The modern oil industry, a dynamic force that shapes global economies, has a rich history that traces back to its origins in Baku. In 1837, the first commercial refinery was established, setting the stage for a transformative journey. This article delves into key milestones, from the pioneering wells in Baku to the present-day dynamics of the oil market.
The Birth of the Oil Industry
In 1846, Baku witnessed the drilling of the first modern oil well, a groundbreaking event that reached a depth of 21 meters. This single oil field, responsible for over 90% of global production, funneled its resources to Persia (present-day Iran). Simultaneously, Pennsylvania emerged as the epicenter of the first black gold rush, catapulting the world's oil production.
Standard Oil Dominance (1870-1911)
The incorporation of Standard Oil Co by John D. Rockefeller in 1870 marked a pivotal moment. Swiftly rising to prominence, Standard Oil controlled nearly 90% of refined oil in the United States by 1890. As production expanded in the US and Russia, global oil prices plummeted from $2.56 a barrel in 1876 to a mere $0.56 in 1892.
The early 20th century witnessed the formation of major oil entities like Texaco, Gulf Oil, Royal Dutch/Shell, BP, Chevron, Exxon, and Mobil, each contributing to the industry's transformation.
1914-1949: Oil in Times of Wars and Crises
The period between 1914 and 1949 unfolded amidst major wars and economic crises, significantly impacting oil prices. World War I doubled oil prices, reaching $1.98 per barrel by its end. The interwar years brought challenges, including the Great Depression and the discovery of oil in East Texas, leading to a price decline.
1950-2003: Nationalization and OPEC's Emergence
Post-World War II, nations sought control over oil production, with Iran, Indonesia, and Saudi Arabia partially nationalizing their industries. The Suez crisis in 1956 emphasized geopolitical influences. The late 1950s saw OPEC's formation, shifting control from major oil companies to oil-producing nations.
The 1973 oil embargo by OPEC members during the Yom Kippur war sent prices soaring, reaching unprecedented levels. The discovery of oil in the North Sea introduced Brent crude as a benchmark alongside WTI.
2003-Present: Fracturing and Shifting Dynamics
The 21st century brought seismic shifts with the US invasion of Iraq in 2003, creating supply uncertainties. The Arab Spring in 2011 disrupted supplies, propelling prices to $126.48 per barrel. Technological advancements, particularly hydraulic fracturing, made the US a dominant player, reshaping global oil dynamics.
The unresolved US-China trade war and geopolitical uncertainties have kept prices fluctuating, with the US acting as a new 'swing producer.' Despite efforts by OPEC to stabilize prices, the global economy and high shale production are expected to keep prices subdued.
The journey of the oil industry, from its nascent days in Baku to the present global landscape, is a tale of innovation, geopolitical influences, and market dynamics. Understanding this historical evolution provides crucial insights into the challenges and triumphs that have shaped the complex world of oil markets.