January 23, 1895 – Standard Oil seals Fate of Oil Exchanges

The Standard Oil Company purchasing agency in Oil City, Pennsylvania, notifies independent producers it will only buy their oil at a price “as high as the markets of the world will justify” — and not necessarily “the price bid on the oil exchange for certificate oil.”

Standard Oil’s action will bring an end to a popular “paper oil” market of brokers and buyers.

Before the 1870s, oil buyers took on-site delivery in wooden barrels they provided. Soon a rapidly growing pipeline infrastructure spawned “oil certificates” or “pipeline certificates” — negotiable instruments based on the number of barrels in a pipeline issued for delivery in kind. Since these certificates could be bought and sold, trading flourished in oil exchanges at Titusville, Petroleum Center, and Oil City.

“The necessity of a suitable place in which to trade oil certificates was one that followed the improved method of transportation, and was in fact apparent from the early stages of oil commerce,” explains an Oil City 1896 Derrick Souvenir Book.

As many as 40 million barrels of oil are represented by certificates. But with Standard Oil buying 90 percent of production and setting its own price independent of oil certificates, the company’s edict will end oil exchanges. Marginalized by Standard Oil pricing strategy, they close one by one. The petroleum industry’s oldest exchange, established in 1871 in Titusville, is dissolved in 1897.

“During the later years the excitement of speculation has been greatly eliminated from the oil business, and this has so reduced the business as to make it a shadow of its former greatness,” the 1896 Derrick concludes about the Oil City exchange. “Its members are scattered far and wide, but the glory of the days when fortunes were made and lost in hours and minutes, will ever be a memory with them and thousands of others.”

Learn more about the role of pipelines, oil exchanges and certificate speculators in “Oil Scouts — Oil Patch Detectives.”

January 24, 1895 – Pure Oil Company founded by Independent Producers

The Pure Oil Company is formed by Pennsylvania oil region independent producers, refiners and pipeline operators.

With its headquarters in Pittsburgh, the company is organized to counter Standard Oil Company’s dominance. It is the second vertically integrated oil company — after Standard — in the region, according to historian Neil McElwee.

Beginning in March 1896, Pure Oil markets illuminating oil by tank wagon on the streets of Philadelphia and New York in direct competition with Standard Oil. “The organizers of the firm were politically savvy and connected. They used a committee of the Congress, the Industrial Commission, to advance their competitive position,” McElwee explains in an article for Oil150.

In 1914 in Columbus, Ohio, oilmen Fletcher Heath and Beman Dawes start the Ohio Cities Gas Company. Dawes believes Pure Oil’s pipelines and producing properties compliment his company’s growing oil production. His company acquires Pure Oil. “The Pennsylvania Pure Oil firm in 1917 passed into history,” McElwee notes.

“Aware of a pressing need to establish a brand and corporate identity more competitive in the marketplace, Dawes renamed Ohio Cities Gas in 1920,” McElwee concludes. The Ohio firm adopts the old Pennsylvania name, Pure Oil. Union Oil Company of California purchases Pure Oil in 1965. Chevron Corporation purchases Union Oil in 2005.

January 26, 1931 – Third Well reveals Giant East Texas Oilfield

In Gregg County, Texas, John Farrell, W. A. Moncrief, and Eddie Showers bring in the Lathrop No. 1 with a flow of 320 barrels of oil per hour from a depth of 3,587 feet.

The Lathrop No. 1 well is located 25 miles north of Rusk County’s Daisy Bradford No. 3 and 15-miles north of the Lou Della Crim No. 1.  At first, the great distance between these discoveries convinces geologists, petroleum engineers – and all of the major oil companies – that the wildcat wells are separate oilfields.

However, to the delight of many small, struggling  farmers, it will become apparent the wells are part of  a massive oil-producing field. Further development reveals the 130,000-acre East Texas oilfield stretching 42 miles long and four to eight miles wide.

At the end of 1933 there are 11,875 producing wells owned by 1,715 different operators, all drawing on the Woodbine Sand Formation. Over production drives the price of oil from $1.25 per barrel to as low as 25¢ per barrel. The region’s unique history is exhibited at the East Texas Oil Museum in Kilgore.

This remains the largest and most prolific oil reservoir ever discovered in the contiguous United States. Learn more at “H.L. Hunt and the East Texas Oilfield.”

January 29, 1850 – Canadian brings New Resources to Light

Canadian Abraham Gessner is issued a patent for “obtaining of illuminating gas from compact and fluid bitumen (crude oil), asphaltum, chapapote, or mineral pitch as found in mines, quarries and springs in the earth.”

Gessner licenses his “coal gas” distillation apparatus to manufacturers for about $1 per burner, declaring his gas “affords the cleanest, safest, and most agreeable light ever used.”

The manufactured gas industry will survive into the mid-20th century. Gessner’s research will lead him four years later to “a new and useful manufacture or composition of matter, being a new liquid hydrocarbon, which I denominate Kerosene.”

January 29,  1886 – Birth of Internal Combustion Automobile

German mechanical engineer Karl Benz applies for a patent for his Benz Patent Motorwagen — a three-wheeler with a one-cylinder, four-stroke gasoline engine. His “Fahrzeug mit Gasmotorenbetrieb” (vehicle with gas engine) patent is recognized as the world’s first patent for a practical internal combustion engine powered automobile.

January 29, 1969 – Santa Barbara Spill leads to Modern Environmental Movement

After drilling 3,500 below the ocean floor, a Union Oil Company drilling platform six miles off Santa Barbara, California, suffers a blowout — spilling between 80,000 barrels and 100,000 barrels of oil into the Pacific Ocean and onto surrounding beaches.

“Riggers began to retrieve the pipe in order to replace a drill bit when the ‘mud’ used to maintain pressure became dangerously low,” explains a report by the University of California, Santa Barbara (UCSB).

“A natural gas blowout occurred. An initial attempt to cap the hole was successful but led to a tremendous buildup of pressure. The expanding mass created five breaks in an east-west fault on the ocean floor, releasing oil and gas from deep beneath the earth.”

It takes skilled oilfield workers 12 days to control the well by pumping chemical mud down the bore hole at a rate of 1,500 barrels an hour.

“In the spring following the oil spill, Earth Day was born nationwide,” the UCSB report explains. “Many consider the publicity surrounding the oil spill a major impetus to the environmental movement.”

Although the U.S. Environmental Protection Agency is established the following year — joining several other federal agencies regulating the industry — public opinion turns against offshore exploration.

“Images of spilled oil bubbling to the ocean’s surface and covering birds and other wildlife have firmly cemented in much of the public mind that offshore drilling is dangerous, that it inflicts tremendous environmental harm, and that its costs are not worth its benefits,” notes Drew Thornley in Energy & the Environment: Myths & Facts.

“Thus the means by which the U.S. obtains about 25 percent of the nation’s natural gas production and about 24 percent of its oil production have become, understandably, linked to environmental degradation,” he adds. But according to the National Research Council, natural processes are responsible for more than 60 percent of the petroleum that enters North American ocean waters — and more than 45 percent of the petroleum that enters ocean waters worldwide.

Researchers have found that natural offshore seeps near Goleta, California, alone have leaked up to 25 tons of oil each day — for the last several hundred thousand years.

“Ironically, research shows that drilling can actually reduce natural seepage, as it relieves the pressure that drives oil and gas up from ocean floors and into ocean waters,” says Thornley.

In 1999, two peer-reviewed studies found that natural seepage in the northern Santa Barbara Channel “was significantly reduced by oil production,” he concludes. Researchers found that seepages declined 50 percent over two decades because, “as oil was pumped from the reservoir, the pressure that drives natural seepage dropped.”

A May 2009 study by researchers at Woods Hole Oceanographic Institution and UCSB was the first to quantify the amount of oil residue in seafloor sediments that result from natural petroleum seeps off Santa Barbara. It shows the oil content of sediments is highest closest to the seeps and tails off with distance, creating an oil fallout shadow. The next step for the research team involves investigating why microbes consume most, but not all, of the compounds in the oil.

Exhibits at the Santa Barbara Maritime Museum today educate young people about California’s offshore industries, including the diving technologies used in the Santa Barbara Channel. Other exhibits explain the continuing process of oil emerging from natural seeps in the channel — today visited by tourists in boats.

Learn more about exploration and production technologies at the Ocean Star Offshore Drilling Rig & Museum.