Perils of Petroleum
I shall sketch in only the main episodes:
First, crude oil was largely a patent medicine. But even before that fad ran out, demand was greatly expanded by the use of oil in kerosene lamps. The prospect of lighting the world's lamps gave rise to an extravagant promise of growth. The prospects were similar to those the industry now holds for gasoline in other parts of the world. It can hardly wait for the underdeveloped nations to get a car in every garage. In the days of the kerosene lamp, the oil companies competed with each other and against gaslight by trying to improve the illuminating characteristics of kerosene. Then suddenly the impossible happened. Edison invented a light, which was totally nondependent on crude oil. Had it not been for the growing use of kerosene in space beaters, the incandescent lamp would have completely finished oil as a growth industry at that time. Oil would have been good for little else than axle grease.
Then disaster and reprieve struck again. Two great innovations occurred, neither originating in the oil industry. The successful development of coal-burning domestic central-heating systems made the space heater obsolescent. While the industry reeled, along came its most magnificent boosts yet - the internal combustion engine, also invented by outsiders. Then when the prodigious expansion for gasoline finally began to level off in the 1920's, along came the miraculous escape of a central oil heater. Once again, the escape was provided by an outsider's invention and development. And when that market weakened, wartime demand for, aviation fuel came to the rescue. After the war the expansion of civilian aviation, the dieselization of railroads, and the explosive demand for cars and trucks kept the industry's growth in high gear.
Meanwhile centralized oil heating - whose boom potential had only recently been proclaimed - ran into severe competition from natural gas. While the oil companies themselves owned the gas that now competed with their oil, the industry did not originate the natural gas revolution, nor has it to this day greatly profited from its gas ownership. The gas revolution was made by newly formed transmission companies that marketed the product with an aggressive ardour. They started a magnificent new industry, first against the advice and then against the resistance of the oil companies
By all the logic of the situation, the oil companies themselves should have made the gas revolution. They not only owned the gas; they also were the only people experienced in handling, scrubbing, and using it, the only people experienced in pipeline technology and transmission, and they understood heating problems. But, partly because they knew that natural gas would compete with their own sale of heating oil, the oil companies pooh-poohed the potentials of gas.
The revolution was finally started by oil pipeline executives who, unable to persuade their own companies to go into gas, quit and organized the spectacularly successful gas transmission companies. Even after their success became painfully evident to the oil companies, the latter did not go into gas transmission. The multibillion-dollar business, which should have been theirs, went to others. As in the past, the industry was blinded by its narrow preoccupation with a specific product and the value of its reserves. It paid little or no attention to its customers' basic needs and preferences.
The post-war years have not witnessed any change. Immediately after World War 11 the oil industry was greatly encouraged about its future by the rapid expansion of demand for its traditional line of products. In 1950 most companies projected annual rates of domestic expansion of around 6% through at least 1975.
Though the ratio of crude oil reserves to demand in the Free World was about 20 to 1, with 10 to 1 being usually considered a reasonable working ratio in the United States, booming demand sent oil men searching for more without sufficient regard to what the future really promised. In 1952 they "hit" in the Middle East; the ratio skyrocketed to 42 to 1. If gross additions to reserves continue at the average rate of the past five years (37 billion barrels annually, then by 1970 the reserve ratio will be up to 45 to 1. This abundance of oil has weakened crude and product prices all over the world.
Perils of Petroleum
I shall sketch in only the main episodes:
First, crude oil was largely a patent medicine. But even before that fad ran out, demand was greatly expanded by the use of oil in kerosene lamps. The prospect of lighting the world's lamps gave rise to an extravagant promise of growth. The prospects were similar to those the industry now holds for gasoline in other parts of the world. It can hardly wait for the underdeveloped nations to get a car in every garage. In the days of the kerosene lamp, the oil companies competed with each other and against gaslight by trying to improve the illuminating characteristics of kerosene. Then suddenly the impossible happened. Edison invented a light, which was totally nondependent on crude oil. Had it not been for the growing use of kerosene in space beaters, the incandescent lamp would have completely finished oil as a growth industry at that time. Oil would have been good for little else than axle grease.
Then disaster and reprieve struck again. Two great innovations occurred, neither originating in the oil industry. The successful development of coal-burning domestic central-heating systems made the space heater obsolescent. While the industry reeled, along came its most magnificent boosts yet - the internal combustion engine, also invented by outsiders. Then when the prodigious expansion for gasoline finally began to level off in the 1920's, along came the miraculous escape of a central oil heater. Once again, the escape was provided by an outsider's invention and development. And when that market weakened, wartime demand for, aviation fuel came to the rescue. After the war the expansion of civilian aviation, the dieselization of railroads, and the explosive demand for cars and trucks kept the industry's growth in high gear.
Meanwhile centralized oil heating - whose boom potential had only recently been proclaimed - ran into severe competition from natural gas. While the oil companies themselves owned the gas that now competed with their oil, the industry did not originate the natural gas revolution, nor has it to this day greatly profited from its gas ownership. The gas revolution was made by newly formed transmission companies that marketed the product with an aggressive ardour. They started a magnificent new industry, first against the advice and then against the resistance of the oil companies
By all the logic of the situation, the oil companies themselves should have made the gas revolution. They not only owned the gas; they also were the only people experienced in handling, scrubbing, and using it, the only people experienced in pipeline technology and transmission, and they understood heating problems. But, partly because they knew that natural gas would compete with their own sale of heating oil, the oil companies pooh-poohed the potentials of gas.
The revolution was finally started by oil pipeline executives who, unable to persuade their own companies to go into gas, quit and organized the spectacularly successful gas transmission companies. Even after their success became painfully evident to the oil companies, the latter did not go into gas transmission. The multibillion-dollar business, which should have been theirs, went to others. As in the past, the industry was blinded by its narrow preoccupation with a specific product and the value of its reserves. It paid little or no attention to its customers' basic needs and preferences.
The post-war years have not witnessed any change. Immediately after World War 11 the oil industry was greatly encouraged about its future by the rapid expansion of demand for its traditional line of products. In 1950 most companies projected annual rates of domestic expansion of around 6% through at least 1975.
Though the ratio of crude oil reserves to demand in the Free World was about 20 to 1, with 10 to 1 being usually considered a reasonable working ratio in the United States, booming demand sent oil men searching for more without sufficient regard to what the future really promised. In 1952 they "hit" in the Middle East; the ratio skyrocketed to 42 to 1. If gross additions to reserves continue at the average rate of the past five years (37 billion barrels annually, then by 1970 the reserve ratio will be up to 45 to 1. This abundance of oil has weakened crude and product prices all over the world.
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Perils of Petroleum
I shall sketch in only the main episodes:
First, crude oil was largely a patent medicine. But even before that fad ran out, demand was greatly expanded by the use of oil in kerosene lamps. The prospect of lighting the world's lamps gave rise to an extravagant promise of growth. The prospects were similar to those the industry now holds for gasoline in other parts of the world. It can hardly wait for the underdeveloped nations to get a car in every garage. In the days of the kerosene lamp, the oil companies competed with each other and against gaslight by trying to improve the illuminating characteristics of kerosene. Then suddenly the impossible happened. Edison invented a light, which was totally nondependent on crude oil. Had it not been for the growing use of kerosene in space beaters, the incandescent lamp would have completely finished oil as a growth industry at that time. Oil would have been good for little else than axle grease.
Then disaster and reprieve struck again. Two great innovations occurred, neither originating in the oil industry. The successful development of coal-burning domestic central-heating systems made the space heater obsolescent. While the industry reeled, along came its most magnificent boosts yet - the internal combustion engine, also invented by outsiders. Then when the prodigious expansion for gasoline finally began to level off in the 1920's, along came the miraculous escape of a central oil heater. Once again, the escape was provided by an outsider's invention and development. And when that market weakened, wartime demand for, aviation fuel came to the rescue. After the war the expansion of civilian aviation, the dieselization of railroads, and the explosive demand for cars and trucks kept the industry's growth in high gear.
Meanwhile centralized oil heating - whose boom potential had only recently been proclaimed - ran into severe competition from natural gas. While the oil companies themselves owned the gas that now competed with their oil, the industry did not originate the natural gas revolution, nor has it to this day greatly profited from its gas ownership. The gas revolution was made by newly formed transmission companies that marketed the product with an aggressive ardour. They started a magnificent new industry, first against the advice and then against the resistance of the oil companies
By all the logic of the situation, the oil companies themselves should have made the gas revolution. They not only owned the gas; they also were the only people experienced in handling, scrubbing, and using it, the only people experienced in pipeline technology and transmission, and they understood heating problems. But, partly because they knew that natural gas would compete with their own sale of heating oil, the oil companies pooh-poohed the potentials of gas.
The revolution was finally started by oil pipeline executives who, unable to persuade their own companies to go into gas, quit and organized the spectacularly successful gas transmission companies. Even after their success became painfully evident to the oil companies, the latter did not go into gas transmission. The multibillion-dollar business, which should have been theirs, went to others. As in the past, the industry was blinded by its narrow preoccupation with a specific product and the value of its reserves. It paid little or no attention to its customers' basic needs and preferences.
The post-war years have not witnessed any change. Immediately after World War 11 the oil industry was greatly encouraged about its future by the rapid expansion of demand for its traditional line of products. In 1950 most companies projected annual rates of domestic expansion of around 6% through at least 1975.
Though the ratio of crude oil reserves to demand in the Free World was about 20 to 1, with 10 to 1 being usually considered a reasonable working ratio in the United States, booming demand sent oil men searching for more without sufficient regard to what the future really promised. In 1952 they "hit" in the Middle East; the ratio skyrocketed to 42 to 1. If gross additions to reserves continue at the average rate of the past five years (37 billion barrels annually, then by 1970 the reserve ratio will be up to 45 to 1. This abundance of oil has weakened crude and product prices all over the world.
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