Here’s an intriguing question….
When was oil thought to have large scale economic value?
- The emergence of a need for fuel and the realization that oil might be a valuable commodity seemed to emerge in several parts of the world in the early 1850’s, including Canada, Britain and America.
- By the mid C19th in America a problem was occuring . The supply of sperm whale oil, that Americans used in their oil lamps was severely limited because the sperm whale had been hunted almost to extinction.
- An American lawyer George Bissell, thought that he might be able to convert crude oil to kerosene to provide fuel for lamps.
- In 1854, Bissell founded the Pennsylvania Rock Oil Company, this failed but undeterred, in 1858 he set up the Seneca Oil Company to drill for oil.
He hired an ex railroad conductor, Edwin Drake, known as ‘Colonel Drake’ to start the drilling and at about 65′ he struck oil.
He was extracting 35 barrels a day at $20 a barrel.
News soon spread and by 1860 there was a black gold rush.
- It was difficult to transport the crude oil and difficult to sell it.
- This resulted in refineries being set up, by 1860 there were 15 refineries by 1865 there were 194 and 3.5 million barrels of oil were being extracted every year.
The result of this? The oil price collapsed to 10c a barrel.
- Finding markets for the various factions forged a new cycle of innovation, ‘Vaseline’ that well known product was invented by Robert Chesebrough in 1869.
So who made money?
Andrew Carnegie was a large stock holder in the Columbia Oil Company.
John D Rockefeller financed his first refinery in 1862. He soon realized that refining and transportation as opposed to production was key to the industry’s expansion.
- In 1870 he established Standard Oil which controlled 10% of the refining capacity.
- He screwed transport costs down by entering into deals with the railway companies, this allowed him to undercut his competitors and by 1880, Standard Oil controlled 90% of the refining capacity.
What did this mean for America?
It gave America the economic stability it needed, by 1865 it was the countries 6th largest export. This helped the Union in the Civil War.
It provided the lubricants and fuel needed to expand the ‘machine age’ and the American lands were opened up as never before by railroads.
The world’s reliance on oil had just begun
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