The Petroleum Industry

Origins

Petroleum had been known since antiquity—as seepage in oil springs and as a curiosity. Kerosene, distilled from coal, illuminated mid-nineteenth-century homes. When Edwin Drake drilled the first commercial oil well at Titusville, Pennsylvania, in 1859, he sought a cheaper source of illuminating oil. The gusher he struck launched an industry that would reshape the world.

Oil booms followed the pattern of gold rushes: sudden discoveries, frenzied drilling, wild price swings, and eventual consolidation. John D. Rockefeller recognized that refining and distribution, not drilling, offered the path to control. His Standard Oil Company achieved near-monopoly by the 1880s through efficiency, economies of scale, and ruthless elimination of competitors. The Standard Oil Trust became the archetype of industrial monopoly.

The internal combustion engine transformed petroleum from illuminant to fuel. Automobiles, trucks, ships, and eventually aircraft ran on refined petroleum products. By the twentieth century, oil powered transportation, heated buildings, and provided raw material for plastics, chemicals, and pharmaceuticals.

Structure & Function

The petroleum industry developed distinct sectors: exploration and production (finding and extracting oil), refining (converting crude oil into usable products), and distribution (moving products to consumers). Major oil companies integrated all three sectors, while independents specialized in each. The scale of operations—drilling in remote locations, shipping by tanker and pipeline, refining in massive facilities—required enormous capital and sophisticated logistics.

Oil’s strategic importance drew government involvement. American antitrust action broke up Standard Oil in 1911. European powers sought control of Middle Eastern oil after World War I. The “Seven Sisters”—major Western oil companies—dominated the industry through mid-century. OPEC’s formation (1960) and the oil shocks of the 1970s shifted power toward producing nations.

Historical Significance

Petroleum powered the twentieth century. Gasoline and diesel fueled transportation systems that reshaped geography. Petrochemicals created plastics, synthetic fibers, and pharmaceuticals. Oil-producing regions gained geopolitical importance; wars were fought over access to petroleum resources. The oil industry’s capital requirements and global scope helped develop modern multinational corporations.

The environmental consequences of petroleum became apparent only gradually. Oil spills, refinery pollution, and eventually climate change from carbon dioxide emissions raised questions about oil’s long-term viability. By the twenty-first century, the petroleum era that began at Titusville appeared to be entering its final phase—though transition to alternatives proceeds slowly.