OIL, DEVELOPMENT AND INDIA 51 in all stages of activities in the oil industry from exploration, development, and extraction of crude oil to transportation and marketing— has many interesting consequences. For example, a major consequence of it is that a great deal of commercial and trading transactions in the oil industry (which often involve many countries) are no more than intra-company transactions between affiliates of the same mother company. Hence the prices charged and paid for are not the results of ^arms length^ deals but are internal book-keeping prices involving various branches of the same corporate body. For example, when the crude-producing affiliate of Exxon in Saudi Arabia sells crude oil to the Exxon refinery at Bombay, from the point of view of the latter, assuming no interference from the government, the amount purchased is not dependent on the quoted price. A corollary of the above is that what matters most to a vertically integrated firm is the overall profit from all its operations, and not the ^profits' shown by its individual constituents. It is possible for such a firm to manipulate the transfer prices for inter-affiliate transactions, and thereby to produce such book-keeping profits or losses for individual affiliates which are consistent with their overall global objectives. In India, the refinery and marketing affiliates of the multinational corporations usually tended to show low profit or loss for their Indian operations, and thereby managed to get away with paying very little taxes, while most of the profit was shown in crude-selling operations from East Asia which maximized their return, net of taxes. Independents on the Scene The majors are colose partners (as well as rivals) in an oligopolistic market which until recently was ruled by a commonly adopted price formula, detailed market sharing arrangements, and various types of jointly owned and pooled operations. Caltex (jointly owned by two US majors until the mid-sixties), and Burmah Shell (jointly owned by an associate of BP and Royal Dutch Shell) are some examples of collaboration among the majors in the fields of marketing and refining. But more important examples until recently are Aramco (Saudi Arabia), Kuwait Oil Company, Iranian Consortium, or Iraq Petroleum Company, which virtually monopolized the production of crude oil from East Asia. They are also bound with one another by several long-term crude oil purchase deals, as also by short-term localized operations of swapping crude oil and products in order to minimize transport costs. (See table I). The history of the oil industry is full of explicit, written, market-sharing agreements between the oligopolists. Sometimes markets were divided up territorially (as in the 1905 agreement), sometimes by percentages (as in the 1928 ^as is' agreement) and at other times by a combination of percentage shares and absolute amounts in a specific market (as in India during 1905-1928). Since the 1940s, written agreements are