For the last 160 years oil has been a hugely important resource not only for America but the rest of the world. This has led to America becoming a superpower partly because it is an oil powerhouse. This is the story of how America became an oil powerhouse which continues through to this day.
Oil in Lamps and Bathtubs
It was in 1850 that Edwin Drake first struck oil when working for the Seneca Oil Company in 1859 in Titusville, Pennsylvania. The prelude that had led to that important development was the refinement of crude oil into kerosene for the purpose of lamp oil. This was done by Samuel Martin Kier and it turns out he was the man who did more to save the whale then anyone else because whales were hunted so that oil could be extracted from them for the purpose of using their oil in lamps. Of course with the invention of the electric light this became very much a secondary concern.
At first Drake didn’t know how to store oil and he just put it into bathtubs. Then he hit upon the idea of putting it in barrels. He was the pioneer of the method of drilling for oil into the ground which is still in use today. Just 12 to 20 barrels per day were produced from this well but from such small beginnings enormous changes were about to take place. But a standard measurement was required in order to build customer trust and so the standard oil barrel of 42 U.S. gallons or 159 liters was set. This was the same amount as King Richard III’s wine tierce so people could know the exact amount of what was being dealt with. We still talk in dollars per barrel to this day.
Oil in Cars and Texas
Then came John D. Rockefeller who is still considered to be the richest American of all time. Such was the dominance of the Standard Oil Company that it led to the enacting of Antitrust laws called the Sherman Act in 1890. At its peak the Standard Oil Company controlled 90% of oil production in the U.S.A. But the true age of oil would truly begin once the motor car was sold to a mass market in the early 20th century, thus marking the slow decline of the train which was powered by coal.
Coal just doesn’t have the power to weight ratio of oil and so oil became the dominant source of power in the world. Fortunately for America it has Texas because in 1894 a major oil discovery was made there. In 1901 the Spindletop oil well gushed out thousands of barrels uncontrollably until it could be tamed, thus marking the true start of the Texas oil boom.
Oil Around the World
From the middle of the 20th century the oil industry declined in importance globally due to the discovery of oil in the middle East and Venezuela. The low point was 1973 and the oil embargo which emphasised just how vulnerable America was by that point. America had reached peak production in 1970 with 10 million barrels per day. By 1989 the U.S was reckoned to have just 5% of the world’s oil reserves. The cheap oil prices of the 1980’s seemed to have finally killed off the U.S. industry but of course history never works in straight lines. By 2008 oil production was at just 4 million barrels per day but this was to change soon.
The Future of Oil
Over the last 15 years fracking has made a tremendous impact on oil production and it has totally changed the industry. With the ability to drill sideways, production has increased to 12 million barrels per day and is now one of the major players in oil production. The recent attempt to undercut the oil industry in the U.S. by Russia and Saudi Arabia will have nasty short term consequences but at some point a viable price will reappear because it has to do so. Stability is not the oil industry’s strong point but the long-term outlook looks good for the U.S. oil industry at this point.