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Petroleum Industry

Petroleum Industry

THE MODERN PETROLEUM INDUSTRY

THE ERA OF THE SEVEN SISTER COMPANIES, 19111980

NATIONALIZATION, 19702000

CONCENTRATION AND CENTRALIZATION

THE POLITICAL ECONOMY OF THE PETROLEUM INDUSTRY

BIBLIOGRAPHY

The documentary evidence for the human use of petroleum begins with the Old Testament books of Genesis and Exodus and the works of the ancient Greek historian Herodotus (c. 484430/420 BCE). In addition archaeologists found pitch in the tombs of the Egyptian kings Tutankhamen (c. 13701352 BCE) and Seti II (c. 1200 BCE). The Toltecs of Mexico used bitumen to set tiles as early as 1200 CE, and Native Americans dug oil wells in what are now Pennsylvania, Kentucky, and Ohio.

Still, until the 1850s there was no petroleum mining or production. In that decade oil wells were drilled specifically seeking petroleum in Poland, Canada, and the United States. By 1900 petroleum had been discovered in Baku (in present-day Azerbaijan), Poland, France, Scotland, Italy, Romania, Egypt, Canada, the United States, Mexico, Sumatra, Trinidad, and Peru. In the twentieth century discoveries were made on every continent and in most countries.

THE MODERN PETROLEUM INDUSTRY

The first modern use of petroleum was for kerosene, discovered in 1852. A kerosene lamp was invented in 1857, and the first kerosene factory was built near Baku in 1859. Gasoline was a by-product of kerosene production. After 1901 most petroleum was used for fuel oil to heat and light buildings and for gasoline to power automobiles with internal combustion engines.

From a macroeconomic perspective, petroleum is important because the industrial systems of Western nations and Japan all are based upon its use as a major source of cheap energy and of chemicals for other uses. About 30 percent of the top fifty industrial firms in the United States are petroleum or chemical firms. A similar proportion of the top fifty non-American industrial firms also produce petroleum or chemical products. Petroleum has become essential for fueling production facilities in all industries and for powering, heating, cooling, and lighting buildings and illuminating streets. It thereby makes possible the high-density urban agglomerations so characteristic of western Europe and North America. Without it Western societies would have had to develop either a more efficient energy source or an extensive form of land use rather than the intensive form now practiced. Such a use of land for living space, given a growing population, would threaten food production by depleting the acreage of farmable land. Moreover, because petroleum fuels the vast bulk of industry, virtually all employment in the West depends in the final analysis on its use. Petroleum fuel shortages mean unemployment, and large-scale unemployment can have catastrophic political consequences. Paradoxically, another use of petroleum since the mid-twentieth century has been to encourage decentralization of massive urban agglomerations into the suburbs, requiring the use of petroleum to fuel vehicles. A sustained shortage of petroleum thus would halt this trend toward decentralized land use.

From a macroeconomic perspective, petroleum is an intermediate good, consumed only to produce final consumption items. Despite the emphasis in the mass media on gasoline consumption and prices, the most extensive use of petroleum products since 1949 according to the U.S. Energy Information Administration has been for combined heat and power for homes and industry. Petroleum products thus enter the production functions of every home and industry in the economy. The amount value of petroleum products consumed in the United States in 2005 was 1,836,392 thousand barrels per day.

Industry Structure The modern petroleum industry is structured into four types of organizations: (1) state enterprises, (2) multinational corporations, (3) the Organization of Petroleum Exporting Countries (OPEC), and (4) legally organized commodity exchanges. In most petroleum-producing countries in the early twenty-first century, the state owns a petroleum company with a legal monopoly on the production and distribution of crude petroleum. The largest of these after 1918 was the Soviet state petroleum enterprise.

Most crude petroleum is produced by Western companies. In 1870 the Standard Oil Company was created by the Rockefeller brothers and two other partners. In 1893 the Standard Oil Trust was formed in New Jersey to evade an antitrust suit brought by the state of Ohio. Gulf Oil Corporation was formed in 1901 by the Richard K. Mellon family. Texaco was founded as the Texas Company in 1901 by Joseph S. Cullinan, Walter B. Sharp, and Arnols Shaect. The U.S. Supreme Court in 1911 ordered Standard Oil Trust dissolved. The component companies, still with the plurality of shares owned by the former Rockefeller shareholders, continued to operate as ostensibly separate companies. These companies were Standard Oil of Ohio, Standard Oil of Indiana, Standard Oil of New York, Standard Oil of New Jersey, Standard Oil of California, Standard Oil of Kentucky, Atlantic, and the Ohio Oil Company (later Marathon).

The Royal Dutch Company for the Exploration of Petroleum Sources in the Netherlands Indies was established in 1890. It merged in 1907 with Shell Transport and Trading Company, a British company, to form Royal Dutch Shell. The British government formed the Anglo-Iranian Oil Company in 1914. This company ultimately became British Petroleum. In 1924 the Compagnie Française des Pétroles was established by the French government. ELF began before World War II (19391945) with the establishment of three small companies to explore for gas near oil seepages in Aquitaine. Italy in 1926 formed Agencia Generale Italiani Petroli (AGIP). In 1953 ENI was founded as a conglomerate of thirty-six subsidiaries, including AGIP.

These companies all were multinational, multidivisional, and vertically and horizontally integrated firms. Within each company, five major functions were performedexploration, drilling and production, transportation, refining, and distribution to final consumers. Subsidiaries were responsible for each function. Transfers of product among these subsidiaries and other divisions of the companies were accomplished using shadow pricing or some other form of transfer pricing. Actual payments were made only for transactions with outside firms.

OPEC was established in Baghdad in September 1960 as an intergovernmental organization of five original member statesIraq, Iran, Kuwait, Saudi Arabia, and Venezuela. Its charter required that each member acquire an increasing level of control of production. By 1970 each member state was required to own a minimum of 55 percent of foreign petroleum companies operating within its jurisdiction. Iraqi production has not been part of OPEC quota agreements since March 1998 due to U.S. and United Nations controls. Other OPEC members have included Qatar (joined 1961), Indonesia and Libya (1962), Ecuador (19631993), Trucial States of Oman (now United Arab Emirates, 1967), Algeria (1969), Nigeria (1971), Gabon (19751995), and Angola (2007). The OPEC cartel was formed to control the world oil supply so as to increase revenue to member states. It operates by assigning members an annual supply quota for crude oil production and export. In 2005 it controlled about 41.7 percent of world production. OPEC also sets prices.

THE ERA OF THE SEVEN SISTER COMPANIES, 19111980

The name seven sisters was coined in a 1961 Time magazine article to refer to the dominant firms in the world oil industry: Royal Dutch Shell, Anglo Persian Oil (Anglo-Iranian Oil/British Petroleum/BP), Gulf Oil, Texaco, and three of the Standard Oil companies from the 1911 trust dissolutionStandard Oil of New Jersey (Humble Oil [Esso]/Exxon), Standard Oil of New York (Socony/Socony-Vacuum/Socony-Mobil/Mobil), and Standard Oil of California (Socal/Chevron). With the exception of Royal Dutch Shell, which is British and Dutch, these are all U.S. or British companies. Only the U.S. companies had their own significant domestic supply sources in the founding period of the industry from 1850 to 1950. The British and Dutch thus undertook a worldwide search for sources, beginning with their colonies and extending after World War I (19141918) to the League of Nations territories mandated to their administration. The seven sisters and Atlantic Richfield (ARCO), called majors, were vertically integrated, and all had similar structures. They had separate subsidiaries for exploration, production, refining, and distribution and geographic subsidiaries for operations in different areas.

The most important independent or nonintegrated companies, which did not operate in at least one of the areas defining the integrated companies, in this period included Getty, Phillips, Signal, Union, Continental, Sun, Amerada Hess, Cities Service, Marathon, Compagnie Française des Pétroles, Occidental, ENI, Tenneco, and Skelly Oil. In 1983 Occidental acquired Cities Service. Texaco acquired Getty in 1984.

Soviet Petroleum Industry The petroleum industry in Russia prior to the Bolshevik Revolution of 1917 was operated largely by U.S., British, and Swedish companies. During the seven sisters period, the Soviet state owned and operated the industry. The industry returned to private hands after 1991. ConocoPhillips acquired 16.8 percent of Lukoil, the largest Russian oil company. BP-Amoco invested in both Lukoil and Sidanko.

NATIONALIZATION, 19702000

Around 1912 producing countries began nationalizing or expropriating the ownership of foreign companies. The theoretical basis for expropriation was provided by Marxism-Leninism. The acceleration of this policy after 1970 was due more to nationalism, although the regimes that instituted it were almost always leftist. Majority or full expropriation took place in Argentina (1912), the Soviet Union (Baku, 1918), Mexico (1938), Iran (1951), Indonesia (1950s-1960s), Egypt (19611964), Peru (1968), Libya (1971), Nigeria (1971), Iraq (1972), Algeria (1972), and Saudi Arabia (1973).

CONCENTRATION AND CENTRALIZATION

Since the 1980s there has been an acceleration in the rate of concentration and centralization in the world oil industry with the development of what are referred to as supermajors, majors, and independents or jobbers. Supermajors consist of BP-Amoco, Chevron-Texaco, Exxon-Mobil, ConocoPhillips, and Shell. This category of companies is defined as having a capitalization of $100 billion or more. Majors are defined as companies having a capitalization of $30 to $100 billion. Independents and jobbers include those with a capitalization of less than $30 billion. Supermajors have largely abandoned their traditional function of exploration, 80 percent of which now is conducted by independents. They receive most of their profits from the refining and petrochemical industries and also have diversified into alternative sources of energy, including atomic energy.

Simultaneously with this centralization and consolidation, many countries opened up their petroleum industries again to private international companies. Conflicts between source countries and companies extracting crude petroleum have been endemic from the beginning of the modern era, and examples such as the conflict in southeastern Nigeria and the war in Iraq are manifestations of this phenomenon.

Environmental issues in the extraction and transportation phases of the industrys operation are less visible and perhaps less important than in the consumption phase. For this reason this issue has been the most recent to emerge. However, the environmental impact of the international industry is difficult to measure systematically, for no international statistics on this issue are collected. The number and volume of oil spills are available, but these represent only extraordinary occurrences, not the everyday degradation of the environment due to operations.

THE POLITICAL ECONOMY OF THE PETROLEUM INDUSTRY

During World War I and continuing into the early twenty-first century, Western countries transformed their economies and their military forces to use petroleum as the primary fuel source. As they did so diplomatic and military conflicts arose over control of the known sources of petroleum. Because this transformation was not far advanced until after World War I, that war cannot be characterized as a war over oil.

Most of the known sources at the beginning of this period were in the United States. Elsewhere oil production began in Baku in the 1870s, in the Dutch East Indies in 1883, in Iran in 1908, in Egypt in 1910, in Venezuela in 1914, in Kurdistan (now part of Iraq) around 1915, in Iraq in 1927, in Saudi Arabia in 1935, in Libya in 1959, in Egypt in 1966, in Sudan in 1974, and in Kazakhstan in 2000. These sources were discovered by Western oil companies, which have involved their governments in protecting their exploitation of these resources.

Local and Regional Conflicts Many of the conflicts that arose were local or regional, involving antagonistic political and military forces internal to countries with petroleum reserves, or between neighboring countries with at least one having reserves. These conflicts took the form of rebellions, revolutions, coups détat, civil wars, and border wars. For example, in the failed 1905 revolution in Russia, the Baku fields were set afire. The Kurds, representing Turkey, massacred millions of Armenians during World War I. In 1929 and 1989 civil wars occurred in Afghanistan. In 1945 a coup in Venezuela gave control of the oil fields to a different power group in the country. Petroleum has been associated with two civil wars (19551972 and 19832005) and an armed rebellion in Sudan. The Nigeria-Biafra civil war (19671970) involved petroleum fields in the Niger Delta. The Angolan civil war (19762002) involved petroleum reserves in the Cabinda enclave. And a rebellion that began in Darfur in 2003 involved the South Darfur fields. Local and regional conflicts increased significantly after Britain withdrew its naval forces from the Indian Ocean and the Persian Gulf in 1971.

Multinational and Global Conflicts Other conflicts involved the major European political powers of the day the large petroleum-consuming countriesin conflicts that were considered to be major set-piece wars. Britain and Afghanistan fought three wars (18381842, 18781881, and 1919), the British attempting to thwart perceived Russian designs on British India, then including Pakistan. At that time petroleum had not been discovered in or near Afghanistan and so played little role in these wars.

After World War I, Turkey captured a part of the territory of the ethnic Kurds. Another part was given to Britain by the League of Nations as part of the Iraq mandate. A section of this territory was given to the French in the Syrian mandate. The Soviet Union captured the Azerbaijan part in 1920. Kurdistan was made a semiautonomous region of Iraq, the only Kurdish political entity internationally recognized. Turkey and the Soviet Union captured parts of the territory of the ethnic Armenians, other parts of which lie in northern Syria, Iraq, and Iran.

During the 1890s the British attempted to expand the border of their colony British Guiana (now Guyana) westward to include parts of Venezuela, where indications of oil had been discovered. This was probably unnecessary, because Guyana is a geologic sink, a lower-than-sea-level basin into which petroleum flows by gravity from Venezuela on the west and Dutch Guiana (now Surinam) on the east, so wells drilled in Guyana would draw from pools shared with Venezuela and Surinam. Nevertheless, British and German warships blockaded the ports of Venezuela until the United States, citing the Monroe Doctrine, forced them to cease. Oil was discovered in 1914, and by 1928 Venezuela was the worlds largest exporter of oil. Thus one sees the hand of Britain in the Afghanistan, Kurdistan, and Venezuela conflicts between the two world wars.

The most important of these major conflicts was World War II, the first war that might be characterized as an oil war, with the petroleum resources of the Caspian Sea, the Persian Gulf, the Gulf of Mexico, the Caribbean Sea, Lake Maracaibo, and the Dutch East Indies being strategic targets of all combatants. As part of its strategy to defend the Caribbean Sea and the Gulf of Mexico from German attack, the United States concluded a deal with Britain in 1940 by which the United States gave Britain used destroyers in exchange for the right to use or build bases in the British Caribbean colonies.

North Africa was the location of battles between Italy and Germany on one side and Britain and the United States on the other to secure Persian Gulf oil, even though no oil had yet been discovered in Libya or the Western Desert of Egypt, where most of the battles were fought. On August 1, 1941, before its entrance into the war, the United States imposed an oil embargo on the Axis powersGermany, Italy, and Japan. The Netherlands and Britain followed suit. The 1941 embargo reduced Germanys supply from Mexico and Venezuela and reduced Japans supply from the Caspian Sea, the Persian Gulf fields, and the Dutch East Indies. The U.S. entrance into the war was largely due to its embargo of petroleum supplies to Japan. After negotiations with the United States, Britain and Holland failed to reverse this decision, and Pearl Harbor was attacked in December 1941 to reduce the U.S. capacity to enforce the embargo. Japan then invaded and occupied the Dutch East Indies (Sumatra, Java, and Borneo) from 1942 to 1946 to secure petroleum to fuel its war effort.

A few months after the war ended in 1945, a military coup took place in Venezuela, with control of revenues from oil production a major motivation for the conflict. The Dutch also fought wars in Indonesia to regain control of its colony but was forced to grant it independence in 1948. The cold war between the United States and the Soviet bloc from 1945 to 1991 involved the same strategic oil issues as World War II but did not rise to the level of open warfare. The Korean War (19501953) and the Vietnam War (19541975) were proxy wars for the United States and the Soviet Union but were less conspicuously concerned with control of petroleum reserves and their transportation to world markets. Importantly, however, with the exception of World War II, all conflicts over oil, both regional and global, took place in the countries in which the reserves lay, and not in the consuming countries. This changed dramatically with the onset of terrorism.

Terrorism The rise of terrorism since the airplane hijackings in 1968including especially the attacks on New York City in 1993 and 2001 and on the Pentagon in 2001, the bombings of U.S. embassies and ships in 1998 and 2001, and the bombings on Spanish and British trains and buses and other facilities in 2004 and 2005 changed the location of conflicts. Terrorism may be considered a form of guerrilla warfare, in contrast to a set-piece war. In response to this shift in theaters and tactics, Western governments alleged that certain Arab Muslim states were sponsors of these acts of terror or gave safe haven to terrorists. Western states directed military and economic sanctions against these states, which included Iran, Libya, Sudan, Somalia, Afghanistan, and Iraq. It is not without significance that all these states either have petroleum reserves or stand athwart transportation routes to world petroleum markets. Somalia, for example, controls the approach to the Red Sea and the Suez Canal.

Since 1980 five major wars have been fought in the region: the Soviet-Afghanistan War (19791989), the Iraq-Iran War (19801988), the Persian Gulf War (19901991), the U.S.-Afghanistan War that began in 2001, and the U.S.-Iraq War that began in 2003. In addition since 1980 U.S. naval ships and aircraft have blockaded and threatened to attack Libya, accusing it of being a state sponsor of terrorism.

In 1991 the former republics of the Soviet Union became independent. Several of them gave concessions to Western companies to explore for petroleum. With these discoveries, proposals were made for pipelines to carry the petroleum to shipping points for export to world markets. Three feasible routes exist for exporting Caspian Sea petroleum to world markets: west through Azerbaijan, Armenia, and Georgia to the Black Sea; south through Iraq and Iran to the Persian Gulf; or southeast through Afghanistan and Pakistan to the Arabian Sea. Overland markets are north into Russia and east into China.

All wars have as an objective the conquest of territory and its resources and assets, a major part since 1900 being petroleum reserves. Thus all wars since 1900 may be considered, to some extent, wars to control oil. This objective has attained the highest priority since World War II, leading to increased military and diplomatic conflict. Petroleum wars may be expected to continue to arise until a different energy source is discovered and widely employed or until an effective international nonviolent conflict resolution method is found and employed.

SEE ALSO Energy Industry; Industry; Iran-Iraq War; Iraq-U.S. War; Nationalization; Organization of Petroleum Exporting Countries (OPEC); Resource Economics; State Enterprise

BIBLIOGRAPHY

Bilkadi, Zayn. 1994. Bulls from the Sea. Saudi Aramco World 45 (4): 2031.

Blair, John M. 1976. The Control of Oil. New York: Pantheon.

Ellison, Julian. 1974. The Petroleum Industry in Africa and America. Occasional Paper no. 19741. New York: Black Economic Research Center.

Engler, Robert. 1961. The Politics of Oil: A Study of Private Power and Democratic Directions. New York: Macmillan.

Library of Congress Business References Service. 20052006. History of the Oil and Gas Industry. Business and Economics Research Advisor (BERA) 5/6. http://www.loc.gov/rr/business/BERA/issue5/history.html.

Mir-Babayev, Mir Yusif. Azerbaijans Oil History: A Chronology Leading Up to the Soviet Era. 2002. Azerbaijan International 10 (2).

Razavi, Hossein, and Fereidun Fesharaki. 1991. Fundamentals of Petroleum Trading. New York: Praeger.

Sampson, Anthony. 1975. The Seven Sisters: The Great Oil Companies and the World They Shaped. New York: Viking.

Snow, Keith Harman. 2007. The New Old Humanitarian Warfare in Africa, Part II. Somali Times, February 7.

U.S. Department of Commerce, Census Bureau. 1975. Historical Statistics of the United States: Colonial Times to 1970. Bicentennial ed., pt. 1. Washington, DC: U.S. Government Printing Office.

Wirth, John D. 1985. Latin American Oil Companies and the Politics of Energy. Lincoln: University of Nebraska Press.

Wirth, John D., ed. 2001. The Oil Business in Latin America: The Early Years. Washington, DC: Beard.

Julian Ellison

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Petroleum Industry

PETROLEUM INDUSTRY

PETROLEUM INDUSTRY. Petroleum, Latin for "rock oil, " fuels 60 percent of all energy humans use. It also provides the raw material for synthetic cloth, plastics, paint, ink, tires, drugs and medicines, and many other products.

Crude oil can be separated into many different parts called fractions, each of which boils at a different temperature. As crude oil is boiled, the different fractions vaporize and rise to various levels of the distillation tower, also called a still. Thinner oils boil at lower temperatures and consequently reach the top of the tower before they condense. The heavier oils, which boil at higher temperatures, do not reach as high before condensing. The lightest vapors, from the thinnest oils, produce liquefied gases, propane and butane, and petrochemicals. Petrochemicals can be changed into a variety of products: plastics, clothes fabrics, paints, laundry detergent, food additives, lawn chemicals, and more than 6,000 other everyday products. The middle vapors result in gasoline, kerosene, and diesel fuel, as well as jet fuel (a form of kerosene). Next come the fractions that make home heating oil and fuel for ships and factories. The heaviest oil produces lubricating oil and grease, which can also be turned into items such as candle wax. At the very bottom of the distillation tower is the leftover sludge, also called bitumen, which is used in the asphalt that makes roads and roofing.

At the beginning of the twenty-first century, 1.5 million people in the United States were employed in the petroleum industry, which fueled 97 percent of American transportation. Oil provided 38 percent of the country's energy, while natural gas, which is either mixed with the crude oil or lying as a separate layer on top of it, accounted for 24 percent.

Petroleum's Commercial Beginnings

Although people knew of oil prior to 1850 and even had some uses for it, primarily as lamp fuel, it was not a sought-after commodity. Oil bubbled to the surface in "seeps, " and several of these could be found along Oil Creek near Titusville, Pennsylvania. No one was able to collect enough oil to make it an economically sound venture. Titusville resident Joel Angier transacted the first

petroleum lease in 1853 when he leased a portion of an Oil Creek seep from a local saw mill. Although Angier's collection, like those before him, was not economically viable, enough of his oil made it to commercial centers to pique interest in its use and begin theories regarding its extraction. Downstream, farmer Hamilton McClintock gathered enough oil from another seep to produce twenty or thirty forty-two-gallon barrels in a season. His was the largest oil operation of its day, and it set the standard for measurement of oil. Although forty-two-gallon barrels are no longer used, this is still the measurement used for oil production. McClintock fielded some interest from an investment group from New York and Connecticut, but his $7,000 asking price was deemed too exorbitant.

Another group, the Pennsylvania Rock Oil Company of New York, later renamed the Seneca Oil Company, purchased Angier's seep for $5,000. Company principals George H. Bissell and Jonathan G. Eveleth hired Benjamin Silliman Jr., a professor of chemistry at Yale, to analyze the crude oil from their seep. Silliman produced an 1855 report that determined crude oil could be separated into fractions, each with a use. His report emphasized that one of the fractions could be useful as a high-quality illuminant. This report enabled Bissell to get additional financing for his oil venture. The Seneca Oil Company hired Edwin Drake to extract the oil. His first attempt produced ten gallons of crude a day, which was not enough to provide a return on the investment. Drake attempted to increase production by opening more springs and trying to mine the oil, but neither met with success. He eventually settled on drilling. He hired salt well driller Billy Smith, who drilled to a depth of 69.5 feet on 27 August 1859. The next day Smith looked into the well and saw crude oil rising up in it. Reports claim this well's productivity ranged anywhere from ten to forty barrels per day, a minimum of a 400-fold increase in production. This discovery of a method for extracting larger quantities of oil generated the first oil boom. People inundated Pennsylvania, leasing the flats around Oil Creek. By 1861, the commonwealth's wells were producing more than 2 million barrels annually, accounting for half the world's oil production.

Birth of the Modern Oil Industry

In 1900, worldwide crude oil production stood at nearly 150 million barrels. Illuminants served as the primary product of the oil industry, but new inventions such as the automobile and the airplane used petroleum as fuel. Gasoline was also used as an industrial solvent. Initially a barrel of oil yielded eleven gallons of gasoline. Refining began in 1850, when James Young of England patented the first oil refining process. Samuel Kier founded the first commercial refining process in the United States in the 1860s. In 1913, refineries achieved their first major technological breakthrough, adding heat to the oil molecules, thereby "cracking" heavier molecules of hydrocarbons into lighter molecules. By the 1960s, a barrel of oil yielded more than 21 gallons of gasoline, nearly double the production


of the first two decades of the twentieth century. Catalytic cracking in 1936 produced a higher octane fuel as well as the lighter gases that provided the first step in producing five major products: synthetic rubber, plastics, textiles, detergents, and agricultural chemicals.

While Pennsylvania was initially the biggest oil producing state, that didn't stop people from hunting elsewhere. Independent oil prospectors, known as wildcatters, as well as oil companies, discovered oil in Ohio, Indiana, Illinois, Oklahoma, Kansas, California, and Texas. Often oil was discovered by people drilling for water, as happened with the Corsicana field in Texas. Pennsylvania oilman John Galey and his partner, James Guffy, came to Texas at the behest of Anthony Lucas, an engineer and salt miner working for Patillo Higgins, who believed oil could be found under salt domes. In particular, Higgins was eyeing Spindletop, a hill whose elevation had increased over the centuries as the salt continued to rise under the surface. Galey had drilled to 1,020 feet by 10 January 1901. When the drill was pulled out to change equipment, mud began to bubble up the hole, and the drill pipe was shoved out of the hole with tremendous force. Mud followed by natural gas followed by oil shot

out of the ground to a height of more than 150 feet, the first "gusher" experienced by the oil industry. The Lucas gusher produced at an initial rate of 100,000 barrels per day, more than all the other producing wells in the United States combined. In a matter of months the population of nearby Beaumont, Texas, swelled five times, to 50,000 residents, and more than 100 different oil companies put wells on Spindletop. The find was instrumental in creating several large oil companies such as Gulf, Amoco, and Humble, which became part of Standard Oil. It also gave rise to a new drilling technique, since drilling through several hundred feet of sand had proved problematical. Driller Curt Hamill pumped mud rather than water down the drill hole to keep the rotary drill bit cool and to flush out the cuttings. The mud stuck to the sides of the hole and prevented the sand from caving. Since then, mud has been used in almost every drill hole around the world.

While companies retrieved $50 million in oil from the salt dome, they had invested $80 million. Consequently, the site was familiarly known as "Swindletop." It served to usher in the modern age of oil, causing the industry to realize that tremendous potential existed for the vast amounts of this natural resource that had barely been tapped. It became the fuel of choice for transportation, everything from ships and trains to cars and planes. Worldwide oil production in 1925 stood at 1 billion barrels and doubled fifteen years later.

Transportation of Oil

Horses served as the primary means of transporting machinery to the oil field, as well as carrying the product to refineries, in the early Pennsylvania oil fields. By 1865 horses had been supplanted by the newly completed rail line, and tank cars, originally two open tubs, were developed for rail transport. The first pipeline was developed in 1863, when Samuel Van Syckle pumped crude through five miles of a two-inch pipe from the Pithole field in western Pennsylvania to a railroad terminal. In the 1870s a six-inch pipeline ran from oil fields to Williamsport, Pennsylvania, 130 miles away. Ten years later pipelines ran from Pennsylvania to Cleveland, Buffalo, and New York City. At the end of the twentieth century, the United States had over 1 million miles of oil pipeline in use. Most pipelines were buried, with the exception to the 800-mile trans-Alaska pipeline, built partially above ground in the 1970s to prevent damaging the fragile permafrost.

The California oil boom in the 1920s gave rise to yet another industry, that of the oil tanker. Removed from the industrial centers in the East, California looked over-seas for its market. The first tanker, the George Loomis, took its maiden voyage in 1896. From that beginning, petroleum and petroleum products now account for nearly half the world's seaborne trade. The materials are hauled on supertankers, the largest ships ever built, a quarter mile long and half a million tons in weight, shipping 1 million barrels of oil.

The Politics of Oil

Attempts to control the oil industry began as early as the 1870s, when the newly-formed Standard Oil Company, established by brothers John D. and William Rockefeller, sought to gain a monopoly in the industry. They made generous profit offers to companies that merged with them and threatened those that didn't. Early success was recognized in the rapid rise of Standard Oil's market share, from 10 percent in 1872 to 95 percent by 1880, but Standard Oil couldn't control the rapid pace of discovery and development of new fields over the next two decades. By the time the U.S. Supreme Court dissolved the Standard Oil Company into 34 separate companies for violating the Sherman Antitrust Act of 1911, Standard's market share had dropped to 65 percent.

By 1925 the United States was supplying 71 percent of the world's oil. Increased production in Oklahoma and East Texas in the wake of the Great Depression, between 1929 and 1932, caused an oil glut, dropping the price of oil to a low of 10 cents per barrel. This resulted in the Interstate Oil Compact of 1935, followed by the Connally "Hot Oil" Act, which prohibited interstate shipment of oil produced in violation of state conservation laws. The intent was to coordinate the conservation of crude oil production in the United States, and was the first attempt by the federal government to control the supply and demand of the industry. The government stepped in again in 1942, rationing civilian petroleum supplies during World War II. In 1945, the last year of the war, one-third of domestically produced petroleum was going to the war effort.

Continual expansion of offshore drilling gave rise to the 1953 U.S. Submerged Lands Act, which determined that the federal government's ownership of land extends three miles from the coastline. That same year Congress passed the Outer Continental Shelf Lands Act, which provided federal jurisdiction over the shelf and authorized the secretary of the interior to lease those lands for mineral development.

Domestic production of crude oil doubled after the war, but demand tripled. The United States accounted for over half the world's oil production in 1950, but Americans were also using all they produced and more, for the first time becoming a net importer of oil. Thirty years previously the United States had imported only 2 percent of its total petroleum. Now imports accounted for 17 percent of the total. Thirty years after that, in 1980, the United States was importing 45 percent of its petroleum. By 2002 the United States was importing 56 percent of its petroleum, and that figure was projected to grow to 65 percent by the year 2020.

Government regulation of the oil industry reached a pinnacle of invasiveness in the 1970s, as the government sought to reduce import dependency, encourage domestic production, and stabilize prices. These actions were largely a result of an embargo of oil exports by the Persian Gulf nations of the Middle East. Reacting to the United States' support for Israel in the 1973 Arab-Israeli war, the

Organization of Petroleum Exporting Countries (OPEC) nations withheld their oil exports, driving the cost of petroleumfrom$5 per barrel in the late 1960s to $35 per barrel in 1981.

At the same time, domestic oil production declined from 9.6 million barrels a day in 1970 to 8.6 million barrels in 1980. To address the demand and supply issue, President Richard Nixon created what amounted to a paradoxical energy policy: to restrict imports and reduce reliance on foreign oil, while at the same time encouraging imports to protect domestic reserves and encourage lower prices for domestic use. He first imposed price controls on oil in 1971 and then, two years later, abolished the import quotas established twenty years earlier by the Eisenhower administration. Nixon's 1973 "Project Independence" was a plan to make the United States self-sufficient in oil by 1985 by increasing domestic supplies, developing alternative energy sources, and conserving resources. His successor, Gerald Ford, continued a program to reduce reliance on foreign oil through reduction of demand and increased domestic production. Ford focused on transporting oil from Alaska and leasing the outer continental shelf for drilling. He also established the Strategic Petroleum Reserve, a federal storage of oil. By 2002 the reserve stood at 578 million barrels of crude, equal to a fifty-three-day supply of imports. President Jimmy Carter created a National Energy Plan in 1977. He wanted to increase taxes to reduce demand, impose price controls, and shift consumption from imported to domestic sources. He also wanted to direct the nation toward nuclear energy. Despite the attempts of three administrations to reduce national dependence on foreign oil, all of these policies had little impact on oil imports. American imports from OPEC continued to increase throughout the 1970s. By the beginning of the twenty-first century OPEC provided 42 percent of the United States' imported oil and 24 percent of the total oil used in the United States. The 1979 revolution in Iran curtailed U.S. supply from that country and drove prices to unprecedented levels for three years. The Iranian political situation eventually stabilized by 1982, and the oil crisis abated for the first time in over a decade.

The American political policy toward oil under presidents Ronald Reagan and George H. W. Bush adhered to a free-market philosophy. Reagan abandoned conservation and alternative energy initiatives and deregulated oil prices, policies continued by Bush. One result of these policies was an increase in imports from the Middle East, and by 1990 the Persian Gulf states were supplying 600 million of America's 2.2 billion imported barrels annually. President Reagan also signed Proclamation 5030 in 1983, establishing the "U.S. exclusive economic zone, " claiming U.S. rights 200 nautical miles off national coastlines, in an effort to expand the search for oil.

A rift in OPEC in the mid-1980s over market share helped cause a collapse of oil prices. Prices plummeted to as low as $10 per barrel, down from a high of $31. While a boon for consumers, this caused a severe recession in regions of the United States where much of the industry revolved around petroleum. In 1983 Texas, Alaska, Louisiana, and California accounted for three quarters of domestic oil production. Along with Oklahoma, these states are still the top oil producers in the nation.

The George H. W. Bush administration developed a comprehensive national energy policy when the Gulf War of 1991 caused concern over the security of the long-term oil supply. However, the legislation passed by Congress in 1992 did not really address oil and gas, focusing instead on electric utility reform, nuclear power, and increased funding for research and development of alternative fuels. During the 1990s the Clinton administration generally adopted a "status quo" approach to energy, with some exceptions. Clinton suggested the use of tax incentives to spur conservation and alternative fuels, while also encouraging modest tax breaks to increase domestic production. Clinton tightened pollution-reducing regulations on the petroleum industry. Additionally, he closed off several areas of the United States to oil production, supported the ban on drilling in the Arctic National Wildlife Refuge (ANWR), and signed the Kyoto Protocol, a worldwide attempt to limit the production of greenhouse gases. In contrast to the Clinton administration, Congress sought to end restrictions on Alaska North Slope exports and the lift the ban on drilling in the ANWR. Toward the same end, Congress also implemented royalty relief for projects in the Gulf of Mexico. Royalty relief was intended to provide incentives for development, production increases, and the encouragement of marginal production. Deep-water Gulf drilling leases more than tripled between 1995 and 1997.

In 2000 the George W. Bush administration indicated a shift in U.S. energy policy. Like those before him, Bush intended to increase domestic production and decrease consumption. His conservation program proposed to study options for greater fuel efficiency from automobiles and create tax incentives for purchasing hybrid cars that run on gas and electricity. More significantly, to increase production, Bush wanted to review, with the objective of easing, pollution control regulations that may adversely impact the distribution of gasoline. He was seeking to open the ANWR to drilling, despite the Senate's rejection of such drilling in April 2002. Incidents such as the 1989 spill by the Exxon Valdez, which ran aground on Bligh Reef off the Alaskan shore, and the intent to drill in the ANWR brought opposition to the continued search for oil. The Exxon Valdez spilled 10.8 million gallons of oil into Prince William Sound in Alaska, contaminating 1,500 miles of coastline—the largest oil spill in North America.

Demand and Supply

Despite the conservation efforts of repeated administrations, national demand for petroleum products continued to increase. As the twenty-first century began, the United

States was using 19.5 million barrels of petroleum per day—an average of three gallons per person. This usage rate meant America's entire production of oil comprised only half its total consumption. The other 50 percent came from all over the globe, half of it from other nations in the Western hemisphere, 21 percent of it from the Middle East, 18 percent from Africa, and the rest from elsewhere. Canada is the United States' largest supplier, followed in order by Saudi Arabia, Venezuela, and Mexico. The United States uses more than one-quarter of the world's oil production each year. Initially, when oil was extracted and refined for widespread commercial use in the United States in the 1860s, national oil reserves increased as new fields were discovered and better techniques for extracting and refining the oil were implemented. However, the amount of available reserves plateaued in the 1960s and a decline began in 1968. The discoveries in Alaska temporarily alleviated the decline, but the daily output continued to drop from 9.6 million barrels daily in 1970 to nearly 6 million barrels per day in 2002.

The hunt for oil continues. While Drake's original well came in at 69.5 feet, current U.S. holes are on average one mile deep, and at least one is seven miles in depth. Once natural pressure quits forcing the flow of oil up the well, an assembly of pipes and valves called a Christmas tree is used to pump additional oil out. Carbon dioxide and other gases, water or chemicals are injected into the well to maintain pressure and increase production. U.S. fields are among the world's oldest continually producing fields. By 2002, the Earth had yielded 160 billion barrels of oil, with an estimated 330 billion barrels left in the ground. Some estimates suggest that at current production rates the world's proven oil reserves will last until 2050.

BIBLIOGRAPHY

Ball, Max W. This Fascinating Oil Business. Indianapolis: Bobbs Merrill, 1965.

Conoway, Charles F. The Petroleum Industry: A Non-Technical Guide. Tulsa, Okla.: PennWell, 1999.

Deffeyes, Kenneth S. Hubbert's Peak: The Impending World Oil Shortage. Princeton: Princeton University Press, 2001.

Doran, Charles F. Myth, Oil, and Politics: Introduction to the Political Economy of Petroleum. New York: Free Press, 1977.

Economides, Michael, and Oligney, Ronald. The Color of Oil: The History, the Money, and the Politics of the World's Biggest Business. Katy, Texas: Round Oak Publishing Company, 2000.

Levy, Walter J. Oil Strategy and Politics, 1941–1981. Boulder, Colorado: Westview Press, 1982.

Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York: Simon and Schuster, 1991.

TerriLivermore

T. L.Livermore

MichaelValdez

See alsoEnergy Industry ; Energy, Renewable ; Kerosine Oil ; Petrochemical Industry ; Petroleum Prospecting and Technology ; Standard Oil Company .

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Petroleum

Petroleum


Petroleum is a naturally occurring liquid oil normally found in deposits beneath the surface of the earth. It is a type of oil composed of rock minerals, making it different from other kinds of oils that come from plants and animals (such as vegetable oil, animal fat, or essential oils). The word petroleum comes from the Latin words petra (rock) and oleum (oil), and so literally means rock oil. Despite this, petroleum is an organic compound, formed from the remains of microorganisms living millions of years ago. It is one of the three main fossil fuels, along with coal and natural gas.


Petroleum Economy

Petroleum, like all fossil fuels, primarily consists of a complex mixture of molecules called hydrocarbons (molecules containing both hydrogen and carbon). When it comes out of the ground, it is known as crude oil, and it may have various gases, solids, and trace minerals mixed in with it. Through refinement processes, a variety of consumer products can be made from petroleum. Most of these are fuels: gasoline, jet fuel, diesel fuel, kerosene, and propane are common examples. It is also used to make asphalt and lubricant grease, and it is a raw material for synthetic chemicals. Chemicals and materials derived from petroleum products include plastics, pesticides, fertilizers, paints, solvents, refrigerants, cleaning fluids, detergents, antifreeze, and synthetic fibers.

The modern petroleum industry began in 1859 in Pennsylvania, when a man named Edwin L. Drake constructed the first oil well, a facility for extracting petroleum from natural deposits. Since then, petroleum has become a valuable commodity in industrialized parts of the world, and oil companies actively search for petroleum deposits and build large oilextraction facilities. Several deposits exist in the United States. However, around 1960 oil production in the country began to decline as oil in the deposits was being used up and fewer new deposits were being discovered. Demand for petroleum products continued to increase, and as a result the United States came to rely more and more on oil imported from other countries. In 2001 the amount of petroleum extracted from deposits in the United States was estimated to be only one-third of the amount demanded by U.S. consumers. A similar pattern exists in other industrialized countries, and some, like Japan and Germany, import almost all of the oil they use.

TEN LARGEST OIL SPILLS IN HISTORY (BY VOLUME)
location date amount spilled
source: oil spill intelligence report (1999). international oil spill statistics: 1998. new york: aspen publishers. available from www.aspenpublishers.com/environment.asp
1. sea island installations, persian gulf, kuwait january 26, 1991 240,000,000 gallons (816,327 tons)
2. ixtoc i exploratory well, bahia del campeche, mexico june 3, 1979 140,000,000 gallons (476,190 tons)
3. production well, fergana valley, uzbekistan march 2, 1992 88,000,000 gallons (299,320 tons)
4. nowruz no. 3 well, persian gulf, nowruz field, iran february 4, 1983 80,000,000 gallons (272,109 tons)
5. tanker castillo de bellver, table bay, south africa august 6, 1983 78,500,000 gallons (267,007 tons)
6. tanker amoco cadiz, off portsall, brittany, france march 16, 1978 68,668,000 gallons (233,565 tons)
7. tanker odyssey, north atlantic ocean, off st. john's, newfoundland, canada november 10, 1988 43,100,000 gallons (146,600 tons)
8. tanker atlantic empress, caribbean sea, trinidad and tobago july 19, 1979 42,704,000 gallons (145,252 tons)
9. tanker haven, genoa, italy april 11, 1991 42,000,000 gallons (142,857 tons)
10. production well d-103, 800 km southeast of tripoli, libya august 1, 1980 42,000,000 gallons (142,857 tons)



However, on a per capita basis, the consumption in these countries is nowhere near the consumption in the United States.

The United States and Canada are unique in that, on average, an individual in these countries consumes about twice as much petroleum product as do individuals in most other industrialized nations. People in the United States and Canada rely more on personal vehicles for their transportation and tend to drive greater distances, making petroleum their major source of energy. In the United States, about two-thirds of the petroleum consumed is transportation fuel, and two-thirds of that (45% of the total) is gasoline for cars and trucks. About 40 percent of the energy used in the United States every year comes from petroleum.


Foreign Oil Dependence

Political leaders in the United States have long been gravely concerned about the country's growing dependence on foreign oil, which in many ways puts the country at the mercy of foreign governments, some of them hostile to the United States. The greatest production of crude oil in the world is in the Persian Gulf region of the Middle East, where about 65 percent of the world's known petroleum deposits are located. About half of U.S. imports come from members of the Organization of the Petroleum Exporting Countries (OPEC), a group of countries encompassing the Persian Gulf and certain parts of Africa and South America. Events in these often volatile regions can have a huge impact on oil prices in the United States and worldwide, and because of the crucial role oil plays in U.S. society any change in the price can precipitate uncontrollable shifts in the country's economy (see chart "World Oil Price 1970-2000"). The most famous example of this is the Arab Oil Embargo of 1973 to 1974, when U.S. support for Israel in a conflict in the Middle East led to a decision by OPEC to impose steep price increases on the sale of oil to the United States. One response by the U.S. government has been the establishment of the Strategic Petroleum Reserve, an emergency stockpile designed to sustain the country's oil needs for approximately three months in the event of a complete cutoff of imports. There is little doubt, however, that dependence on foreign oil is both a political liability for the United States as well as a risk to national security.


Environmental Pollution

Petroleum-derived contaminants constitute one of the most prevalent sources of environmental degradation in the industrialized world. In large concentrations, the hydrocarbon molecules that make up crude oil and petroleum products are highly toxic to many organisms, including humans. Petroleum also contains trace amounts of sulfur and nitrogen compounds, which are dangerous by themselves and can react with the environment to produce secondary poisonous chemicals. The dominance of petroleum products in the United States and the world economy creates the conditions for distributing large amounts of these toxins into populated areas and ecosystems around the globe.

Oil Spills

Perhaps the most visible source of petroleum pollution are the catastrophic oil-tanker spillslike the 1989 Exxon Valdez spill in Prince William Sound, Alaskathat make news headlines and provide disheartening pictures of oilcoated shorelines and dead or oiled birds and sea animals. These spills occur during the transportation of crude oil from exporting to importing nations. Crude oil travels for long distances by either ocean tanker or land pipeline, and both methods are prone to accidents. Oil may also spill at the site where it is extracted, as in the case of a blowout like the Ixtoc I exploratory well in 1979 (see table "Ten Largest Oil Spills in History"). A blowout is one of the major risks of drilling for oil. It occurs when gas trapped inside the deposit is at such a high pressure that oil suddenly erupts out of the drill shaft in a geyser.

Accidents with tankers, pipelines, and oil wells release massive quantities of petroleum into land and marine ecosystems in a concentrated form. The ecological impacts of large spills like these have only been studied for a very few cases, and it is not possible to say which have been the most environmentally damaging accidents in history. A large oil spill in the open ocean may do less harm to marine organisms than a small spill near the shore. The Exxon Valdez disaster created a huge ecological disaster not because of the volume of oil spilled (eleven million gallons) but because of the amount of shoreline affected, the sensitivity and abundance of organisms in the area, and the physical characteristics of the Prince William Sound, which helped to amplify the damage. The Exxon Valdez spill sparked the most comprehensive and costly cleanup effort ever attempted, and called more public attention to oil accidents than ever before. Scientific studies of the effects of oil in Prince William Sound are ongoing, and the number of tanker accidents worldwide has decreased significantly since the time of the Valdez spill, due to stricter regulations and such required improvements in vessel design as double-hull construction.


Nonpoint Sources

Spills from tankers, pipelines, and oil wells are examples of point sources of pollution, where the origin of the contaminants is a single identifiable point. They also represent catastrophic releases of a large volume of pollutants in a short period of time. But the majority of pollution from oil is from nonpoint sources, where small amounts coming from many different places over a long period of time add up to large-scale effects. Seventy percent of the oil released by human activity into oceans worldwide is a result of small spills during petroleum consumption. These minor unreported spills can include routine discharges of fuel from commercial vessels or leakage from recreational boats. However, in North America, the majority of the release originates on land. Oil tends to collect in hazardous concentrations in the stream of wastewater coming out of cities and other populated areas. Runoff from asphalt-covered roads and parking lots enters storm drains, streams, and lakes and eventually travels to the ocean, affecting all of the ecosystems through which it passes. As cities grow, more and more people use petroleum productslubricants, solvents, oil-based paint, and, above all, gasolineand these are often improperly disposed of down drains and sewage pipes. Industrial plants also produce small, chronic spills that aren't noticed individually, but add up over time and enter waterways.

Taken together, land-based river and urban runoff sources constitute over half of the petroleum pollution introduced to North American coastal waters due to human activity, and 20 percent of the petroleum pollution introduced to ocean waters worldwide. When wastewater from these sources enters the marine environment it is usually by means of an estuary, an area where freshwater from land mixes with seawater. Estuaries are especially critical habitats for a variety of plants and animals, and are among the ecosystems most sensitive to pollutants.


Petroleum-Contaminated Soil

Not all oil released from land sources is quickly washed away to sea, however. Pipeline and oil-well accidents, unregulated industrial waste, and leaking underground storage tanks can all permanently contaminate large areas of soil, making them economically useless as well as dangerous to the health of organisms living in and around them. Removing or treating soil contaminated by petroleum is especially urgent because the hydrocarbons can leach into the underlying groundwater and move into human residential areas. The engineering field of bioremediation has emerged in recent decades as a response to this threat. In bioremediation, bacteria that feed on hydrocarbons and transform them into carbon dioxide can be applied to an affected area. Bioremediation has in many cases made cleaning up petroleum-contaminated sites a profitable real-estate investment for land developers.


Air Pollution

The U.S. Environmental Protection Agency (EPA) designates six criteria pollutants for determining air quality. These are: carbon monoxide (CO), nitrogen oxides (NO and/or NO2, usually referred to as NOx), sulfur dioxide (SO2), ground-level ozone (O3), particulate matter (including things like soot, dust, asbestos fibers, pesticides, and metals), and lead (Pb). Petroleum-fueled vehicles, engines, and industrial processes directly produce the vast majority of CO and NOx in the atmosphere. They are also the principal source of gaseous hydrocarbons (also called volatile organic compounds, or VOCs), which combine with NOx in sunlight to create O3. Ozone, while important for blocking ultraviolet rays in the upper atmosphere, is also a key component of urban smog and creates human health problems when present in the lower atmosphere. Sulfur dioxide is a trace component of crude oil, and can cause acid rain when released into the air at oil refineries or petroleum power plants. Particulate matter is directly emitted in vehicle exhaust and can also form from the reaction of exhaust gases with water vapor and sunlight. Finally, leaded gasoline is a huge contributor of lead to the atmosphere, and the use of unleaded gasoline has decreased lead concentrations dramatically. The EPA and the World Bank are working to encourage the phaseout of leaded gasoline worldwide.

Petroleum-fueled transportation and coal-burning power plants are considered the chief causes of global warming. Excess amounts of carbon dioxide, methane, and NOx, among other gases, trap heat in the atmosphere and create the greenhouse effect. Carbon dioxide (CO2) is a main constituent of petroleum fuel exhaust, even though it is not toxic and therefore not classified as a pollutant. About one-third of the CO2 emitted into the atmosphere every year comes from vehicle exhaust. Methane (NH3), although usually associated with natural gas, is also emitted whenever crude oil is extracted, transported, refined, or stored.


The Future of Petroleum

The world's reliance on petroleum is expected to grow, despite widespread environmental, economic, and political consequences. The U.S. oil extraction industry continues to aggressively search for new oil deposits and lobby the federal government to open up restricted areas to drilling. The Arctic National Wildlife Refuge in Alaska has been on the oil industry agenda for several decades, creating a long-standing environmental controversy. Advances in oil well technology have allowed extraction in the deep ocean beyond the continental shelf, but these have not been enough to reverse the trend of declining production in the United States.

There are many compelling reasons to decrease society's dependence on petroleum for energy, and the most obvious place to begin is in the transportation sector. Energy-efficient engines and hybrid gas/electric cars can help to reduce some of the need for oil, providing higher gas mileage and less demand. A variety of alternative fuels have also been developed, such as ethanol, biodiesel (made from vegetable oil), and hydrogen. Each of these would produce little or no exhaust pollutants or greenhouse gases, and each derives from plentiful renewable resources. The United States is now in fact actively researching hydrogen as a viable alternative to gasoline, and the hydrogen fuel cell as a substitute for the internal combustion engine.

Petroleum is a useful chemical substance for many important purposes. But it is also a nonrenewable resource with a highly toxic composition, and it poses significant problems when used in huge volumes throughout the industrialized world.

see also Air Pollution; Arctic National Wildlife Refuge; Coal; Disasters: Oil Spills; Economics; Electric Power; Energy; Fossil Fuels; Global Warming; Ozone; NOx; Renewable Energy; Sulfur Dioxide; Underground Storage Tanks; Vehicular Pollution.

Bibliography

Oil Spill Intelligence Report. (1997). Oil Spills from Vessels (19601995): An International Historical Perspective. New York: Aspen Publishers.


internet resources

Committee on Oil in the Sea, National Research Council. (2003). Oil in the Sea III: Inputs, Fates, and Effects. Washington, D.C.: The National Academies Press. Available from http://www.nap.edu/catalog/10388.html.

Energy Information Administration. "Official Energy Statistics from the U.S. Government." Available from http://www.eia.doe.gov.

Exxon Valdez Oil Spill Trustee Council. "Restoring the Resources Injured by the Exxon Valdez Oil Spill and Understanding Environmental Change in the Northern Gulf of Alaska." Available from http://www.oilspill.state.ak.us.

National Biodiesel Board. "Need a Fill Up?" Available from http://www.biodiesel.org.

National Ethanol Vehicle Coalition. "National Ethanol Vehicle Coalition and E85." Available from http://www.e85fuel.com.

National Oceanic and Atmospheric Administration. "Office of Response and Restoration, National Ocean Service." Available from http://response.restoration.noaa.gov.

Schlumberger Excellence in Educational Development (SEED) Science Center. "Science Lab: Oil Well Blowout Simulator." Available from http://www.slb.com/seed/en/lab/blowout.

Trench, Cheryl J. (2001). "Oil Market Basics." Washington, D.C.: Energy Information Administration. Available from http://www.eia.doe.gov.

U.S. Department of Energy. "Energy Efficiency and Renewable Energy." Available from http://www.eere.energy.gov.

U.S. Department of Energy. "Fossil.energy.gov: A U.S. Department of Energy Web Site." Available from http://www.fossil.energy.gov.

U.S. Department of Energy. "Fossil Fuels: An Energy Education Website." Available from http://www.fossil.energy.gov/education.

U.S. Environmental Protection Agency. (1995). Profile of the Petroleum Refining Industry. Washington, D.C.: U.S. Government Printing Office. Available from http://www.epa.gov.

U.S. Environmental Protection Agency. (1999). Profile of the Oil and Gas Extraction Industry. Washington, D.C.: U.S. Government Printing Office. Available from http://www.epa.gov.

U.S. Environmental Protection Agency. "Air Quality Where You Live." Available from http://www.epa.gov/air/urbanair/index.html.

U.S. Geological Survey. Available from http://www.usgs.gov.

U.S. Geological Survey. (1997). "Bioremediation: Nature's Way to a Cleaner Environment." Available from http://water.usgs.gov/wid/html/bioremed.html.

Adrian MacDonald

OIL SEEPS

Almost half (45%) of the petroleum entering the marine environment is from natural seeps rather than anthropogenic sources. At seeps, oil and gas bubble out of cracks in the seabed creating special environments in which new organisms grow. These organisms survive through chemosynthesis rather than photosynthesis. They live in total darkness, more than four hundred meters below sea level, but survive by feeding directly off the hydrocarbons present in seeps or by eating carbon compounds resulting from chemosynthetic bacterial degradation of seep oil. Since 1984 oceanographers have discovered chemosynthetic communities of clams, mussels, tubeworms, bacterial mats, and other organisms on the seafloor of the Gulf of Mexico. United States Department of the Interior regulations protect these chemosynthetic communities from damage due to oil and gas drilling activities.

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Petroleum

Petroleum


Petroleum is a naturally occurring complex mixture made up predominantly of carbon and hydrogen compounds, but also frequently containing significant amounts of nitrogen, sulfur, and oxygen together with smaller amounts of nickel, vanadium, and other elements. Solid petroleum is called asphalt; liquid, crude oil; and gas, natural gas. Its source is biological. Organic matter buried in an oxygen-deficient environment and subject to elevated temperature and pressure for millions of years generates petroleum as an intermediate in the transformation that ultimately leads to methane and graphite. The first successful drilled oil well came in 1859 in Pennsylvania. This is considered to be the beginning of the modern oil industry. Continuous distillation of crude oil began in Russia in 1875.

Occurrence

Oil is the largest segment of our energy raw materials use, being 40 percent, while coal use accounts for 27 percent, gas 21 percent, and hydroelectric/nuclear 12 percent. Although there are 20,000 petroleum fields known worldwide, more than half of the known reserves are contained in the 51 largest fields. The Middle East has 66 percent of the known world reserves. The United States has only 2 percent of the known world reserves. Hence the need for imports. The Organization of Petroleum Exporting Countries (OPEC) is important to the international trade and distribution of this crude oil. There is a growing dependence of the United States on imports. Although U.S. domestic production has not grown since the 1950s, imports have grown dramatically, from 0.3 billion barrels of oil in 1955 to 3.0 billion barrels in 1997. The United States has increased its percentage of imports, from approximately 13 percent in 1970 to 55 percent in 2000. It uses approximately 18 million barrels of oil per day. Worldwide production is about 56 million barrels per day. With known reserves, this level of worldwide production could remain constant for only 43 years. But there are large volumes of unconventional petroleum reserves, such as heavy oil, tar sands, and oil shale. These are located in the Western Hemisphere. Improvements in recovery methods must be made, and the cost of production must decrease, for these sources to become more important providers of energy.

Composition

Crude oils vary dramatically in color, odor, and flow properties. There are light and heavy crude oils; they are sweet or sour (i.e., have high or low sulfur content, with an average of 0.65%). Several thousand compounds are present in petroleum. The number of carbon atoms in these compounds can vary from one to over a hundred. Few are separated as pure substances. Many of the demands for petroleum can be served by certain fractions obtained from the distillation of crude oil. Typical distillation fractions and their uses are given in Table 1. The complexity of the molecules, their molecular weights, and their carbon numbers increase with the boiling point. The higher-boiling fractions are usually distilled in vacuo at temperatures lower than their atmospheric boiling points to avoid excessive decomposition to tars.

Each fraction of distilled petroleum is a complex mixture of chemicals, but these mixtures can be somewhat categorized. A certain sample of straight-run gasoline (light naphtha) might contain nearly 30 aliphatic (containing no benzene ring), noncyclic hydrocarbons; nearly 20 cycloaliphatic hydrocarbons (mainly cyclopentanes and cyclohexanes), sometimes called

FRACTIONS OF PETROLEUM
Approximate bp (°C) Name Uses
source: Wittcoff, Harold A., and Reuben, Bryan G. (1996). Industrial Organic Chemicals. New York: John Wiley.
<20°C Gases Similar to natural gas and useful for fuel and chemicals.
20150°C Light naphtha (C5C6) Fuel and chemicals, especially gasoline.
150200°C Heavy naphtha (C7C9) Fuel and chemicals.
175275°C Kerosene (C9C16) Jet, tractor, and heating fuel.
200400°C Gas oil (C15C25) Diesel and heating fuel. Catalytically cracked to naphtha and steam-cracked to alkenes.
>350°C Lubricating oil Lubrication. May be catalytically cracked to lighter fractions.
>350°C Heavy fuel oil Boiler fuel. May be catalytically cracked to lighter fractions.
Asphalt Paving, coating, and structural uses.

naphthenes; and 20 aromatic compounds (such as benzene, toluene, and xylene). Examples of compounds found or used in petroleum and mentioned in this article are given in Figure 1.

When any fraction of petroleum is used as a source of energy and burned to CO2 and H2O, the sulfur is converted into SO2 in the air. The SO2 is a major air contaminant, especially in larger cities. With air moisture it can form H2SO4 and H2SO3. Much of the sulfur-containing material must be taken out of petroleum before it can be used as fuel. The current maximum percentage allowable in gasoline is 0.10 percent S.

Octane Number

One cannot talk about the chemistry of gasoline without understanding octane numbers. When gasoline is burned in an internal combustion engine to CO2 and H2O, there is a tendency for many gasoline mixtures to burn unevenly. Such nonconstant and unsmooth combustion creates a "knocking" noise in the engine. Knocking signifies that the engine is not running as efficiently as it could. It has been found that certain hydrocarbons burn more smoothly than others in a gasoline mixture. In 1927 a scale that attempted to define the "antiknock" properties of gasolines was created. At that time, 2,2,4-trimethylpentane (commonly called "isooctane") was the hydrocarbon that, when burned pure in an engine, gave the best antiknock properties (caused the least knocking). This compound was assigned the number 100, meaning it was the best hydrocarbon to use. The worst hydrocarbon researchers could find in gasoline (which when burned pure gave the most knocking) was n -heptane, assigned the number 0. When isooctane and heptane were mixed, they gave different amounts of knocking depending on their ratio: The higher the percentage of isooctane in the mixture, the lower was the amount of knocking. Gasoline mixtures obtained from petroleum were burned for comparison. If a certain gasoline has the same amount of knocking as a 90 percent isooctane, 10 percent heptane (by volume) mixture, we now say that its "octane number" is 90. Hence, the octane number of a gasoline is the percent isooctane in an isooctane-heptane

mixture that gives the same amount of knocking as the gasoline being measured. Thus, a high octane number means a low amount of knocking.

Presently there are two octane scales, a research octane number (RON) and a motor octane number (MON). RON values reflect performance at 600 rpm, 148.8°C (125°F), and low speed. MON is a performance index of driving with 900 rpm, 51°C (300°F), and high speed. The station pumps now give the (R + M)/2 value. Regular is usually 87 to 89 and premium about 92 on this scale.

Certain rules have been developed for predicting the octane number of different types of gasoline, depending on the ratio of different types of hydrocarbons in the mixtures:

  1. The octane number increases as the amount of branching or the number of rings increases.
  2. The octane number increases as the number of double and triple bonds increases.

Additives

In 1922 two chemists working at General Motors, Midgley and Boyd, were looking at different substances that would aid the combustion of gasoline and help the knocking problems of engines. In other words, they were seeking methods of increasing the octane rating of gasoline without altering the

hydrocarbon makeup. They were also interested in cleaning up the exhaust of automobiles by eliminating pollutants such as unburned hydrocarbons and carbon monoxide through more complete combustion. By far the best substance that they found was tetraethyllead. Lead in this form aids in breaking carbon-carbon and carbon-hydrogen bonds . But the lead oxide formed in the combustion is not volatile and would accumulate in the engine if dibromoethane and dichloroethane were not added. In the environment the lead dihalide formed undergoes reaction by sunlight to elemental lead and halogen , both of which are serious pollutants.

For the past several years other additives have been tried. Ethyl alcohol has become popular. When 10 percent ethyl alcohol is mixed with gasoline it is called gasohol and it is popular in states with good corn crops, as the alcohol can be made from corn fermentation. An attractive alternative to tetraethyllead is now methyl t -butyl ether (MTBE). MTBE has been approved at the 7 percent level since 1979. From 1984 to 1995 its production grew by 25 percent per year, the largest increase of any of the top chemicals. The Clean Air Act of 1991 specifies that the gasoline must be at the 2.0 percent oxygen level. Thus, MTBE, ethyl t -butyl ether (ETBE), ethanol, methanol, and other ethers and alcohols had to be added to gasoline at higher levels. The product is called reformulated gasoline (RFG), and it may cut carbon monoxide levels and may help to alleviate ozone depletion. But improved

emission control systems may make this high-level input unnecessary. Currently MTBE accounts for 85 percent of the additive market, with 7 percent being ethanol and the remaining 8 percent split by other chemicals. In 1999 California took steps toward banning MTBE. In 2000 some factions called for a U.S. ban on MTBE and for increased use of ethanol to meet the oxygenate requirement. MTBE has been found in drinking water. But ethanol cannot be blended into gasoline at the refinery because it is hygroscopic and picks up traces of water in pipelines and storage tanks. Also, ethanol shipped away from the Midwest, where it is made by corn fermentation, would add to the cost of gasoline. Gasohol may increase air pollution because gasoline containing ethanol evaporates more quickly. Studies and debate continue.

Refinery Processes

There are processes that are used to refine petroleum into useful products. These are important processes for the gasoline fraction because they increase the octane rating. Some of these processes are used to increase the percentage of crude oil that can be used for gasoline. They were developed in the 1930s when the need for gasoline became great with the growing automobile industry. These processes are also keys in the production of organic chemicals. An example of each of these processes is given in Figure 2. One process is cracking. In catalytic cracking, as the name implies, petroleum fractions of higher molecular weight than gasoline can be heated with a catalyst and cracked into smaller molecules. This material can then be blended into the refinery gasoline feed.

Catalytic reforming leaves the number of carbon atoms in the feedstock molecules usually unchanged, but the resultant mixture contains a higher number of double bonds and aromatic rings. Reforming has become the principal process for upgrading gasoline. High temperatures with typical catalysts of platinum and/or rhenium on alumina and short contact times are used. A typical example is the reforming of dimethylcyclopentane to toluene. Straight-run gasoline can be reformed to as high as 40 to 50 percent aromatic hydrocarbons, of which 15 to 20 percent is toluene.

Although cracking and reforming are by far the most important refinery processes, especially for the production of petrochemicals, two other processes deserve mention. In alkylation, alkanes (hydrocarbons with no double or triple bonds) react with alkenes (hydrocarbons with double bonds) in the presence of an acid catalyst to give highly branched alkanes. In polymerization an alkene can react with another alkene to generate dimers, trimers, and tetramers of the alkene. As an example, isobutylene (C4) reacts to give a highly branched C8 alkene dimer.

Natural Gas

Natural gas can be as high as 97 percent methane, the remainder being hydrogen, ethane, propane, butane, nitrogen, hydrogen sulfide, and heavier hydrocarbons. A typical mixture contains 85 percent methane, 9 percent ethane, 3 percent propane, 1 percent butanes, and 1 percent nitrogen. Uses of natural gas by all industry include fuel (72%) and the manufacture of: inorganic chemicals including ammonia (15%), organic chemicals (12%), and carbon black (1%). The ethane and propane are converted to ethylene and propylene. The methane is purified and used to make a number of other chemicals.

see also Energy Sources and Production; Fire, Fuels, Power Plants; Fossil Fuels; Gasoline; Industrial Chemistry, Organic.

Philip J. Chenier

Bibliography

Chenier, Philip J. (2002). Survey of Industrial Chemistry, 3rd edition. New York: Kluwer Academic/Plenum Publishers.

Wittcoff, Harold A., and Reuben, Bryan G. (1996). Industrial Organic Chemicals. New York: Wiley.

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Petroleum Microbiology

Petroleum microbiology

Microorganisms play an important role in the formation, recovery, and uses of petroleum . Petroleum is broadly considered to encompass both oil and natural gas . The microorganisms of concern include bacteria and fungi.

Much of the experimental underpinnings of petroleum microbiology are a result of the pioneering work of Claude ZoBell. Beginning in the 1930s and extending through the late 1970s, ZoBell's research established that bacteria are important in a number of petroleum related processes.

Bacterial degradation can consume organic compounds in the ground, which is a prerequisite to the formation of petroleum.

Some bacteria can be used to improve the recovery of petroleum. For example, experiments have shown that starved bacteria, which become very small, can be pumped down into an oilfield, and then resuscitated. The resuscitated bacteria plug up the very porous areas of the oilfield. When water is subsequently pumped down into the field, the water will be forced to penetrate into less porous areas, and can push oil from those regions out into spaces where the oil can be pumped to the surface.

Alternatively, the flow of oil can be promoted by the use of chemicals that are known as surfactants. A variety of bacteria produce surfactants, which act to reduce the surface tension of oil-water mixtures, leading to the easier movement of the more viscous oil portion.

In a reverse application, extra-bacterial polymers, such as glycocalyx and xanthan gum, have been used to make water more gel-like. When this gel is injected down into an oil formation, the gel pushes the oil ahead of it.

A third area of bacterial involvement involves the modification of petroleum hydrocarbons , either before or after collection of the petroleum. Finally, bacteria have proved very useful in the remediation of sites that are contaminated with petroleum or petroleum by-products.

The bioremediation aspect of petroleum microbiology has grown in importance in the latter decades of the twentieth century. In the 1980s, the massive spill of unprocessed (crude) oil off the coast of Alaska from the tanker Exxon Valdez demonstrated the usefulness of bacteria in the degradation of oil that was contaminating both seawater and land. Since then, researchers have identified many species of bacteria and fungi that are capable of utilizing the hydrocarbon compounds that comprise oil. The hydrocarbons can be broken down by bacteria to yield carbon dioxide and water. Furthermore, the bacteria often act as a consortium, with the degradation waste products generated by one microorganism being used as a food source by another bacterium, and so on.

A vibrant industry has been spawned around the use of bacteria as petroleum remediation agents and enhancers of oil recovery. The use of bacteria involves more than just applying an unspecified bacterial population to the spill or the oilfield. Rather, the bacterial population that will be effective depends on factors such as the nature of the contaminant, pH, temperature , and even the size of the spaces between the rocks (i.e., permeability ) in the oilfield.

Not all petroleum microbiology is concerned with the beneficial aspects of microorganisms. Bacteria such as Desulfovibrio hydrocarbonoclasticus utilize sulfate in the generation of energy. While originally proposed as a means of improving the recovery of oil, the activity of such sulfate reducing bacteria (SRBs) actually causes the formation of acidic compounds that "sour" the petroleum formation. SRBs can also contribute to dissolution of pipeline linings that lead to the burst pipelines, and plug the spaces in the rock through which the oil normally would flow on its way to the surface. The growth of bacteria in oil pipelines is such a problem that the lines must regularly be scoured clean in a process that is termed "pigging," in order to prevent pipeline blowouts. Indeed, the formation of acid-generating adherent populations of bacteria has been shown to be capable of dissolving through a steel pipeline up to one-half an inch thick within a year.

See also Biosphere; Fuels and fuel chemistry; Petroleum detection; Petroleum, economic uses of; Petroleum extraction; Petroleum, history of exploration

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Petroleum Microbiology

Petroleum microbiology

Petroleum microbiology is a branch of microbiology that is concerned with the activity of microorganisms in the formation, recovery, and uses of petroleum. Petroleum is broadly considered to encompass both oil and natural gas. The microorganisms of concern are bacteria and fungi .

Much of the experimental underpinnings of petroleum microbiology are a result of the pioneering work of Claude ZoBell. Beginning in the 1930s and extending through the late 1970s, ZoBell's research established that bacteria are important in a number of petroleum related processes.

Bacterial degradation can consume organic compounds in the ground, which is a prerequisite to the formation of petroleum.

Some bacteria can be used to improve the recovery of petroleum. For example, experiments have shown that starved bacteria, which become very small, can be pumped down into an oil field, and then resuscitated. The resuscitated bacteria plug up the very porous areas of the oil field. When water is subsequently pumped down into the field, the water will be forced to penetrate into less porous areas, and can push oil from those regions out into spaces where the oil can be pumped to the surface.

Alternatively, the flow of oil can be promoted by the use of chemicals that are known as surfactants. A variety of bacteria produce surfactants, which act to reduce the surface tension of oil-water mixtures, leading to the easier movement of the more viscous oil portion.

In a reverse application, extra-bacterial polymers, such as glycocalyx and xanthan gum, have been used to make water more gel-like. When this gel is injected down into an oil formation, the gel pushes the oil ahead of it.

A third area of bacterial involvement involves the modification of petroleum hydrocarbons, either before or after collection of the petroleum. Finally, bacteria have proved very useful in the remediation of sites that are contaminated with petroleum or petroleum by-products.

The bioremediation aspect of petroleum microbiology has grown in importance in the latter decades of the twentieth century. In the 1980s, the massive spill of unprocessed (crude) oil off the coast of Alaska from the tanker Exxon Valdez demonstrated the usefulness of bacteria in the degradation of oil that was contaminating both seawater and land. Since then, researchers have identified many species of bacteria and fungi that are capable of utilizing the hydrocarbon compounds that comprise oil. The hydrocarbons can be broken down by bacteria to yield carbon dioxide and water. Furthermore, the bacteria often act as a consortium, with the degradation waste products generated by one microorganism being used as a food source by another bacterium, and so on.

A vibrant industry has been spawned around the use of bacteria as petroleum remediation agents and enhancers of oil recovery. The use of bacteria involves more than just applying an unspecified bacterial population to the spill or the oil field. Rather, the bacterial population that will be effective depends on factors, including the nature of the contaminant, pH , temperature, and even the size of the spaces between the rocks (i.e., permeability) in the oil field. Not all petroleum microbiology is concerned with the beneficial aspects of microorganisms. Bacteria such as Desulfovibrio hydrocarbonoclasticus utilize sulfate in the generation of energy. While originally proposed as a means of improving the recovery of oil, the activity of such sulfate reducing bacteria (SRBs) actually causes the formation of acidic compounds that "sour" the petroleum formation. SRBs can also contribute to dissolution of pipeline linings that lead to the burst pipelines, and plug the spaces in the rock through which the oil normally would flow on its way to the surface. The growth of bacteria in oil pipelines is such as problem that the lines must regularly scoured clean in a process that is termed "pigging," in order to prevent pipeline blowouts. Indeed, the formation of acid-generating adherent populations of bacteria has been shown to be capable of dissolving through a steel pipeline up to 0.5 in (1.3 cm) thick within a year.

See also Biodegradable substances; Economic uses and benefits of microorganisms

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Petroleum

Petroleum

Petroleum, also called crude oil, is a thick, flammable, yellow-to-black colored liquid. Petroleum was first found oozing out of rocks on Earth's surface. Hence, its name comes from the Latin words petra, meaning rock, and oleum, meaning oil. Petroleum is a hydrocarbon, an organic compound containing only carbon and hydrogen. It is a mixture of other hydrocarbon compounds such as natural gas, gasoline, kerosene, asphalt, and, probably most important, fuel oil.

Today, most scientists agree that oil was formed from the remains of plants and tiny animals that settled to the bottom of ancient oceans. These remains or sediments were buried by layers of mud and sand. Gradually, over millions of years, the weight of these accumulating layers built up great pressure and heat. The sediments packed together and became rock. The organic (once living) remains were changed into kerogen, a waxy substance that forms oil and natural gas. Most of the world's petroleum is more than 100 million years old, and is thus called a fossil fuel.

Unlike coal, which stays in one spot unless moved by Earth's shifting crust, oil slowly migrates upward through cracks and pores, or tiny holes, in nearby rocks. Eventually the oil reaches a solid layer of rock and becomes trapped underneath in a reservoir (pool). Natural gas often occurs in association with oil. Most of the world's petroleum reservoirs lie deep underground in structures called anticlinesgently folded layers of rock that form an arch above the deposit. Petroleum can also be trapped by fractured layers (or faults), salt formations, and stratigraphic (rock) traps. Some oil is also contained in shales (clay) and sands.

Location of world's supply

Although petroleum is found throughout the world, the Middle East possesses nearly two-thirds of all recoverable oil. Latin America contains about 13 percent, while the continents of Europe, North America, Asia, and Africa have only 4 to 8 percent each. Most North American oil is extracted in Alaska, Texas, California, Louisiana, and Oklahoma. The former Soviet republics, Saudi Arabia, and China are among the world's other leading oil producers. Their petroleum is sent to the United States for refining. While the United States possesses little of the world's petroleum supply (it must import more than 50 percent of its oil), it is one of the world's leading refiners. It is also the world's heaviest consumer of oil.

The importance of oil

Currently, petroleum is among our most important natural resources. We use gasoline, jet fuel, and diesel fuel to run cars, trucks, aircraft, ships, and other vehicles. Home heat sources include oil, natural gas, and electricity, which in many areas is generated by burning natural gas. Petroleum and petroleum-based chemicals are important in manufacturing plastic, wax, fertilizers, lubricants, and many other goods.

Different types of petroleum can be used in different ways. Refineries separate different petroleum products by heating petroleum to the point where heavy hydrocarbon molecules separate from lighter hydrocarbons. As a result, each product can be isolated and used for a specific purpose without waste. Thus, tar or asphalt, the dense, nearly solid hydrocarbons, can be used for road surfaces and roofing materials. Waxy substances called paraffins can be used to make candles and other similar products. And less dense, liquid hydrocarbons can be used for engine fuels.

The future of oil

The oil industry faces strong challenges. Environmental concerns are forcing companies to reevaluate all of their operations. Political unrest in the Middle East causes concern about access to oil supplies. And it is only a matter of time before oil supplies finally run out. According to some experts, that could be as soon as the mid-twenty-first century.

[See also Fossil and fossilization; Internal-combustion engine; Natural gas; Oil drilling; Oil spills; Plastics; Pollution ]

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petroleum industry

petroleum industry. The industry came to maturity in the 20th cent. but it has a longer history. One of the curiosities of the Ironbridge Gorge was a spring of natural bitumen discovered in 1786. In 1847 a petroleum seepage was discovered in a Derbyshire coal-mine; this yielded 300 gallons per day and required refining. James ‘Paraffin’ Young (1811–83), a technical chemist, developed the technology. He wrongly imagined that the petroleum had been condensed from the coal and began to distil oil-bearing coals and shales. The best was Torbanite, found near Bathgate (Scotland); Young patented his process in 1850 and founded the Scottish shale-oil industry. His technology was transferred to the petroleum industry.

In 1890 petroleum was discovered in Sumatra, and the Royal Dutch Company was formed. Marcus Samuel, an overseas merchant, began shipping Russian kerosene in 1892; he formed the Tank Syndicate the following year, the ancestor of Shell Transport and Trading Company (1897). By 1914 America controlled 65 per cent of the world's output.

In 1900 William Knox D'Arcy, a successful English speculator in Australian gold-mining, accepted an oil concession in Persia and formed the Anglo-Persian Oil Company. This was the origin of British Petroleum. In 1903 Admiral ‘Jackie’ Fisher decided that, as an experiment, fuel oil should be tried in two battleships, and this proved to be economic without impairing performance. In 1905 Burmah Oil Company contracted to supply fuel for the navy, but the naval race with Germany encouraged Winston Churchill and Fisher to secure strategic supplies of petroleum. Burmah and the government became the leading shareholders in Anglo-Persian, and in 1914 the navy's requirement for 277,000 tons of fuel oil was met.

Despite disarmament, the inter-war years witnessed an expansion of markets: the first mass-produced British cars and the development of aviation increased the demand for petrol. Major refineries were built in Britain at Llandarcy and Grangemouth as the potential of the petrochemical industry was recognized. Oil became the fuel of the world's merchant marine and important in electricity generation and domestic heating.

These developments became more significant after 1945. Petroleum was the fastest-growing component in the energy sector until 1973. For strategic reasons and to save imports the government favoured home-based refining. Capacity was increased, and new plant was built at Stanlow (1947) and Fawley (1951); in 1953 29 million tons were refined, and in 1980 133 million tons. Some refineries were very large by 1980: all but 3 per cent of output was refined in plants with a capacity of over 1 million tons, and three, Fawley (Esso), Kent (BP), and Shell Haven (Shell), were at 10 million tons or more.

In the 1970s the petroleum industry was affected by two major shocks. The first was increased prices engineered by OPEC, a cartel of the leading exporting countries, and this was followed by the Arab–Israeli War (1973). Prices, which had remained stable between 1950 and 1972 at £7/8 per ton despite inflation, increased more than fourfold by 1974 and thereafter to over £60 by 1979. Oil consumption fell, and the search for alternative oilfields grew apace. Viable oilfields were discovered in the North Sea off Scotland in 1971 and by November 1975 the Forties field was on stream. North Sea production, largely pioneered by American investment and technology, in 1981 exceeded home demand. Capital formation between 1976 and 1979 averaged over £2 billion. This expansion brought new jobs, new government revenue, compensated for the decline in manufacturing in the 1980s, and assisted the balance of payments.

John Butt

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Strategic Petroleum Reserve (Geologic considerations)

Strategic Petroleum Reserve (Geologic considerations)

The Strategic Petroleum Reserve (SPR) operated by the United States Department of Energy is the largest emergency supply system of its kind in the world. The SPR presently consists of four underground storage facilities located in salt domes along the coastal regions of Louisiana and Texas, and has a total storage capacity of 700 million barrels of oil. These sites were chosen from among the more than 400 potential areas along the Gulf Coast of the southern United States after careful review of their relative geologic characteristics.

A salt dome is a body of rock salt surrounded by layers of sedimentary rock. Geologic characteristics considered in selecting storage sites include: 1) area geologic activity, 2) structural size 3) existence of a trapping mechanism, 4) salt geometry, 5) salt composition, and 6) surface conditions.

Geologic activity in the area of potential storage sites must be well understood. The coastal plains along the Gulf Coast tend to be in a perpetual state of either subsidence or uplift, and the rate of such relative change must be measurable and predictable.

Structural size is a significant factor in SPR storage and location. Oil is stored in cylindrically shaped caverns constructed within the salt body that are typically 200 ft (61 m) in diameter and approximately 2,000 ft (610 m) in height or larger. A storage dome may consist of from one to more than twenty caverns in a three-dimensional pattern. Salt domes along the Gulf Coast typically range between being 0.5 to 5 miles in diameter and may be over 20,000 ft (6,096 m) in vertical height.

Fluid naturally flows through permeable strata just as water passes through a sponge. Oil will seek the highest possible level due to its relatively low specific gravity and would float to the surface if not otherwise trapped. A salt dome must be overlain by a trapping mechanism in order to be an environmentally safe and an economically secure storage site. Cap rock is a stratum of rock lacking permeability that can act as a trapping mechanism. However, not all salt domes are overlain by cap rock.

Salt domes are usually formed as the lighter salt rises through sedimentary strata above in a plastic state from a deeper source, while forming irregular-shaped and sometimes freestanding columns. The three-dimensional geometry of the salt diapir must be profiled in order to facilitate the design of the storage cavern pattern.

Ideally, the salt dome is composed of homogenous halite free of shale or other sedimentary rock. The presence of irregularities in composition may effect cavern construction and containment integrity.

Surface conditions play a role in site selection and project design, construction and ease of operation. Typically, such sites are located in marsh areas or beneath standing water. Proximity to existing infrastructure supporting oil import, delivery, and water handling is a major cost and operational consideration.

Though geologically complex, salt domes have proven to be a reliably safe and economically competitive means of storing oil for future use, and play a key role in national energy management and supply.

See also Petroleum detection; Petroleum, economic uses of; Petroleum extraction; Petroleum, history of exploration

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Pipelines, Early

PIPELINES, EARLY

PIPELINES, EARLY. The first oil pipelines eliminated the risk, expense, and uncertainty of boat and wagon transportation, increasing efficiency. However, they also prompted labor protest, business failures, rate wars, and monopolization. The first pipeline proposal was defeated in 1861 by opposition from the teamsters, workers who transported the oil and who saw their occupation threatened. In 1862 the first successful pipeline, one thousand feet long, began operations at Tarr Farm in Oil Creek, Pennsylvania. It was operated by Barrows and Company. In 1865 Samuel Van Syckle built a 5.25-mile pipeline from Pithole, Pennsylvania, that could carry eighty-one barrels of oil an hour, the equivalent of three hundred teams working ten hours. Disgruntled teamsters cut the line in several places, but Van Syckle managed to complete that line and another. Other businesses followed suit.

Although the pipelines reduced the cost of shipping oil to the uniform rate of $1.00 per barrel, they proved to be monopolies of the worst sort, keeping their prices just below the teamsters' to eliminate teaming, yet high enough so that producers derived little benefit. Teamsters left the fields in droves, and those who remained made threats and even set fire to some tanks. Eventually, the teamsters reduced their rates, but to no avail. Van Syckle's partners suffered financial failure not long after completing their line. It was bought and combined with another in 1867 to form the first great pipeline company, the Allegheny Transportation Company. During the next few years, short pipelines multiplied, crossing and paralleling one another in every direction. Competition was keen, and ruinous rate wars ensued, soon resulting in the consolidation of the lines.

BIBLIOGRAPHY

Boatright, Mody Coggin, and William A. Owens. Tales From the Derrick Floor: A People's History of the Oil Industry. Garden City, N.Y.: Doubleday, 1970.

Giddens, Paul H. The Birth of the Oil Industry. Use and Abuse of America's Natural Resources Series. 1938. Reprint, New York: Arno Press, 1972.

Miller, Ernest C. Pennsylvania's Oil Industry. 3d ed. Pennsylvania History Studies, no. 4. Gettysburg: Pennsylvania Historical Association, 1974.

Paul H.Giddens/d. b.

See alsoPetroleum Industry ; Petroleum Prospecting and Technology .

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Petroleum

Petroleum

Abu Dhabi National Oil Company

Amerada Hess Corporation

Amoco Corporation

Ashland Oil, Inc.

Atlantic Richfield Company

British Petroleum Company Plc

Burmah Castrol Plc

Chevron Corporation

Chinese Petroleum Corporation

Citgo Petroleum Corporation

The Coastal Corporation

Compañía Española De Petröleos S.A.

Conoco Inc.

Cosmo Oil Co., Ltd.

Den Norske Stats Oljeselskap As

Diamond Shamrock, Inc.

Egyptian General Petroluem Corporation

Empresa Colombiana De Petröleos

Ente Nazionale Idrocarburi

Entreprise Nationale Sonatrach

Exxon Corporation

General Sekiyu K.K.

Idemitsu Kosan K.K.

Imperial Oil Limited

Indian Oil Corporation Ltd.

Kanematsu Corporation

Kerr-Mcgee Corporation

Koch Industries, Inc.

Kuwait Petroleum Corporation

Libyan National Oil Corporation

Lyondell Petrochemical Company

Mapco Inc.

Mitsubishi Oil Co., Ltd.

Mobil Corporation

National Iranian Oil Company

Neste Oy

Nigerian National Petroleum Corporation

Nippon Mining Co., Ltd.

Nippon Oil Company, Limited

Occidental Petroleum Corporation

Oil And Natural Gas Commission

Ömv Aktiengesellschaft

Pennzoil Company

Pertamina

Petro-Canada Limited

Petrofina

PetróLeo Brasileiro S.A.

PetróLeos De Portugal S.A.

PetróLeos De Venezuela S.A.

PetróLeos Del Ecuador

PetróLeos Mexicanos

Petroleum Development Oman Llc

Petronas

Phillips Petroleum Company

Qatar General Petroleum Corporation

Repsol Sa

Royal Dutch Petroleum Company/The Shell Transport And Trading Company P.L.C.

Sasol Limited

Saudi Arabian Oil Company

Shell Oil Company

Showa Shell Sekiyu K.K.

Société Nationals ELF Aquitaine

Sun Company, Inc.

Texaco Inc.

Tonen Corporation

Total Compagnie Française Des Pétroles S.A.

Türkiye Petrolleri Anonim Ortakligi

Ultramar Plc

Unocal Corporation

Usx Corporation

The Williams Companies, Inc.

YPF Sociedad AnöNima

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petroleum

petroleum (crude oil) Fossil fuel that is chemically a complex mixture of hydrocarbons. It accumulates in underground deposits and the chemical composition of petroleum strongly suggests that it originated from the bodies of long-dead organisms, particularly marine plankton. Petroleum is rarely found at the original site of formation, but migrates laterally and vertically until it is trapped. Most petroleum is extracted via oil wells from reservoirs in the Earth's crust sealed by upfolds of impermeable rock or by salt domes which form traps. In the first stage of petroleum refining, the heavier hydrocarbons, which usually have higher boiling points than lighter ones, are distilled. The next stage is cracking, which breaks the heavy hydrocarbons down into more economically useful products, such as petrol and paraffin. Purification of the various products to remove impurities, such as sulphur and nitrogen compounds, completes the refining process. The most versatile end products are ethene and propene, which are widely used in the plastics and chemical industries. See also natural gas

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Petroleum Industry

PETROLEUM INDUSTRY


Crude oil seeps from the earth's crevices and fissures, and accumulates in pools on surface rocks; it has been used as a fuel source since approximately 3500 b.c.. In the early nineteenth century, crude oil was collected from rock pools and primitively refined for commercial use. Dr. Abraham Gesner of Pittsburgh, inventor of kerosene lamp oil, formed the Pennsylvania Rock Oil Company in 1854. In 1859 Edwin Drake and W.A. Smith drilled the first U.S. well, specifically to find petroleum, in Titusville, (Oil Creek) Pennsylvania. Because crude oil was unsuitable for direct use, it had to be refined and converted into such products as kerosene, gasoline, and motor oil. In 1860 D.S. Stombs and Julius Brace of Virginia introduced and patented a semi-continuous refining system. In 1861 the first full-fledged petroleum refinery in the United States opened; it churned out mostly kerosene.

The legendary oil tycoon, John D. Rockefeller (18391937), began oil operations in 1863. Based in Cleveland, Ohio, Rockefeller founded the Standard Oil Company on June 10, 1870. Skillfully using the laws of incorporation and assembling trusts, Rockefeller eventually acquired competing companies across the country and established a very effective monopoly. By 1879 the 30 companies that belonged to the Standard Oil trust controlled 80 percent of the refineries and 90 percent of the pipelines in the U.S. petroleum industry. This giant trust leveraged its clout with the railroads to negotiate favorable freight rates.

Rockefeller was the biggest, but not the only, oil entrepreneur. In 1897 Joseph S. Cullinan organized the first pipeline and refinery in Corsicana in Texas. Cullinan also successfully pioneered the use of petroleum as a diesel fuel for locomotives and as a dust settler for streets.

The main reason for increased public demand for petroleum was the proliferation of the gasoline-powered automobile, various renditions of which sprang up in the late nineteenth century. Machinist and inventor Henry Ford employed assembly line techniques to lower the cost of each unit of production, making automobiles available to more consumers, and thus increasing the demand for gasoline.

Advancements in technology during World War I (19141918) escalated demand for petroleum. Farmers were able to increase productivity with gas powered tractors; new asphalt highways carried diesel-powered trucks delivering goods across the nation. New products derived from refined petroleum included plastics, synthetic fiber and rubber. Increasing demand for new products promoted a steadily increasing supply of new crude oil.

By 1992 the Chevron Oil Company was the largest petroleum refiner in the United States and was a huge producer of oil in terms of profits and sales. Chevron began in 1882 as Standard Oil of California, and quickly developed internationally. The second largest capacity refiner in the United States was Exxon Corporatoin. Exxon came about through the 1934 merger of Standard Oil Company of New Jersey and the Anglo American Oil Company Ltd. Exxon grew remarkably throughout the twentieth century. By 1993 it was the industry leader with profits totaling $5.28 billion. Profits of the Mobile Corporation ranked second at $2.08 billion from sales of $56.6 billion. Other industry leaders included Texaco Inc., Shell Oil Co., Chevron Corp., Atlantic Richfield Co., Conoco Inc., Amoco Corp., and BP America Inc.

Since the early 1950s natural gas was the refineries' largest end-product. Residential and commercial users consumed the largest proportion of natural gas. Industry consumed the next largest amount with power generation a distant third in natural gas consumption. (Food, paper, chemical, and petroleum refining industries all consume vast amounts of natural gas.)

In 1997 U.S. refineries produced an average of 14.63 million barrels of refined petroleum products each day. The United States supplied over one-fifth of the world's refined petroleumroughly equal to the production of all the European countries combined. The U.S. refineries employed approximately 93,000 people in 1998.

During the first four decades of the twentieth century, the heyday of internal combustion in the United States, U.S. oil reserves were gradually depleted. Accordingly the oil industry became among the first to undergo "globalization." The Standard Oil Company anticipated this development back in 1888 when it established its first foreign affiliate, the Anglo American Oil Company Limited, headquartered in London. Although U.S. and European companies continued to reap most of the profits of petroleum production, by the mid-1950s much of the world's petroleum was being pumped in a small group of oil-producing countries, most of them in the Persian Gulf. In an effort to gain control of its petroleum reserves, these countries founded the Organization of Petroleum Exporting Countries (OPEC) in 1960. OPEC set a standard cost for producing a barrel of oil in all member countries. The minimum price per barrel was based on the tax-paid cost per barrel plus a profit margin. New petroleum companies could not undermine OPEC's dominant market by offering lower prices. In OPEC's early years, other petroleum producing countries used the organization more as a defensive instrument to stabilize the market. But plagued with oil shortages and political disruptions in the Middle East during the 1970s, non-OPEC refineries and suppliers began to rely more heavily on their own private inventories.

Beginning in the 1970s, many developments led to a sharp decline in world demand for OPEC oil. Several major factors, including environmental concerns, brought about changes; most changes were not in OPEC's favor. Revolutionary innovations in the oil industry drastically reduced the risk and expense of finding and developing oil and expanded output among non-OPEC producers. For example major U.S. oil companies owned and operated exploration and drilling sites around the world. Exploration, production, and transportation of petroleum in the United States was handled by private companies under the regulation of federal, state, and local commissions. Strategies such as this helped to boost the world's oil supplies at the expense of OPEC's market share. By the 1980s OPEC was a shadow of its former self.

Refining and production of oil and gas has become an exacting engineering science. The United States was a pioneer in petroleum refining, exploration, and perfected most techniques and procedures before other nations. U.S. petroleum refiners have been regarded as the world leaders. However, it remains to be seen as to whether shifting political boundaries will allow U.S. refiners to compete directly with foreign companies for a larger market share.

See also: Exxon Corporation, OPEC Oil Embargo, John D. Rockefeller, Standard Oil Company, Texas Company


FURTHER READING

Chernow, Ron. "The Monopoly That Went Too Far." Business Week, May 18, 1998.

Hast, Adele, ed. International Directory of Company Histories. Chicago: St. James Press, 1991, s.v. "Exxon."

Hillstrom, Kevin, ed. Encyclopedia of American Industries. Farmington Hills, MI: The Gale Group, 1994, s.v. "Petroleum Refining and Related Areas."

Mack, Toni, James R. Norman, Howard Rudnitski, and Andrew Tanzer. "History is Full of Giants That Failed to Adapt." Forbes, February 28, 1994.

Monthly Labor Review. Washington, DC: U.S. Bureau of the Census, July 1993.

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petroleum

petroleum (crude oil) In geology, a term used generally to describe naturally occurring liquid hydrocarbons formed by the anaerobic decay of organic matter. Oil is rarely found at its original site of formation but migrates to a suitable structural or lithological trap. Petroleum is frequently associated with salt water and with gaseous hydrocarbons. See also NATURAL GAS; and OIL SHALE.

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petroleum

pe·tro·le·um / pəˈtrōlēəm/ • n. a liquid mixture of hydrocarbons that is present in certain rock strata and can be extracted and refined to produce fuels including gasoline, kerosene, and diesel oil; oil.

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petroleum

petroleum •columbium •erbium, terbium, ytterbium •scandium • compendium •palladium, radium, stadium, vanadium •medium, tedium •cryptosporidium, cymbidium, idiom, iridium, rubidium •indium •exordium, Gordium, rutherfordium •odeum, odium, plasmodium, podium, sodium •allium, gallium, pallium, thallium, valium •berkelium, epithelium, helium, nobelium, Sealyham •beryllium, cilium, psyllium, trillium •linoleum, petroleum •thulium • cadmium •epithalamium, prothalamium •gelsemium, premium •chromium, encomium •holmium • fermium •biennium, millennium •cranium, geranium, germanium, Herculaneum, titanium, uranium •helenium, proscenium, rhenium, ruthenium, selenium •actinium, aluminium, condominium, delphinium •ammonium, euphonium, harmonium, pandemonium, pelargonium, plutonium, polonium, zirconium •neptunium •europium, opium •aquarium, armamentarium, barium, caldarium, cinerarium, columbarium, dolphinarium, frigidarium, herbarium, honorarium, planetarium, rosarium, sanitarium, solarium, sudarium, tepidarium, terrarium, vivarium •atrium •delirium, Miriam •equilibrium, Librium •yttrium •auditorium, ciborium, conservatorium, crematorium, emporium, moratorium, sanatorium, scriptorium, sudatorium, vomitorium •opprobrium •cerium, imperium, magisterium •curium, tellurium •potassium • axiom • calcium •francium • lawrencium • americium •Latium, solatium •lutetium, technetium •Byzantium • strontium • consortium •protium • promethium • lithium •alluvium, effluvium •requiem • colloquium • gymnasium •caesium (US cesium), magnesium, trapezium •Elysium • symposium

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