In World War Two Germany was in an epic oil crisis. 
I have covered this before in a couple of videos, but
I'll leave some links in the description. And today we've 
actually got some follow-up questions from my patrons.
Two of them this time, one's from Kevin who said,
"You've repeatedly talked about Germany's oil 
shortages as a main reason they lost the war.
While Germany didn't have enough oil at 
their disposal, they did have plenty of coal.
You can't power tanks or planes with coal, but the Germans developed 
a way to create synthetic fuel from coal in order to run vehicles.
How did coal-derived synthetic fuel affect Germany's 
overall fuel situation, and why could it apparently not
sufficiently make up for the deficit of oil?"
So there's primarily two sources here that I'm going to 
rely on, they're both by the same author, which is Toprani.
And I'm looking at his "The First War For Oil", and 
also his PhD, actually, which has got plenty of sources.
There are other authors, there's Hayward, there's Fritz, 
there's quite a few authors that mention the oil crisis now.
But Toprani seems to be the best one. 
If anyone knows of anyone who
really talks about the oil situation in World War Two, or 
the food situation, let me know because yeah, it's good.
But I'm gonna primarily rely on Toprani here.
Even with Romania, the Axis had a 
massive shortfall of oil in World War Two.
And even if there had been a second Romania, they still 
wouldn't have had enough oil to run everything, right?
So the oil crisis in World War Two for the Axis was desperate,
and so the question then becomes, "OK, 
could they have solved it some way or another?"
Hitler's solution was to go east and conquer 
the Caucasus (as well as the Ukraine for the food).
In Kevin's case it's, "Well, why didn't 
they just produce more synthetic fuel?"
Well the ... short answer is that 
it's incredibly difficult to create
synthetic fuel, especially at this 
time, and it's incredibly expensive.
Now the Germans got around this by printing 
money and ... basically, just throwing it at IG Farben.
The point is that doesn't really get around the 
fact that it's very costly and expensive to run.
So going off Toprani's sources, he says,
"By 1937 the regime admitted that synthetic fuel 
producers required as much as 22 tons of brown coal
or 4.5 tons of hard coal to produce one ton of gasoline."
Now ... Toprani also says they 
had 100 odd years worth of coal,
I think is was 170 years worth of coal. 
So it's not like they lacked the coal, right?
So it's not like, "Oh, ... we haven't 
enough coal to produce and turn it into oil."
No, they had plenty of coal. The problem 
was that the actual process of turning it
from coal into oil was a lengthy 
process, a costly process.
So as you can see here that it takes a lot of tons
 just to ... get a small amount of gasoline out of it.
He says, "Although the process of 
synthesising petroleum continue to [progress]
throughout the war, it remained expensive 
in terms of financial and raw material costs."
And what's interesting here, this quote is great,
"When IG Farben first decided to invest in hydrogenation", 
which is the process apparently, they did it in 1925,
"the world price for gasoline 
was about 16 Pfennig per litre,
against an estimated cost of 
20 Pfennig per litre for synthetic gasoline.
By 1931, the figures had changed:
natural gasoline cost 5.2 Pfennig per litre", 
so it actually gone down from 16 to 5,
"while synthetic gasoline had actually gone 
up to 23, and thus IG Farben was in trouble."
And you might be thinking, 
"Well, wait a second, what's going on here?"
During the boom years of the 1920s, governments 
were investing in the capital goods industries.
They were printing money, the central banks were 
printing money (or printing currency to be exact),
and ... well, entrepreneurs were investing 
that into the capital goods industries.
And so as a result agriculture, oil 
production, steel, housing, that sort of thing,
... those sort of sectors were being 
pumped full of this cheap, easy credit,
dollar intervention, whatever 
you want to call it, right?
And as a result these were booming, and 
so they got into themselves into a bubble.
And their prices for their goods were really high because they 
were getting lots of money from the state for free, basically.
All the money is being printed and 
going into the capital goods industry,
so the consumer gets squeezed and sees their 
living standards decrease ... in the boom years.
While the people who work for the 
capital goods industries are like,
"Yeah, we're gonna see our wages increase", so on 
and so forth. And then the Wall Street Crash happens,
and suddenly, right, because ... what ends 
up happening is the governments can't
print money forever, otherwise you get 
hyperinflation, so they put the brakes on.
That results in a crash because now 
this cheap credit and all the loans that the
capital goods industries had got into, these pop, and 
the result is a depression, which then cripples them.
That's why ... during a recession or a depression
it's the capital goods industries that end 
up popping. That's the way the bubbles pop.
Their prices collapse, that's where the unemployment 
comes from. And the consumer in the bust years
actually sees their living standards increase, because 
prices start to come down. And you see it here again.
So as the capital goods industries pop, they need to 
sell off whatever ... assets they can to raise the money,
and what they find out is that, "Oh, we've over-
expanded, we didn't need all this steel, housing,
whatever else," which was all in the 
bubble. So prices start coming down.
Well prices start coming down for the oil, 
and they were like, "Uh-oh". So it went from 16
Pfennig per litre, whatever that is, to 5.
And that's the whole point. So if you're still 
in a job and as a consumer in the bust years
you're gonna have it really good. All the 
theft that went on during the boom years,
you know, basically stole your money, went to the 
state and also went to the capital goods industries,
you see that all returned to you. And suddenly your money 
can go two to three times as far, which is what happened.
For more information on that, see "America's Great 
Depression" by Rothbard, who explains this perfectly.
And people will criticise me, "Oh, you are using 
Rothbard." Yeah, because he actually says
what actually happens, as 
opposed to just making stuff up.
"Oh, it's over-production." Yeah, no, it's mal-investment 
caused by the central banking system.
Fractional reserve banking is what causes the 
recessions. Anyway, the point of the matter is
gasoline went down, but synthetic fuel went up. 
And so IG Farben who was a capitalist ...
corporation, right, supposedly, was like, 
"Well, it's not profitable to make synthetic fuel,
so we're in trouble now."  
That's what Toprani's saying.
And then what they found out was, 
"OK,  so ... it's not profitable to make
synthetic fuel, so we won't really bother doing it. 
The investment we put into it, we won't bother."
So it ... was increasing up to this point, 
but then they sort of went, "Nyah."
And then came the Nazi government. And this is a quote, 
"Within months of taking power, the National Socialists,
backed by the military, pressed for the expansion of 
domestic petroleum output irrespective of the cost."
State Secretary Feder, who is the guy who 
... wrote the 25 points of the Nazi Party,
"one of the founding members of the Nazi party," there 
you go, "was now responsible for petroleum affairs,
and "pledged that all available measures would be 
utilised to fulfill Hitler's plan," central plan, "to promote
motorisation, including increasing the production of 
synthetic fuel, expanding existing refinery capacity,
and raising the output of domestic oilfields.
Feder had initially backed the construction of 
additional oil refineries, but by the autumn of 1933
he was committed to higher 
synthetic fuel production.
Policy would not be determined solely by trade 
and foreign exchange considerations or even cost."
So it wasn't ... about the free market then, was it?
"Since synthetic fuel cost at this point 
three times as much as imported gasoline."
So it cost 20 Reichsmarks to make one litre of fuel, 
and it cost 6 Reichsmarks to buy fuel from abroad.
So clearly the market is saying, "No, we don't want 
you to produce this really expensive synthetic fuel."
But the state went ahead and forced it through 
anyway, and said, "No, no IG Farben, we will give you
currency, we'll print currency, give it to you, and you must produce 
the stuff even though it's economically not viable to do it.
You won't make any profit on it, you will 
make a loss, but we want you to do it anyway."
That's what happened here. And Toprani 
actually explains why historians have
sort of neglected this, and sort of 
... like they've changed the narrative.
He says first things first, "Scholars relied upon 
the reports of the US Strategic Bombing Survey,"
... they were interested in destroying the German war 
effort and not explaining how the economy worked.
Secondly, he says, "East German scholars considered the 
Third Reich to be an instrument of German monopoly capitalism,
IG Farben was the largest German corporation 
before the war, and perhaps fourth largest in the world
behind General Motors, Jersey and US Steel."
And he goes on, "That the Third Reich devoted 
immense resources to the construction of a
synthetic fuel industry that privileged the company's interest 
seemed to be irresistible proof of the underlying validity
of the Marxist critique of the Third Reich." 
Which doesn't make any sense anyway.
So what's going on here? The Nazis get into power, they 
want to go east, they know they're going to go to war.
So rather than rely on ... the free hand of the market, 
right, and profit motive and all this stuff, they go,
"Nope, we're still going to, ... regardless of the cost, we're 
going to convert and start producing a lot more synthetic oil."
So in ... 1931, yeah, IG Farben in 
Germany was creating 120,000 tons.
And then now the Nazis are like, "No, we'll 
divert ... resources from the rest of society
to start producing this really expensive 
fuel because we're going to go to war."
Toprani says that (I'm gonna butcher this), 
the Krauch Plan of 1938 was,
"the most ambitious synthetic 
fuel project ever attempted."
And he goes on, "Synthetic fuel was not going to make 
Germany energy independent, or even autarchic, any time soon."
Because even though they were 
pumping all this resource into doing this,
... it's just simply such a hard process 
that they never ever got to a stage
of actually been able to fulfil 
the demand for oil in Germany.
But by 1936 oil production annually in 
Germany had increased to 1,790,000 tons.
Which is, you know, this is 
more than ten times the amount.
And then, to quote Toprani in his 
First War For Oil, it then increased
342% between 1936 and 1942, 
reaching 6,120,000 tons per year.
And aviation fuel increased a lot as well.
So, "As a result, by 1941, Germany produced 75% 
of its requirements, as opposed to 31% in 1936."
So the Krauch Plan, whatever you 
want to call it, has increased this,
... the Nazis have increased this ... you 
know in 1931 they're only producing over
120,000 tons, they're now producing in 1942, 
so just 11 years later, 6 million tons per year.
So you can see there's a massive difference, there's a 
massive increase of this expensive process of production.
But even with this massive increase 
you still have major deficits, right?
So it's not like they didn't try the most ambitious plan 
ever created for oil production according to Toprani,
you know, and all the effort you could possibly 
put into it, and they still didn't have enough.
So here's another quote so, "The new Central Planning 
Board, chaired by Armaments Minister Albert Speer,
met on the 29th of October 1942 to discuss 
how to raise German petroleum output.
Fischer of the Economics Ministry 
presented the outlook for 1943.
Only 11,700,000 tons were available to cover the 
estimated demand in Axis Europe of 15,000,000 tons."
It's a massive deficit there.
"Increasing consumption of natural gas would 
save about 500,000 tons of petroleum a year
but still leave Germany with a 2,800,000 ton deficit, 
most of which had to come ... out of civilian consumption."
So they're even in ... late 1942 with all that 
effort gone into it, there's a massive deficit.
And so, as I've explained in the previous videos, 
you know, that the Germans are trying to
use synthetic oil and a bit from Romania 
(I say "a bit", it's quite a lot, but you get the idea),
it's like a lot from Romania, a lot from 
synthetic oil, some from ... Hungary
and so on. There's a few other sources, 
and they capture some as well.
But they're trying to make a small amount 
cover everything and they can't do it.
They're trying to do it domestically. And because Britain has 
cut them off from trading with America or Venezuela, which
I think ... was still the world's most productive 
in oil. It might change to America at this point.
But basically those two are producing a lot. 
Britain obviously has the Middle East,
which didn't have that much oil at this 
time as Toprani points out, but it's still there.
And so really Germany's only option is to go east and get the 
oil from the Caucasus, which is what Hitler was trying to do.
But the point is, from let's say 
the beginning of the war until
Germany hypothetically gets the oil 
fields, they are in desperate straits.
And so, even with this synthetic oil 
production, they couldn't produce enough oil.
And so, I don't have the exact figures for ...
because Germany did actually have some crude oil, but I don't 
have the exact figures for the amount of synthetic oil production,
but they were producing as much of it as 
they possibly could do physically, you know,
they had the facilities, they were building it, they were expanding 
them, they were doing whatever they could to get this oil,
because they knew they're in a deficit and they still couldn't 
get enough. And they were still in a deficit of huge proportions.
So, to answer Kevin, you know, the Germans developed 
a way to create synthetic fuel from coal in order to run
vehicles, he said, "How did coal-derived synthetic 
fuel effect Germany's overall fuel situation?"
It basically powered the war. What they had, 
as little as they had, was synthetic basically.
Some of it was from Romania, and some of it was crude, 
but most of it was synthetic. That's what drove them.
But why could it not apparently sufficiently make up 
the deficit for oil? Because it was really expensive to do,
in terms of not necessarily Reichsmarks, in terms of just 
turning the coal into oil is a [time consuming], costly process.
Not necessarily in terms of Reichsmarks, 
but just in terms of the time it takes,
effort it takes, power it takes, whatever 
you want to call it, that's still a cost.
Because what the Germans are doing at 
this time was manipulating the economy,
and ... barter and god knows what else, and they would
artificially decree that the price 
is lower than actually should [be].
It doesn't matter, you know, you can paint over the 
crack, but the reality is that there's still a crack.
And in this case there is still a ... you know, 
there's still a very costly process regardless of,
"Oh, well, we're not gonna charge that." 
It doesn't matter, it's still a costly process.
So that's the reason why they couldn't 
make up sufficiently for the oil.
And then we have a second 
question from Craig who says,
"You said to join for $5 if I wanted 
you to answer a question
and given that I very much enjoy your 
content on World War Two I have no
problem becoming a patron (many of your videos 
have changed established views on this conflict).
In any event, my question has to do with 
Fall Blau and the Stalingrad campaign.
Of course, what is often taught is that the 
Germans want the Caucasus for the oil.
Of course, this is self-evident at this point. 
The converse is also true for the Red Army,
they want the oil as well. As history turned out the 
German presence in Maikop and the Caucasus
did not impact oil supplies for the Red Army enough that 
the Red Army found itself lacking oil to counter-attack.
But the question I would like answered is at what 
point would German occupation of the region
have materially impacted the 
Red Army's ability to fight the war?
Yes, the Soviets and British invade Iran, but at that point 
would the Germans have essentially won the war if they
linger in the Caucasus long enough, not just for them to 
utilise the oil, but to deprive the Red Army of the same oil.
I have read nothing telling me how long the Red Army 
could persist ... with the Germans in the Caucasus oil fields.
Your insight on that topic will 
be greatly appreciated, Thanks,
best regards, Craig from Boynton 
Beach, Florida, I assume, it's Florida.
Again, Craig, I'm gonna give 
you homework. Not homework,
go and read Topriani's "The First War For Oil". 
I think his PhD might mention it as well,
but his First War For Oil really 
goes into this.
... OK, what I'm gonna do, I'm gonna suggest Craig 
that you read "The First War For Oil" by Toprani.
You can find it on-line somewhere, 
or you should be able to.
Because Toprani goes into this ... in a lot of detail 
and so I'm gonna be taking notes out of this,
but yeah, really encourage you to read that.
What I'm also going to do is point back to my other 
video last week where we talked about the food crisis.
... Because this is kind of related, but not quite.
So to recap, there's a food crisis going on the Soviet Union 
in 1942 and 1943. The Germans have overrun the Ukraine,
they've got to the Northern Caucasus. So these 
are the breadbasket areas of the Soviet Union.
So in theory,
if the Germans had held onto this area, potentially 
- I'm not saying possible, I'm saying potentially -
in 1943 there could have been 
a collapse of the Soviet Union.
We don't know this. I was debating this 
last week ... because, and that's the point,
the Germans had taken over 
the grain ... producing areas.
But would there have been an oil crisis? Now the 
Germans did take Maikop, and they bombed Grozny.
They didn't quite take Grozny, but they basically bombed 
it into smithereens and so it wasn't really producing much.
But what's interesting is that, 
quoting from Toprani here, so he says,
"In December 1941 ...General Thomas confessed 
that the Soviet Union's raw material position
may actually have improved since it no longer 
had to support the oil-poor European Russia."
Right, so because the Germans had invaded, 
and they had the west of the country,
this western part of the country 
didn't have any oil facilities.
So the Germans had taken over this huge 
area which now no longer needs [Soviet] oil,
So, there's less oil that the Soviets need to 
produce to facilitate the rest of the country, right?
Unlike the food crisis where they have 
lost the breadbasket of the Soviet Union,
the Soviets actually haven't lost the oil 
basket, the oil drum, of the Soviet Union.
So they are actually producing not as much oil, 
but almost as much oil, as they were before.
But they now have significantly less territory 
... for that oil, so that oil can actually go further.
And that's what General Thomas recognises that actually, 
"Yeah, ... the [Soviet] oil situation may have actually improved
because ... we, the Germans, have taken 
over the oil-poor area of Russia in the west."
So he says, "The following spring, General Thomas 
calculated likely Soviet oil production beyond
the Caucasus at 8,000,000 tons in 1942. 
This meant that the loss of the region,
accounting for 75% of total Soviet production would 
leave the Soviets with an annual deficit of at least
15,000,000 tons, or 7,000,000 tons (there was 
a debate), if they expended surviving stocks.
Although oil reserves in the Volga-Urals area", 
so that's quite a way, "exceeded those of Baku,
the transportation and refining infrastructure 
... beyond the Caucasus was inadequate."
So basically the Caucasus is 
where the main point of the oil is.
The problem is they don't take Baku, and the Germans 
actually said, "As for the effect on the Soviet war effort,
Soviet oil stocks (possibly 8,000,000 tons) 
would be large enough to forestall
the worst effects of the loss of the Caucasus until 
well into 1943, perhaps later if US exports arrived."
So the Germans kind of thought, "Even if we take 
the Caucasus, the Soviets have still got stocks
and this potential for lend-lease." So it's unlikely 
that they would fall even if they took Baku.
So the oil crisis, ... so the Germans have to 
take the Caucasus in order to solve their crisis.
But even if they do take the Caucasus, 
the Soviets might still hold on.
And in fact, they may not be actually in a crisis 
if the US can actually import goods to them.
Yeah, and what's also interesting: so the idea of going 
to Stalingrad in the first place was to block the Volga.
So that's why the 6th Army was 
going east with the 4th Panzer Army.
And the debate whether ... they actually have to go into Stalingrad 
or could have just gone south of it and block the Volga there.
Whatever.The point of the matter is that, 
let's just say even if they did take Stalingrad,
the Germans actually knew that, well, the Soviets could 
just ship oil ... through Kazakhstan rather than up the Volga.
So it would have made it more difficult, and the Germans 
actually estimated that they [the Soviets] could barely
get enough, you know, if Baku doesn't fall, 
they could barely get enough through.
But they could get enough through, which means 
that even if they took Stalingrad as well as Baku,
which is impossible, but let's just say they did 
that, it wouldn't have knocked them out of the war.
The Soviets would still have 
been in the war, even at this point.
However, it's not the oil for the 
war effort that's the issue here.
They would have had enough oil to keep the tanks going, 
but not enough for both the tanks and the domestic economy.
So to quote Toprani, "On the other hand, the lack of fuel would 
have had a pernicious effect by paralysing Soviet agriculture.
Moreover, the Allies would be unable to make up the 
Soviet petroleum deficit because of their tanker losses."
So, if they had lost the oil, it's not so much 
the oil that would have been the issue,
it's the fact that they wouldn't 
had enough oil for the tractors, etc.
and that would have made the 
food situation in the Soviet Union
even worse than it was, and we 
know ... it was pretty bad as it was.
So really the Germans just have to take the northern 
Caucasus, block the Volga, and that potentially could have
resulted in less oil, even if they don't take Baku, that would 
have resulted in less oil getting into the Soviet Union.
Which would have had a paralysing 
effect on Soviet agriculture in 1943.
So if we go back to that last 
week's video, where we said,
"Yep, there's a food crisis in the Soviet Union anyway." 
Then imagine it with a paralysing
of Soviet agriculture, just imagine how 
much worse that would have been.
So, there's no way ... to say, as I 
said last week, there's no way to say,
"Yes, the Soviet Union definitely 
would have collapsed in 1943."
We cannot say that because we don't know. 
But what we can say is that it's pretty near likely.
And so you can just imagine, wow, if the 
Germans have just gone a little bit further, or
if they had just held onto 
that region they had taken,
how much worse would it have been? 
How much worse could it have been?
