1 introduction - history

7/28/2019 1 Introduction - History

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Petroleum EconomicsBy Dr. IMS

Acknowledgement: Elias Abllah


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History


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Oil history timeline

3000 BCThe Mesopotamians of that era used rock oilin architectural adhesives, shipcaulks, medicines, and roads.

2000 BCThe Chinese refined crude oil for use in lighting and heating.

600700 ADArab and Persian chemists discovered that petroleums lighter elements could

be mixed with quicklime to make Greek fire, the napalm of its day.

1750A French military officer noted that Indians living near Fort Duquesne (nowthe site of Pittsburgh) set fire to an oil-slicked creek as part of a religiousceremony. As settlement by Europeans proceeded, oil was discovered in many

places in northwestern Pennsylvania and western New Yorkto the frequentdismay of the well-owners, who were drilling for salt brine.


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Mid1800sExpanding uses for oil extracted from coal and shale began to hint atthe value of rock oil, encouraging the search for readily accessiblesupplies.

1859Oil was first discovered when a homemade rig drilled down 70 feetand came up coated with oil. This rig was near Titusville (innorthwestern Pennsylvania) and was owned by "Colonel" Edwin L.Drake.

1890sMass production of automobiles began creating demand for gasoline.Before this, kerosene used for heating had been the main oil product.

1920With 9 million automobiles in the United States, gas stations wereopening everywhere.


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1950presentWith the growing use of automobiles, oil became our most usedenergy source .

1960The Organization of Petroleum Exporting Countries (OPEC)was formed by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.The group has since grown to include 11 member countries.

1970Production of petroleum (crude oil and natural gas plant liquids)in the U.S. lower 48 States reached its highest level at 9.4million barrels per day. Production in these States has beendeclining ever since.

1972Oil well productivity for the Nation reached a high of 18.6

barrels per day per well.
http://tonto.eia.doe.gov/kids/energy.cfm?page=kids_glossaryhttp://tonto.eia.doe.gov/kids/energy.cfm?page=kids_glossary


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1973

Referred to as theArab Oil Embargo, several Arab OPECnations embargoed, or stopped selling, oil to the United States

and Holland to protest their support of Israel in the Arab-IsraeliYom Kippur War. Later, the Arab OPEC nations added SouthAfrica, Rhodesia, and Portugal to the list of countries that wereembargoed. Arab OPEC production was cut by 25 percent,causing some temporary shortages and the tripling of oil prices.Some filling stations ran out of gasoline, and cars had to wait in

long lines for gasoline.

1973

In reaction to the Arab Oil Embargo of 1973, Congress passedlaws that tried to protect consumers from gasoline shortages andhigh prices. The price controls of the Emergency PetroleumAllocation Act of 1973 were generally considered a failure, andthey were later repealed.


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1975

Congress passed the Energy Policy and Conservation Act of

1975 aimed at increasing oil production by giving priceincentives. This act also created the Strategic Petroleum Reserve(SPR) and required an increase in the fuel efficiency (miles pergallon) of automobiles.

197880The Iranian Revolution, which began in late 1978, resulted in adrop of 3.9 million barrels per day of crude oil production fromIran from 1978 to 1981. At first, other OPEC countries made upfor the drop in Iranian production. In 1980, the Iran-Iraq War

began, and many Persian Gulf countries reduced output as well.By 1981, OPEC production was about one-fourth lower than ithad been in 1978, and prices had doubled.


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198085

OPEC kept prices high by producing less oil. Saudi Arabia acted as a swingproducer, cutting more production than any other OPEC country. But highprices caused less oil to be used. For example, cars became smaller, using

less gasoline. The drop in oil consumption meant that less oil needed to beproduced. Thus, oil production from Saudi Arabia fell from 9.9 millionbarrels per day in 1980 to 3.4 million barrels per day in 1985.

1981

The U.S. Government responded to the oil crisis of 1978-1980 by removing

price and allocation controls on the oil industry. For the first time since theearly 1970s, market forces (supply and demand) set domestic crude oil

prices.

1986

In 1986, Saudi Arabia stopped holding back production, and other OPEC

members increased production. This caused an oil glut, and prices werealmost cut in half. Oil consumption grew quickly in the late 1980s because

prices remained low.


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1988

Alaskas production at Prudhoe Bay peaked at 2.0 millionbarrels per day and fell to 1.0 million barrels per day in 1999.

By then, U.S. total output had dropped to 7.8 million barrels perday, 31% below its peak.

199091

Iraq invaded Kuwait on August 2, 1990, causing crude oil and

product prices to rise suddenly and sharply. Prices rose evenhigher when the United Nations (UN) limited the amount of oilthat could be purchased from these countries. Between the endof July and August 24, 1990, the world price of crude oilclimbed from about $16 per barrel to more than $28 per barrel.The price rose even higher in September, reaching about $36

per barrel. As UN troops began seeing military successes inIraq, concerns about long-term supply problems were eased andoil prices dropped again.


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1990

The Clean Air Act Amendments of 1990 required

many changes to gasoline and diesel fuels to makethem pollute less. The use of these cleaner fuels wasphased-in during the 1990s. Since 1995,reformulated gasoline has been used in places withthe worst pollution problems.

Since 1993

For the first time, the United States imported more oil

and refined products from other countries than itproducedowing to growing petroleum demand anddeclining U.S. production.


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199798

The Asian financial crisis that occurred in 1997

had worldwide economic effects. As the Asianeconomies shrank, their demand for petroleum

products declined. The slow demand for

petroleum, along with the reluctance of OPECto cut its production quotas, led to the plummet

of oil prices in 1998.


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2001 U.S. petroleum consumption reached 19.7 million barrelsper day, an all-time high.

Of every 10 barrels of petroleum consumed in the UnitedStates, more than 4 barrels were consumed in the form ofmotor gasoline. The transportation sector alone accountedfor two-thirds of all petroleum used in the United States.

To meet demand, crude oil and petroleum products wereimported at the rate of 11.9 million barrels per day, whileexports measured 1.0 million barrels per day.

Net imports (imports minus exports) of crude oil and

petroleum products more than doubled between 1985 and2001. The five leading suppliers of petroleum to the UnitedStates that year were Canada, Saudi Arabia, Venezuela,Mexico, and Nigeria.


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2005

The record-setting hurricane season of 2005 caused massivedamage to the U.S. petroleum and natural gas infrastructure.

The Gulf of Mexico, one of the nation's largest sources ofoil and gas production, was dealt a one-two punch byHurricanes Katrina and Rita during August and September.

The Energy Policy Act of 2005 was passed. It requiredincreased use of renewable fuels for transportation and newmeasures to reduce pollution from gasoline and diesel.

Gasoline prices broke $3.00 per gallon for the first time.


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2006

Refineries began using more ethanol, a

renewable fuel, in response to the Energy

Policy Act.

2008

For the first time, crude oil price broke $100 per

barrel and gasoline prices broke $4.00 per

gallon.


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Oil at Present

Production

90MMBBL/D

Reserve


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Thank You

1 introduction - history

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