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The History of Oil

Important Dates in the History of the Oil Industry

1859: First oil well drilled at Titusville, Pennsylvania.

1865: John D Rockefeller buys out his partner in one of Pennsylvania’s most successful refinery businesses for $72,500 and in 1870 forms the Standard Oil Company (by 1881 Standard controlled over 80% of the US oil industry and was responsible for over a quarter of US crude oil production).

1871-72: First oil wells drilled in Baku by the Nobel brothers, in what is now Azerbaijan – the beginnings of the Soviet oil industry.

1886: Burmah Oil founded by Scottish merchants, headquartered in Glasgow. First operations were oil production and refining in Burma (Myanmar).

1891: Marcus Samuel, head of a successful family trading company based in the East End of London, signs a deal with the Rothschilds and the Nobels who controlled the Russian oil industry, giving him the sole right to transport Baku kerosene eastwards through the Suez Canal. The first ships were all named after sea shells, in recognition of Marcu’s father who started in business as a shell merchant (on 18th October 1897 the”Shell” Transport and Trading Company came into existence).

1885: Aeilko Jns Zijlker of the East Sumatra Tobacco Company discovers oil in Sumatra leading, in 1890, to the launching of the Royal Dutch Company.

1885: Zijkler dies shortly afterwards and the reins were handed to Jean Baptiste. 1885: August Kessler who dies in 1900, in turn succeeded by Henri Deterding.

1885: By this time Shell and Royal Dutch together controlled over half Russian and Far Eastern oil exports.

1901: Oil found in Mexico.

1907: After years of negotiation, Shell and the Royal Dutch Company were combined in the ratio 60:40. Both became holding companies with RD holding 60% of the stock in the operating companies and Shell 40% (there was no Group Board as such, but a Committee of Managing Directors composed of the active members of the Boards of both companies).

1908: Oil discovered in Persia (Iran) by Burmah Oil.

1909: The newly founded Anglo-Persian Oil Company went public with Burmah Oil taking the majority of the shares (by 1912 the company was in financial difficulties).

1911: The US Supreme Court orders the dissolution of the Standard Oil Trust under the 1890 Sherman Anti-Trust Act. Seven new entities are formed in its place: Standard Oil of New Jersey (eventually Exxon), Standard Oil of New York (Mobil), and Standard Oil of California (Chevron), Standard Oil of Ohio (eventually the US arm of BP), Standard Oil of Indiana (Amoco), Continental Oil (Conoco) and Atlantic, which became part of Atlantic Richfield Company (ARCO).

1913: Oil found in Venezuela.

1914: The British Government, led by Churchill and driven by the rapid expansion of oil powered battleships, acquired 51% of Anglo-Persian for £2.2m in order to secure fuel supplies for the Admiralty.

1922: The Neutral Zone delineated by the British between Saudi Arabia and Kuwait to accommodate the nomadic Bedouin people.

1927: Oil found in Iraq.

1938: Oil found in Kuwait and Saudi Arabia.

1948: Standard Oil of New Jersey (Exxon) joins Socony-Vaccum (Mobil) and Standard Oil of California (Chevron) and Texaco in ARAMCO to exploit the Saudi Arabian oil reserves.

1951: Anglo-Persian nationalised by Mohammed Mossedegh. Subsequent British embargo effectively halts Iranian oil exports (the first post war oil crisis).

1954: Anglo-Persian re-named British Petroleum.

1956: The Suez crisis: Nasser takes control of the Suez Canal from French and British interests, temporarily disrupting supplies (the second post war oil crisis).

1956: Oil discovered in Algeria and Nigeria.

1957: BP, keen to reduce its dependence on the Middle East, explores in Alaska togeth er with Sinclair Oil. In 1967 ARCO finds the first oil reserves in Prudhoe Bay.

1959: Groningen gas field discovered in the Netherlands.

1960: OPEC founded in Baghdad by Saudi Arabia, Iran, Iraq, Venezuela and Kuwait in response to aggressive price cutting by the Soviets and Standard Oil of New Jersey. The five founding members were at the time the source of over 80% of the world’s crude exports. The OPEC members agreed to defend the price of oil with each member country agreeing to insist that companies consult them on pricing levels.

1965: OPEC transfers its headquarters from Geneva to Vienna.

1967: Six Day War - Suez Canal closed (the third post war oil crisis).

1969: Oil discovered in the North Sea.

1973: The first oil price shock: the Arab oil embargo triggered the 20th century’s first significant, sustained increase in oil prices, shattering the consuming countries ‘complacency about supply security and low prices (oil price rise from $2.90/bbl in September to $ 11.65 in December).

1974: Burmah Oil declared bankrupt - bailed out by British government who paid 178m for Burmah’s 25% stake in BP.

1979: Iranian revolution. Oil prices surge to more than $35/bbl. Shah of Iran goes into exile and Ayatollah Khomeni takes power (Iranian exports case), 1979/81: The second oil price shock: the Iranian Revolution followed by the Iran/Iraq war triggered a tripling in prices (oil price rises from $ 13 to $34/bbl (the fifth post-war oil crisis).

1982: OPEC sets first quotas. In 1982 OPEC, which had been producing 31m barrels per day in 1979, set an output limit for the group of 18 million barrels per day with an output quota for each country with the exception of Saudi Arabia, which would adjust its production to support the system.

1983: OPEC cuts prices by 15% to $29/bbl in the face of rising global production, particularly in the North Sea.

1985-86: The third oil price shock: In 1985/86, Saudi Arabia’s jettisoning of the swing producer role and adoption of netback pricing (see overleaf ) triggered a sharp drop in prices. OPEC introduces ‘netback pricing’ to gain market share; (these deals give refiner buyers a guaranteed return, so sellers resort to them in order to push volume into a weak market). OPEC manages to increase production, but the price of oil collapses and oil revenues plummet.

1990: Iraq invades Kuwait; OPEC countries increase production to help stabilize shortfall.

1990-91: Gulf War (the sixth post-war oil crisis).

1997: OPEC increases production by 10% at an OPEC conference in Jakarta.

1998: Asian economic downturn and mild winter contribute to rising inventories; the price of oil drops to $ 10/bbl. OPEC agrees production cuts in March and June. Non- OPEC Mexico attends OPEC conference for first time in March (attends again in June, joined by representatives from the Russian Federation and Oman).

1999: OPEC agrees further cuts in March. Price for Brent blend rises to above $20/bbl from single digits in February.

2000: OPEC increases quotas four times in April, July, September and October in response to prices spiking over $30/bbl.

2006: Venezuelan government decided to bring all active oil-producing operations run by foreign companies in Venezuela effectively under state control.

2006-07: Sustainable growth in Asian Economies India, China, Japan and Korea and increase in annual GDP by 10.5% -13.3%.

2008: The highest oil price in the oil history. Oil prices rose to a fresh record high, hitting new peaks for the history of oil, at almost US$ 145.00 a barrel, as a weak dollar overshadowed an increase in US crude inventories (the dollar hit record low against the euro and the greenback fell below 100 Japanese yen for the first time in 12 years).

2009-2011: The oil prices increased from $40 in 2007 to $70 & $85 in 2010. Today, reports that OPEC aims to call for further compliance before considering any output cut if oil falls below US$70 a barrel may be at least temporarily rendered redundant by a recent rebound in the price of crude.
Commentators have suggested that as the recession-combating stimuli from governments worldwide is gradually withdrawn, there could be a slowdown in the hoped for global economic recovery. Certainly, the fall of the oil price below US$70 in early February, bringing it to its lowest level for nearly four months, took it out of the price range (US$70-US$90) that OPEC considers desirable at present - both for its members and for consumers.
However, the cold snap in the US, not to mention the continuing tension over the Iranian nuclear policy, has pushed the price of oil back over the US$70 mark. In any case, OPEC spokesmen had indicated that only a continued decline for five or more weeks would be likely to spur the compliance call so, for the moment, the US weather seems to have come to the rescue.