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   Issue 5/6, Winter 2005/Spring 2006

History of the Oil and Gas Industry

The use of oil and gas has a long and fascinating history spanning thousands of years. The development of oil and gas has evolved over time and its numerous uses have also expanded and become an integral part of today's global economy. The use of oil eventually replaced coal as the world's primary source of industrial power in the early twentieth century. Just as oil and gas drives today's world economy, the control and availability of oil and gas played a major role in both World Wars and still remains the critical fuel source that powers industry and transportation. This section provides an overview of the history of the oil and gas industry, looking at the use of oil and gas in ancient times, as well as the early days of the modern oil and gas industry.

Ancient     Modern     Major Oil Companies     World Oil Market     Print Resources     Internet Resources     LC Catalog Searches

Ancient Use of Oil and Gas

Oil and gas have played an important role throughout world history. Ancient cultures used crude oil as a substance for binding materials and as a sealant for waterproofing various surfaces. Five thousand years ago, the Summerians used asphalt to inlay mosaics in walls and floors. Mesopotamians used bitumen to line water canals, seal joints in wooden boats and to build roads.1

By 1500 B.C., techniques for lighting consisted of a censer or fire pan filled with oil made of a certain volatility so that it would burn slowly and not cause uncontrollable flames or explosions. Over time, the wick oil lamp replaced the fire pan using a flammable oil similar to today's kerosene lanterns.2

The Chinese were the first to discover underground oil deposits in salt wells. 3 The Chinese recognized early on the importance and potential use of oil and gas. Around 500 B.C., ancient Chinese history describes wells over 100 feet deep containing water and natural gas along the Tibetan border. The Chinese constructed extensive bamboo pipelines drawing from the wells in order to transport oil and natural gas, which was used for lighting. By 1500 A.D., the Chinese were exploring and digging wells more than 2,000 feet deep.4

BERA - Business & Economics Research Advisor - A Quarterly Guide to Business & Economics Topics

Issue 5/6: Winter 2005/Spring 2006
Updated July 2013

The Oil & Gas Industry

Table of Contents

Introduction
History
Cartels & Organizations
Production
Refining
Transportation & Storage
Marketing & Distribution
Natural Gas Industry Trends
Alternative Energy Sources
Company Research
Statistical Sources
News & Analysis
Electronic Resources & Catalog Searches

Drilling Rig Near Sable Island
Image (above): Photograph of
drilling rig near Sable Island.
Courtesy of the Maritimes Region of the Department of Fisheries and Oceans, Canada.

The Romans used flaming containers of oil as weapons of war. The Romans also used oil surface deposits for burning lamps. The importance and significance in the use of oil and gas can clearly be seen dating back over thousands of years.

During the mid 13th century in what is now modern-day Azerbaijan, in the Persian city of Baku, inhabitants devised methods and collected from oil seeps in the surface. By the mid 1590's, shallow pits were dug at Baku to facilitate the collecting of oil. The hand-dug holes reached depths of up to 115 feet.5 The holes dug at Baku were in essence primitive oil wells, making Baku one of the first true oil fields.

In 1650, Romania was the site of Europe's first commercial oil reservoir. This site was a major source of oil for Europe. More than 200 years later, Ploesti, Romania became the site of the world's first oil refinery.

The Modern Oil and Gas Industry

The modern oil and gas industry was born in the late 19th century. In the early 1800's, merchants built damns that allowed oil to float to the waters' surface in an area within Western Pennsylvania called Oil Creek. 6 A technique using blankets was employed placing blankets in the water, letting them soak with oil, and the oil was then retrieved by wringing out the blankets. The oil was sold for two dollars per gallon. 7

The invention of the kerosene lamp in the mid 1850's led to the establishment of the first U.S. oil company, the Pennsylvania Rock Oil Company. However, the first major oil company was the Standard Oil Company founded by John D. Rockefeller in 1870. Standard Oil built its first oil refinery in Pennsylvania, then later expanded its extensive operations nationwide. After a decade of fierce competition, Standard Oil became the industry's most dominant company controlling 80 percent of the distribution of all principal oil products, in particular kerosene. 8

In 1909 as a result of antitrust laws, federal courts ordered the break up of the Standard Oil Company dividing it up into 34 separate companies. Standard Oil dominated the first two decades of the oil and gas industry, and the U.S. accounted for more than half of the world's production until around 1950. As the industry became more global in nature, other world markets in Europe, Russia and Asia, began to play a much greater role. New industry giants emerged such as, Shell, Royal Dutch, and Anglo-Persian which later became British Petroleum.

Founding of the World's Major Oil Companies

  • Standard Oil Company - founded in 1870
  • Gulf Oil - founded 1890
  • Texaco - founded 1901
  • Royal Dutch Shell - founded 1907
  • Anglo-Persian Oil Company - founded 1909
  • Turkish Petroleum Company - founded 1910

As the oil industry unfolded over several decades, Standard Oil of New Jersey later became Esso, then Exxon, Standard Oil of New York became Mobil, and Standard Oil of California is now Chevron. Along with Royal Dutch Shell, Texaco, Gulf, and British Petroleum (BP), these oil giants became known as the "seven sisters."

At the beginning of the 20th century, oil production was dominated by three regions: the U.S., Russia and the Dutch East Indies. However, during the first decade of the 20th century, major efforts were underway to explore and develop oil production in the Middle East region. Oil exploration began in Persia (what is currently Iran) followed by Turkey. In the late 1930's, the Burgan oilfield was discovered in Kuwait. A decade later, the Ghawar oilfield was then discovered in Saudi Arabia. Ghawar still remains the largest oil field ever discovered.9 After World War II, joint American and Saudi commercial oil enterprises were formed creating conglomerates, such as Casco (California Arabian Standard Oil Company), Caltex (California Texas Oil Company). Eventually, Esso (Exxon) and Mobil joined the Standard Oil Company of California to form Aramco (Arabian American Oil Company).

Global Economic & Political Affairs and the World Oil Market

During the 1950's, oil consumption grew at a rate of 7 percent annually. Automobile manufacturing expanded rapidly leading to a dramatic increase in the demand for fuel. As the world economy and the oil and gas industry evolved over time, various political and economic events occurred, in particular wars in the Middle East during the late 1960's and 1970's, which had substantial impacts on the world oil and gas industry. The economic environment was experiencing a rapid rise in oil consumption and economic projections indicated that oil reserves were equivalent to only sustaining 30 years of production, leading many to fear that the oil resources would be exhausted by 2000.10

Events within the global political and economic environment have led to periodic world oil shocks. The first oil shock occurred in 1973 as a result of war in the Middle East, specifically the Yom Kippur War. This war and its political effects caused an enormous increase in world oil prices. Oil embargos were also instituted during this time period by the oil exporting countries in the region, reducing world oil production. After the first oil shock, which resulted in real oil supply shortages for countries targeted by the embargo, the industrialized countries established the International Energy Agency (IEA) in 1974.11 This agency within the OECD (Organisation for Economic Cooperation and Development) was made up of over 20 countries including the U.S., Canada, Western Europe and Japan.

Objectives of the IEA:

  • To promote cooperation between member countries in reducing dependence on oil through energy conservation and the development of alternative energy sources
  • To set up an information system on the international oil market and establish consultations with oil companies
  • To cooperate with oil producing and consuming countries in efforts to stabilize world energy markets and to ensure fair and effective management of world energy resources
  • To devise and implement plans to address potential major oil crisis and the disruption of world oil supplies

The second oil shock occurred in 1979, again causing dramatic increases in world oil prices. This oil shock was the result of the Iranian crisis caused by political and social discontent in Iran, which led to strikes in most sectors of the economy, in particular the oil industry.12 Iranian production fell from 6 million barrels per day in September 1978 to 400,000 barrels per day in January 1979.13 Saudi Arabia initially increased production to compensate for the Iranian supply shortage, but later placed a ceiling on its production. These series of events led to escalating oil prices and a great deal of uncertainty concerning the world oil market.

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Selected Print Resources

Adelman, Morris Albert. The Genie Out of the Bottle: World Oil Since 1970. Cambridge, MA: MIT Press, c1995. 350 p.
LC Call Number: HD9560 .A28 1995
LC Catalog Record: 95008271

Adelman chronicles the oil-producing companies' monopoly on oil trade and prices since 1970, showing how OPEC nations at first overestimated their power, then held a lower price level. He introduces the basics of oil economics, explains why nearly all OPEC nations are still in debt, and debunks myths surrounding the supply and production of oil. Annotation by Book News, Inc.

Bamberg, James H. British Petroleum and Global Oil, 1950-1975: The Challenge of Nationalism. Cambridge, UK; New York: Cambridge University Press, 2000. 637 p.
LC Call Number: HD9571.9.B73 B36 2000
LC Catalog Record: 99051453
Publisher Description
Table of Contents

This work covers the history of one of the world's biggest oil businesses between 1950 and 1975. Assessing BP's comparative performance, the book focuses on how BP responded politically, economically and culturally to the rise of new competitors. Synopsis by Books In Print.

Black, Brian. Petrolia: The Landscape of America's First Oil Boom. Baltimore: Johns Hopkins University Press, c2000. 235 p.
LC Call Number: TN872.P4 B56 2000
LC Catalog Record: 99042473
Publisher Description
Publisher-supplied Biographical Information
Book Review (H-Net) External Link

The author offers a geographical and social history of a region that was not only the site of America's first oil boom but was also the world's largest oil producer between 1859 and 1873. Against the background of the growing demand for petroleum throughout and immediately following the Civil War, Black describes Oil Creek Valley's descent into environmental hell. Known as "Petrolia," the region charged the popular imagination with its nearly overnight transition from agriculture to industry. Synopsis by Books In Print.

Economides, Michael J. The Color of Oil: The History, the Money, and the Politics of the World's Biggest Business. Katy, TX: Round Oak Pub. Co., c2000. 203 p.
LC Call Number: HD9560.5 .E24 2000
LC Catalog Record: 99080030

This book describes the oil industry in a unique and introspective way, from the wildcatters of the 1930's to the corporate giants of today. The "primary colors" or input factors in oil production are money, technology, and people. Annotation by The Society of Petroleum Engineers.

Ferrier, R.W. The History of the British Petroleum Company. Cambridge, UK; New York: Cambridge University Press, 1982. 2 volumes.
LC Call Number: HD9571.9.B73 F47 1982
LC Catalog Record: 81018019
Publisher Description
Table of Contents

The first volume of this comprehensive history of British Petroleum covers the history of the Company from its origin up to 1975. Volume 1, covering the years 1901-32, deals with the earlier years of the D'Arcy Concession from its granting in 1901 by the Shah of Persia to the discovery of oil in 1908, the formation of the Company in 1909 and its formative years. The second volume of BP's history aims to be an honest and comprehensive examination of the company in the period 1928-1954. Research in the book is based on unrestricted access to papers and personnel at BP, as well as numerous other sources. Synopsis by Books In Print.

Grace, John D. Russian Oil Supply: Performance and Prospects. Oxford: Oxford Institute for Energy Studies, Oxford University Press, 2005. 288 p.
LC Call Number: HD9575.R82 G68 2005
LC Catalog Record: 2005296716
Table of Contents
Publisher Description
Publisher-supplied Biographical Information

This book traces the development of the Russian oil industry from its inception in the 1870's through the present. Annotation by Books In Print.

Hendrix, Paul. Sir Henri Deterding and Royal Dutch-Shell: Changing Control of World Oil, 1900-1940. Bristol: Bristol Academic, 2002. 275 p.
LC Call Number: Not available
LC Catalog Record: Not available
Publisher Link: http://www.bristolacademicpress.co.uk/ External Link     [Select Publications]

The author provides the first full account in English of the controversial oil magnate Sir Henri Deterding, the founder and chief architect of Royal Dutch-Shell, and the history of the powerful oil company. This book builds on his earlier work in Dutch, Henri Deterding. De Koninklijke, de Shell en de Rothschilds (1996). Description by Publisher.

Linde, Coby Van Der. Dynamic International Oil Markets: Oil Market Development and Structure, 1860-1990. Dordrecht, Netherlands; Boston: Kluwer Academic Publishers, c1991. 224 p.
LC Call Number: HD9560.5 .L565 1991
LC Catalog Record: 91035263

An analysis of long-term international oil market developments and provides insight into the fundamental organization of the oil industry. The study looks at the oil industry's basic market structure, historical market developments, international market developments, the role of OPEC, the major oil companies, and the industry's market process and structure.

Parra, Francisco. Oil Politics: A Modern History of Petroleum. New York: Palgrave Macmillan, 2004. 364 p.
LC Call Number: HD9560.6. P37
LC Catalog Record: 2004271160
Publisher-supplied Biographical Information
Publisher Description
Table of Contents

Discusses the triangular relationship between the major players in the oil industry, host governments, and home-country governments that are at the heart of policies and politics in the international petroleum industry

Sampson, Anthony. The Seven Sisters: The Great Oil Companies and the World They Shaped. New York: Bantam Books, c1991. 414 p.
LC Call Number: HD9560.5 .S24 1991
LC Catalog Record: 91159189
Table of Contents and Selected Text External Link (Biofuel Library)

Sampson discusses the beginning of the world's most critical industry and how the industry came to be dominated by the seven giant oil companies.

Tarbell, Ida M. and Chalmers, David Mark. The History of the Standard Oil Company. Mineola, NY: Dover Publications, 2003. 227 p.
LC Call Number: HD9569.S8 T37 2003
LC Catalog Record: 2002034979
Publisher Description

This reprint of the briefer version of a book that was originally serialized by McClure's Magazine from 1902 to 1904, recounts the history of John D. Rockefeller's Standard Oil Company, the first major industrial monopoly in the US. The story, which became a model for investigative journalists, explores corporate abuses perpetrated by the company. This is an unabridged re-publication of the Harper Torchbook edition originally published by Harper & Row, Publishers, Incorporated, New York, 1966. Annotation by Book News, Inc.

Toal, Brian A. "The oil & gas game," Oil & Gas Investor. Jan 2001. Volume 21, Issue 1; page, 76.
LC Call Number: HD9561 .O49 (vol. 21, iss. 1) LC Catalog Record: 82643824
Full text also available online in the subscription database ABI-Inform (ProQuest). (Available to onsite patrons only.)

Shows highlights — and lowlights — of each year, from 1981 to 2001.

Yergin, Daniel. The prize : the Epic Quest for Oil, Money, and Power. New York : Simon & Schuster, c1991. 871 p.
LC Call Number: HD9560.6 .Y47 1990
LC Catalog Record: 90047575

Daniel Yergin was awarded the Pulitzer Prize for General Nonfiction for this history of international oil between 1850 and 1990. Part 1 (1850-1914) documents the origins of the oil industry around the world. Part 2 (1914-1940) covers the struggle of the early giants through the First World War, the automotive revolution, and the Great Depression. Part 3 relates the story of oil in World War II, while Part 4 describes the increasingly complex interrelationships between oil, international politics, and economics during the post-war period. Finally, Part 5 discusses the battle for world mastery of the oil industry in the face of the numerous shocks and massive adjustments that have characterized its modern devlopment.

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Selected Internet Resources

American Oil & Gas Historical Society.
http://www.aoghs.org/ External Link

The American Oil & Gas Historical Society's web site provides a number of useful and interesting resources. The site includes access to related news and industry historical newsletters available in full-text PDF format, links to publications, as well as interesting articles and photographs.

Extreme Oil: The History. Public Broadcasting Service (PBS).
http://www.pbs.org/wnet/extremeoil/history/ External Link

This web page, based on the PBS series "Extreme Oil," takes a comprehensive look at the oil industry. The web site presents an interactive timeline with information, text and photos covering demographic, historic and scientific aspects of oil production. Each section includes important facts along with other useful interactive links.

Oil History. The Paleontological Research Institution.
http://www.museumoftheearth.org/outreach.php?page=s_oil_home/s_oil_s6_history External Link

Provides an historical overview of the oil industry in the U.S. The web page focuses on three historically important oil production sites: Titusville, Pennsylvania; Spindletop, Texas; and Signal Hill, California.

The History of the Oil Industry - Chronology of Oil Events. San Joaquin Geological Society.
http://www.sjvgeology.org/index.html External Link

The web page presents a chronology of important oil events dating from 347 B.C. to present-day oil production, and provides both a timeline of oil usage and significant oil industry dates, as well as historical summaries.
Petroleum History Institute.
http://www.petroleumhistory.org/
This group is a successor to the Drake Well Foundation. The site includes the Tables of Contents for the publications of the Institute, which focus on the history of oil and various oil industry segments.

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Library of Congress Catalog Searches

Additional works on the history of the oil and gas industries in the Library of Congress may be identified by searching the Online Catalog under appropriate Library of Congress subject headings. Choose the topics you wish to search from the following list of Library of Congress subject headings to link directly to the Catalog and automatically execute a search for the subject selected. Please be aware that during periods of heavy use you may encounter delays in accessing the catalog. Please see the individual sections of this guide for catalog searches relating to those topics. For assistance in locating the many other subject headings which relate to this subject, please consult a reference librarian.


 1. All About Petroleum - As Old as History. American Petroleum Institute.
http://classroom-energy.org/oil_natural_gas/progress_through_petroleum/petroleum/aboutpetroleum02a.html External Link

 2. Ibid.

 3. Ibid.

 4. Ibid.

 5. The History of the Oil Industry. San Joaquin Geological Society.
http://www.sjvgeology.org/history/index.html External Link

 6. Ibid.

 7. Ibid.

 8. Oil and Gas Exploration and Production: Reserves, Costs, Contracts. Paris: Center for Economics and Management, Institut Français Du Petrole Publications, 2004, p. 5.

 9. Ibid.

10. Ibid.

11. Ibid.

12. Ibid.

13. Ibid.

Last Updated: 07/16/2013

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