Love it or hate it, crude oil drives the world.
Energy has made life better for humans ever since cave people figured out how to make fires and huddle around them for warmth and to cook savory meats and stew vegetables. For centuries, wood was the #1 energy source on Earth.
Enter steam. In the early 1700s, the first modern steam engine kicked off the industrial revolution. People around the world began a slow-but-inexorable shift from working on farms to inside factories.
Steam is generated by boiling water. To do that, you need a fuel source to raise the liquid’s temperature. Early steam engines consumed wood or coal to generate heat. While wood is renewable – you can plant more trees – non-renewable coal is much more efficient energy-wise because a smaller amount burns a lot longer and at a much higher heat: a half-ton of coal generated four times as much energy as the same amount of wood.
Burning coal became all the rage. Factories sprang up around the increasingly industrialized world, emitting carbon emissions to beat the band.
By the early 1900s, cities were blackened by dirty, clingy soot, raising the very first environmental concerns about burning coal on an industrial scale.
Demand for new technologies substituted oil for coal. Women in the U.S. who couldn’t yet vote but belonged to ladies’ societies lobbied vigorously for laws to improve air quality and reduce the dense smoke and soot (which got on everything and was hard to get off) caused by burning coal.
The Chinese are credited with discovering fuel oil first around 600 B.C. They transported it in bamboo pipelines. But the emerging oil industry really got rolling after oil was discovered in Pennsylvania by Colonel Drake in 1859, followed by the 1901 Spindletop discovery in Texas.
Compared to coal, petroleum was much more adaptable. The kerosene refined originally from crude oil yielded a reliable and relatively affordable alternative to higher-priced “coal-oils” and whale oil for lamp fuels. Oil replaced almost all of these other energy sources.
It might come as a surprise, but two inventions spurred the demand for petroleum-based energy: the automobile and the light bulb. Both new commodities required oil-burning factories to make them.
By 1919, gasoline sales exceeded kerosene sales. World War I ships, trucks, tanks, and airplanes – all built by burning petroleum – expanded the role of oil beyond that of a strategic energy source to a critical military asset.
Controlling natural oil and gas reserves was the key to capitalizing – literally – on the budding petroleum industry.
In the beginning, three companies dominated the global oil stage: Standard Oil, Royal Dutch Shell, and British Petroleum.
John D. Rockefeller started his career in refining and became the industry’s first “baron” in 1865 when he formed Standard Oil Company. By 1879, Standard Oil controlled 90 percent of America’s refining capacity, its pipelines, and gathering systems. By the end of the 1800s, Standard Oil dominated over exploration, production, and marketing, as well. Standard Oil became today’s ExxonMobil.
Meanwhile, the Nobel and Rothschild families in Europe were vying for control of production and refining of Russia’s vast oil reserves. The Rothschilds commissioned the first oil tankers to transport their kerosene to market from a British trader named Marcus Samuel. The first of these tankers was named the Murex (after a type of seashell) and became the flagship of Shell Transport and Trading, established by Samuel in 1897.
Royal Dutch Petroleum was founded in the Dutch East Indies in the late 1800s. By 1892, the company had integrated production, pipelining, and refining operations. In 1907, Royal Dutch and Shell Transport and Trading agreed to form the Royal Dutch Shell Group.
The same year, oil was discovered in Iran by a British former gold miner and a Middle Eastern shah (ruler) who incorporated as the Anglo-Persian Oil Company. The British government purchased 51 percent of the company in 1914 to provide a steady fuel supply to the Royal Navy in the years before World War I. In 1954, the company became British Petroleum and is now named BP.
These three companies — ExxonMobil, Shell, and BP — are deemed the original Big Oil Super-majors: companies that oil analysts use to discuss the world’s largest public-owned gas and oil corporations.
Presently, the American Chevron Corporation, Italian-based ENI SpA, and French Total SA are also considered Big Oil Supermajors. Sometimes, American ConocoPhillips is also included in this elite cadre of energy providers.
Eventually, oil-rich countries in South America and the Middle East pushed back against the Integrated Oil Companies (IOCs) operating there on behalf of their American or European countries of origin.
In 1960, the governments of Venezuela, Saudi Arabia, Kuwait, Iraq, and Iran founded the Organization of the Petroleum Exporting Countries (OPEC) to negotiate who would control their native oil and gas resources – and the wealth derived from it.
OPEC members – notably Saudi Arabia and Russia – often disagree among themselves, sparking trade wars between them that impact global economies that rely on petroleum fuel to power energy.
Today, many countries seeking independence from foreign sources are focusing on domestic production and energy independence.