918, traces the parallel development of Imperial Oil in Canada and Standard Oil in the United States that formed the backdrop to Standard’s takeover in 1899, through the reorganization of Imperial under Walter Teagle in 1914–18.
• The second part (chapters 4 to 6), which could be designated the “pre-Leduc era” from 1918 to 1947, covers a period in which Imperial was closely tied in with Jersey Standard’s expansion into Latin America after the First World War, and the Canadian company embarked on a thirty-year quest to find oil in Alberta to replace its now-diminished capacity in Ontario.
• The third part (chapters 7 to 10), the “post-Leduc era” from 1948 to 1980, focuses on the expansion of Imperial’s role as a major Canadian oil producer as well as its continuing role as the country’s largest vertically integrated company in the industry, and traces its efforts at diversification into petrochemicals and related areas, and its involvement in the opening of the oil sands from the 1960s and northern oil and gas exploration in the following decade.
• The epilogue (chapters 11 to 13) carries the history forward beyond 1980, selectively focusing on government-company relations during the energy crises of the 1970s–80s, the consolidations of the 1980s–90s including Imperial’s acquisition of Texaco Canada and the Exxon-Mobil merger, and the emergence of environmental issues as a major concern for both Imperial and Exxon.
• The conclusion undertakes a review of Imperial’s evolving linkages with Exxon in the context of the broader history of multinational enterprises in the nineteenth through twenty-first centuries, which hopefully will provide a useful contribution to the literature on parent-subsidiary relations.