Products derived from refined crude oil form an integral part of our lifestyles. From the asphalt and bitumen used on highways to the gasoline and diesel that fuel the vehicles we drive, it is safe to say that the refining of crude oil has profoundly impacted our evolution. Today, refined oil remains one of the main drivers of the economy, with fluctuations in price affecting significant industries such as aviation and transportation.
Estimations by the American Petroleum Institute, API, show that the oil and gas industry accounts for roughly 8% of the Gross Domestic Product of the U.S., with approximately 10.3 million people contributing to the workforce.
The industry has progressed significantly since the initial establishment of a pumped oil well in the year 1845 by Samuel M. Kier, from Pennsylvania. In the 1850s, Kier went on to create the first petroleum refinery in the U.S. in Pittsburg. Since that time, there have been several events that have shaped the oil industry into its current state.
Key Events in History that Defined the Oil Industry
The Pennsylvania Rock Oil Company of Connecticut was one of the first oil corporations to be developed. This company sought the services of Edwin L. Drake to locate oil near Titusville. Under the supervision of William Smith, oil was discovered through drilling at a depth of 69 feet. This discovery led to a surge in the standard of living in Titusville and neighboring locales.
Building on this, John D. Rockefeller constructed a refinery in 1865 and later became the founder of the Standard Oil Company. His goal was to create the best merchandise for the lowest price so that products from refined oil would be readily available for persons from all walks of life. From his refining process, he was able to reduce the amount of waste produced using by-products to create naphtha for gas plants, lubricating oil, and vaseline.
In Beaumont, Texas, a mound known as Spindletop would become the site of one of the most noteworthy oil strikes in the U.S. The mound was discovered in 1901 and within just one year more than fifteen hundred companies were started in the area, only a few of which would survive.
By 1909 oil production in the U.S. would be equal to that produced by other nations combined. The main drivers of the industry were the demand for electricity and the growth of the automobile industry.
In 1930, another vast oil discovery would be made, this time by Columbus Joiner. This discovery of about 5 billion barrels is one of the most massive hauls of all time. Around the time of this discovery, during the Great Depression, the oil price, however, significantly dropped. However, factors such as the implementation of measures from the New Deal and the onset of World War II reversed this fortune.
The second world war led to the expansion of the by-products produced from the refining of oil, to include explosive TNT and artificial rubber. The Allies were supplied with gasoline from oil tankers by the U.S. During this time gas was rationed and oil prices were controlled by the government, meaning the U.S. did not possess an unlimited supply of the product.
Oil reserves were soon subject to depletion, and the reality check led the United States to realize that alliances with oil-rich countries such as Saudi Arabia were necessary for its continued rate of consumption. The King of Saudi Arabia, Abdul Aziz authorized the construction of a pipeline in 1949 to the Mediterranean to facilitate the transfer of Saudi oil to the U.S. allies and air force bases.
During the 1950s, key players began to shift their mindset within the world’s oil industry operated, leading to the eventual formation of the Organization of the Petroleum Exporting Countries (OPEC) in 1960. At this time, countries involved in OPEC included Saudi Arabia, Venezuela, Kuwait, Iraq, and Iran, with the group controlling the world’s oil prices.
OPEC flourished in the 1970s due to the increase in demand for energy, renegotiation of business in Libya, and the war between Israel and the Arabs. The U.S. support for the Israelis, along with Nixon’s removal of the U.S. from the gold standard led OPEC to place an embargo on the export of oil to the U.S. The prohibition resulted in the price of oil rising to four times its value, from $2.90 to $11.65 a barrel.
Domestic oil reserves began to see major depletion during the 1990s and early 2000’s due to high energy demands. The U.S. relied heavily on international imports of oil as the local industry reached all-time lows in 2005.
Fracking operations arose in the late 2000s, allowing the U.S. to regain its role as one of the world’s top oil producers. In 2014 it was noted by the U.S. Energy Information Administration that the U.S. outproduced countries such as Saudi Arabia and Russia.
The Effect of Regulations on the Oil Industry and Consumers
The restriction placed by OPEC on the U.S. played a significant role in the recession that occurred in the 1970s. U.S. citizens were faced with increased gas prices which resulted in less available income for the purchase of goods. The chain reaction ultimately resulted in a reduction in the demand for products and services, and consumers were forced into altering their spending habits. Lines for gas would span for blocks, and the government imposed a reduced speed limit to save on fuel usage.
As the industry continued to run rampant, it became clear that regulations were necessary for continued success, especially in the area of environmental impacts. The Exxon Valdez oil spill in 1989 off the Alaskan coast was one of the worst spills in U.S. history. There were severe impacts on the environment, including the death of numerous species, pollution of coastlines, and a huge impact on the livelihood of fishermen and economies of surrounding towns.
The oil spill birthed the Oil Pollution Act, which implemented an increase in penalty fines for companies responsible for discharge and demanded a new regulation that all tankers required double hulls to lessen the likelihood and effects of spillage.
There have been continued efforts to ensure that emissions from the refining of oil are kept at a low. Standards are implemented by the U.S. Environmental Protection Agency to see this to fruition. Fuels are now cleaner, and there are reduced methane emissions.
The U.S. continues to lead the way in both production and environmental consciousness in the oil refining industry; technological advancements are being made to guarantee that the U.S. is poised to maintain this level in the years to come.
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