Hst 329 - the Rise of Oil

Andy Lucas

HST 329

11/30/05

The Rise of Oil

Oil production is a misnomer, perhaps a cleaver marketing scheme that stuck, but the truth of the matter is that oil cannot be produced, it can only be harvested. Only a fuel which closely derives its energy from the sun, geothermal effect, or nuclear energy can truly be produced. The truth about oil is that there is still much in reserves that have not been tapped into yet. The rate of oil consumption is at an all time high and still climbing. Oil is by far the most readily available high energy density fuel available for the entirety of the 20th century. There are many factors that have helped to create the market that exists for not only petroleum as a fuel, but also as an important chemical used in a huge variety of products which the average American enjoys unthinkingly. In order to better understand the position which the United States is in now and what the future might hold in regards to oil, it would be beneficial to first discuss a history of various economic, political and technological developments which has influenced and created the oil industry as it is today.

The exploitation of oil started in earnest in Pennsylvania. Those living there noticed a black film floating on some of the creeks and streams. With ideas that this strange substance could be a cure all for a variety of diseases; rags and other absorbent materials were quickly employed to soak up the oil, harvesting it from the surface of affected bodies of water. It did not take long to find that oil would burn very readily, and that when refined, one of the products, kerosene, could replace whale oil in lamps and was much cheaper. In 1859 Edwin Drake explored to find the source of the oil, and when he found a suitable location he found investors and began drilling. After much frustration and failed attempts he finally got a well that produced oil. He then started selling the oil for $20/barrels. Others quickly followed suit and drilled their own wells. By 1862 Pennsylvania was producing 3 million barrels of oil per year . In the early years of oil production, the price fluctuated wildly. A young investor named Isaac E. Blake was making up to $1000/day in the oil business by 1869. One year he made a profit of over $100,000 selling crude oil . However, the oil market was very unpredictable. Blake bought a large amount of crude oil on speculation, a speculation which cost him everything when he had to sell the oil for a loss.

The early years of the oil industry were exceedingly rough. The processes for oil extraction were very crude and the operators of the wells knew nothing of how to manage the business aspects. So much oil was spilled and ended up in the streams and ponds that young children known as "oil dippers" were making as much as $25 or $30 per day skimming oil off the top of the water near the oil fields.

Meanwhile a man named John D. Rockefeller helped finance an oil refinery in Cincinnati after noticing that a gallon of kerosene sold for twice the price of a barrel of crude oil. Rockefeller was able to establish the Standard Oil Company and by 1870 had two large refineries. However, the refineries were primarily looking to extract just the kerosene, what was used in the oil lamps to provide people with cheep light. Rockefeller told his associates, "Give the poor man his cheap light, gentleman." There was no use for gasoline yet, nor any other petroleum product. Due to the volatile and explosive nature of gasoline, it was considered to be worse than useless. Uses for gasoline and other weights of petroleum were soon discovered or invented. In 1861 a renound Boston surgeon Dr. Henry Bigalow used gasoline as an anesthetic. Vasoline and paraffin were also invented in that early oil boom.

With the invention of the light bulb slowly reducing the amount of kerosene needed and the with the arrival of gasoline engines and Henry Ford's new affordable Model T, oil consumption reached what could be called the modern phase of consumption. In 1910, with the arrival of the Model T, gasoline sales finally became greater than kerosene. By this time inventors and engineers had developed practical ways to use many of the weights of crude oil. Gasoline could be used for internal combustion engines in vehicles. Airplanes too were buzzing overhead, powered by the energy dense gasoline. Kerosene still was being used widely for lamps; diesel (bunker) fuel burners had replaced coal furnaces on the steam engines which powered the ships of all the modern navies. Oils heavier than diesel were being used for lubricants for the machines that were being birthed in the industrial revolution. Oil bearing locations all over the world were being tapped. Texas, California, the Baku region of Russia,