When the Supreme Court ordered the breakup of Standard Oil in 1911, the decision reflected society's distrust of Big Oil -- and a century later, not much has changed. The oil majors' 19th-century legacy makes them an easy target for politicians; portrayed as rich, powerful, secretive, and manipulative, they are an easy scapegoat when gasoline price spikes breed public discontent. But this ritual theater belies the fact that Big Oil has, in fact, long since been tamed. And for all of the U.S. government's shouting, it wasn't politicians, Supreme Court justices, or federal regulators who tamed it -- it was the free market.

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John D. Rockefeller, Standard's larger-than-life founder and CEO, was openly contemptuous of the U.S. government. But he was not much friendlier toward the idea of the free market. In Rockefeller's world, oil companies and railroads colluded to guarantee profitability for investors and stability for consumers. Competition, Rockefeller believed, was unnecessary and destructive.

Rockefeller knew his enemy: While it was the Supreme Court that dealt the death blow to Standard Oil, by that point the company's position had already eroded dramatically, not because of government meddling but because of market competition. The Nobels in Azerbaijan and Shell in Indonesia became major oil producers and refused to collude with John D. In 1875, U.S. oil production, dominated by Standard Oil, was over 90 percent of world production. By 1911, U.S. output was closer to 60 percent. With new competitors firmly in place, the company that had controlled 90 percent of U.S. oil refining in 1880 accounted for just 60 to 65 percent of it in 1911.

After the breakup, Standard Oil's successors were still major players in oil's global expansion -- but that, too, would change with time. The massive oil fields of the Middle East were developed in the early 20th century by cash-rich, technologically advanced oil companies like Exxon, Mobil, Chevron, and BP, which negotiated sweetheart deals with poor, backward regimes living under the thumb of European colonialism. In 1933, for instance, Chevron obtained a 66-year concession from King Abdul Aziz of Saudi Arabia for a one-time payment of about $4 million (in 2011 dollars), plus a $2 per barrel royalty. Today, the Saudis earn $4 million from their oil fields every six minutes.

Big Oil's dominant position started to crack in the 1950s as governments came to understand the value of their resources and demanded an increasing share of revenues. The Cold War and the demise of European empires shifted the balance of oil power from companies to governments. New independent companies like Occidental and Eni refused to join a common industry front in resisting the demands of oil-producing governments. Big Oil's control of the industry collapsed completely in the 1970s as most oil-producing countries nationalized their industries, handing control to state-owned oil companies. Big Oil's profitable oil fields in the Middle East, Latin America, and elsewhere were either taken away altogether or cut back to contracting operations at the behest of local governments. The United States and Canada are now the only countries in the world that permit the private ownership of oil resources. Elsewhere, governments retain exclusive resource ownership, control production and pricing decisions, and keep the lion's share of revenue for themselves.

A 1952 investigation by the U.S. Federal Trade Commission found that the "Seven Sisters" (Exxon, Mobil, Chevron, Gulf, Texaco, Shell, and BP) held nearly two-thirds of the free world's oil reserves and operated 55 percent of world oil production and refining capacity. In 2010, the Seven Sisters -- now merged into four companies (ExxonMobil, Chevron, Shell, and BP) -- held about 2.5 percent of world oil reserves, primarily under contract with governments, and accounted for only 10 percent of world oil production and 15 percent of global refining. State-owned national oil companies (NOCs) have displaced Big Oil as the major reserve holders and oil producers. The NOCs of Saudi Arabia, Iran, Kuwait, Abu Dhabi, Iraq, and Venezuela control 60 percent of world oil reserves, and most of this oil is off-limits to private investors.

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