This article presents an historical analysis of the way governance arrangements in the petroleum industry have affected development of offshore oil resources in the Gulf of Mexico. Global competition over differential rents and natural value available from petroleum extraction were instrumental in the construction of oil prices high enough to support profitable investment offshore. Attention to the social construction of oil prices illustrates how political discourse on national security and conservation helps translate economic logic into strategic political coalitions and state action. The article shows how the unequal flow of resources in a global extractive industry, as organized by transnational corporations and states, interacts with marginal costs and differential rents to influence economic development. Development of Louisiana offshore oil after the second world war was protected by a private international price cartel, federally enforced import quotas and tax laws. Competition in the industry and the OPEC price increases of the 1970s undermined US domination of world oil, but higher oil prices further stimulated investment offshore. The subsequent breakdown of stable governance in the 1980s drove down oil prices, hastened restructuring of the petroleum industry and caused a rapid decline in Louisiana offshore investment.