Oil: A Journey Through History

Oil, a powerful liquid, fuels our world and propels our daily lives. The modern history of oil began in the 19th century when George Bissell and his associates sent a crude oil sample to Professor Benjamin Silliman at Yale University, hoping to distill it. Silliman's groundbreaking revelation confirmed the possibility of distilling kerosene, sparking the exploration and drilling for crude oil.

In 1859, the first commercial oil well in Pennsylvania marked the inception of the petroleum era. The 19th-century oil boom made names like Rockefeller and Getty synonymous with vast fortunes built on oil. And it didn't stop there.

The 20th century witnessed oil becoming the preferred energy source, driven by technological breakthroughs like the electric light bulb and the automobile. The demand for oil surged as automobile ownership and electricity consumption grew.

World War I uncovered the strategic importance of oil, especially in the Middle East. The British Royal Navy's shift from coal to oil for fuel drastically expanded its operational reach, transforming naval warfare. Alliances were forged with Arab tribes against the Ottoman Empire to secure this critical resource. Oil became the lifeblood of mechanized warfare, powering tanks, aircraft, and naval fleets. The superpowers entered a relentless race for control over this indispensable commodity.

World War II, too, emphasized the strategic importance of Middle Eastern oil, prompting the United States to become a major player in the region post-war. American companies made significant oil and gas discoveries, obtaining concessions in the Middle East. Concurrently, South America experienced its oil and gas awakening.

As a result, the "Seven Sisters," a powerful cartel comprising seven major companies emerged. The members of this influential group included Exxon, Royal Dutch/Shell, British Petroleum, Mobil, Texaco, Gulf Oil, and Chevron. This consortium wielded substantial control over the global oil and gas industry for much of the twentieth century, shaping post-World War II energy and economic landscapes worldwide. The Seven Sisters, giants in the industry, exerted unparalleled power and influence that shaped geopolitics.

Yet, as in all such cases, a pushback was inevitable. The 1950s witnessed a shift that transferred control over oil and gas production and pricing. For both economic and geopolitical reasons, the leaders of oil-producing countries began reclaiming and asserting authority for control of their countries’ oil and gas resources. In addition, oil-producing countries joined hands in 1960 to create a powerhouse – the Organization of the Petroleum Exporting Countries (OPEC). Oil exporting countries wanted a collective power to dictate oil prices, production, and future concession rights.

In the 20th century, soaring oil demand made the Middle East a global energy hub. Some oil-rich nations thrived, funding projects in infrastructure, education, and healthcare. Yet, possessing this sought-after resource came at a cost. The Gulf Wars of 1990-1991 and 2003, the Syrian Civil War, and the Yemeni Civil War all had oil-related dimensions. Iraq, Iran, Libya, and many more ripped the benefits, but also paid the ultimate price for being oil-rich countries. Today, Venezuela is threatening to annex over two-thirds of its oil-rich neighbor Guyana.

In recent decades, the race for oil and gas has intensified, raising concerns about energy security, particularly for nations heavily reliant on imports. Disruptions, whether geopolitical or external, leave countries vulnerable. Overreliance on oil and gas has had major implications, particularly in the developing world. In the 2000s, the combination of mounting tensions in the Middle East, soaring demand from China, a weakening U.S. dollar, dwindling petroleum reserves, and speculative financial activities sent crude oil prices skyrocketing. This sparked what we now know as the 2008 recession. The 2008 global recession wasn’t just a financial crisis. It was rather a triple-F crisis -- a food, fuel, and financial crisis, where fuel prices and energy security played a crucial role.

In recent decades, amid growing environmental concerns, there's been a shift toward renewable energy and cleaner technologies. But this hasn’t been without challenges. The shift towards cleaner and more sustainable energy sources has created geopolitical tensions. Oil and gas-producing nations face pressure to transition away from fossil fuels, affecting their economic interests. Despite hopes for widespread adoption of sustainable energy, the reality is that oil and gas will likely remain central players in the world's energy landscape in the near future.

For more information, watch our video on oil and how it has shaped progress and conflicts.