The cheapest oil ever sold
A group appointed by the supreme government, called the National Conservation Commission, is accused of taking a comprehensive record of natural resources in the United States and discovering where resources are being inefficiently handled and even destroyed. They return to the United States Congress with an alarming report that the national supply of oil will be completely used within only 25 or 30 years more at the rate that the country is currently burning through its precious and definite final fuel source. The year is 1909.
What sounds like the story of a dystopian future is actually a now laughable fork from our past. We now know that the findings of the National Conservation Commission reported back to Congress during the administration of Teddy Roosevelt have done some things wrong. In fact, the domestic oil supply did not dry out in 1[ads1]939. And although we now consume around 7 billion barrels of oil per year (compared to just 750 million barrels annually in 1927), the US oil production industry continues to grow strongly. In fact, we are in the midst of a shale revolution and oil from both the United States and abroad continues to fuel the world and largely control international markets and global economies.
Although hard to believe now, it was a time not so long ago that oil drilling was a whole new concept. When the first commercial oil well was drilled in Titusville, Pennsylvania, where natural oil deposits were so close to the surface that they were found floating on local waterways, oil had not even been drilled anywhere in the modern Middle East. "America's first commercial oil well was created in Titusville, Pennsylvania, when a new technique was pioneered in using a pipeline to drill the boreholes to allow deeper drilling," the BBC elaborates. "The success of the wells, plus the demand for kerosene, triggered an oil force and started a new new industry."
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The Bowie-Gavin Process of Oil Extraction (June 1927 issue of the journal Science and Invention)
The discovery and exploitation of oil, however, did not originate in the United States . According to a timeline set by the BBC, "some of the earliest civilizations relied heavily on oil." The ancient Babylonians, who lived in what is now present-day Iraq, lived in such oil-rich countries that crude oil would bubble to the surface, where locals would use it to waterproof their boats and mix in the mortar for construction. China also began using oil at least as early as 600 BC, when they were already shipping the resource via pipeline – even though these were made of bamboo instead of steel and plastic. Related: Higher oil exports insufficient to cut brimming Venezuelan stocks
That said, the United States certainly made its mark on oil history by rapidly industrializing the resource that was now more valuable than ever in a time of fast mechanization. It didn't take long after the first commercial operation in Pennsylvania for oil to become big business across the country. Nor did it take long before the first big oil price shock shook the market.
Following the Titusville discovery, several oil wells and oil companies quickly sprang up in the region and caught the attention of a young entrepreneur named John D. Rockefeller, who founded the first iteration of what would become Standard Oil in 1867. Thanks to the rapid expansion In the production of oil and the introduction of pipelines, with Cleveland emerging as the center of oil refining, oil production and transportation soon became extremely cheap, leading to price shocks and panic in the market. While the very first barrel of oil sold for $ 16 in 1859, according to figures from the US Energy Information Administration, prices dropped to below 50 cents per barrel by 1861. "As product prices dropped," history reports, "the following panic led to the beginning by a Standard Oil alliance in 1871. Over the course of eleven years, the company was partially integrated horizontally and vertically and ranked as one of the world's largest companies. "
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As we know, this was not the last of oil price volatility in domestic or foreign markets (or the end of large and super-major oil company conglomerates, for that matter). In fact, 50 years later, the oil would be shocked in its commercial lifetime when the price of crude oil fell to it. unimaginable price of just over 10 cents per barrel.
Related: Oil Pirates: The Gulf Of Mexico & # 39; s Million Dollar Problem [19659002] Yes, you've read it right. Although you can see from the chart that oil prices have had a pretty bumpy ride through the less than 200-year existence of the oil industry, the absolute rock bottom happened during a perfect storm of unfortunate events, "when the opening of giant oil fields in the United States coincided with the the Great Depression to create a huge glut and sent prices falling to just 13 cents per barrel, ”according to Reuters.
Although this now seems both far-fetched and unthinkable, pleasantly limited to the annals of history, you have to think again – because this quote comes from an article that is frighteningly titled "US Crude Oil Stocks Returns to the Crisis Level of the 1930s: Kemp "From just a few years ago, in 2015. Based on more data from our friends at EIA, Reuters revealed that" commercial crude oil stocks at refineries and tankers across the country rose to nearly 407 million barrels on January 23, up from 398 million the week before. […] the highest since the agency began collecting weekly data in 1982. "The article continues to qualify these findings, saying that" the parallels are not accurate because production and consumption are so much higher now than in the 1930s. In 1931 407 million barrels were equivalent to 160 days of nationwide production, while the same stocks were only 44 days of production in 2015. However, monthly items extending to 1920 shows inventory, has returned to levels that were soon approaching April 1981, but otherwise not seen since the years between 1924 and 1931. ”
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The US oil industry has has always been characterized by volatility and a struggle between the desire for energy independence and the need to cooperate with global markets that are strongly swayed by powerful foreign interests such as OPEC. the future of oil has never been murky as the American slate revolution slows down, but still produces a tidal wave of cheap oil while global communities and organizations such as the UN, IPCC and millions of disenchanted youth around the world demand an end to carbon emissions and a tough stance against climate change. If the world does business as usual, we will continue to grow closer and closer to a time when warnings of drying out oil reserves are actually proving to be true. If the history of the oil industry teaches us anything, expect the unexpected … and diversify your portfolio.
By Haley Zaremba for Oilprice.com
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