The World Petroleum Industry: It All Started in Pennsylvania

The modern petroleum industry is a vast and complex association of multinational corpora­tions, producing countries, consumers and other inter­acting elements. The petroleum milieu is often identified and equated with the largest oil companies, “the seven sis­ters”: Exxon, Royal Dutch Shell, Gulf, British Petroleum, Mobil, Standard of California, and Texaco. As if to empha­size the importance of the commodity, the May 1975 issue of Fortune reported that Exxon, based upon sales figures, had surpassed General Motors Corporation to become the world’s largest corporation.

Recent events have made it increasingly evident that a struc­tural change has occurred in the world petroleum industry. With the signing of the Teheran Agreement on February 14, 1971, control of world crude production and prices passed largely from the large oil companies to the producing coun­tries belonging to the Organization of Petroleum Exporting Countries (OPEC). It was not, however, until the oil embargo of 1973-74, with its accompanying lines at service stations and price increases, that Western consumers became fully aware of this new reality – a reality which was reinforced by the pe­troleum shortages of 1979.

Today’s world has become a petroleum dependent world. When the modern petroleum industry began in 1859, the United States relied upon wood for 91 percent and on coal for 9 percent of its inanimate energy. By 1973, oil supplied 46 per­cent; gas, 31 percent; nuclear, 1 percent; hydroelectric, 4 per­cent; and coal, 18 percent of the country’s energy needs. The United States has been an oil importing country since 1948, and by early 1980, imports accounted for nearly 50 percent of the nation’s oil needs, although this amount has recently de­creased due to energy conservation and lower consumer de­mand.

Interestingly, the story of the modern petroleum industry, its technology and structure began in America. Despite the international and complex character which the modern petro­leum industry has assumed, its basic technology is American; it is structured along American lines, and indeed, it began in the United States. It is with these early developments, specif­ically in the Oil Region of western Pennsylvania from the late 1850s until 1900, that this article is concerned.

Long before the first oil well was drilled in western Pennsyl­vania, it was known that the region contained petroleum deposits. Indians from the area rubbed crude oil on their bodies as an ointment and used it for medicinal purposes. On their trading trips down the Allegheny River to Pittsburgh, they often carried it with them in hollowed gourds; the oil was used by the white men as a medicine as well, but also as a lubricant. During the settlement of the region, petroleum was often encountered while digging salt wells, but it was con­sidered a nuisance and generally drained off into the rivers. By the 1850s, knowledge of oil seepage along the creeks of western Pennsylvania and nearby Ohio and Virginia was widespread.

Eventually, a number of enterprising individuals began to bottle and sell the crude as a cure-all medicine called “Seneca Oil,” the name under which petroleum first appeared in the East. Soon, other brands appeared. Several hundred thousand bottles of “American Medicinal Oil,” for example, were put up in Burkesville, Kentucky and shipped to the East and to Europe. The most extensive business, however, took place at Tarentum, near Pittsburgh, where Samuel Kier bottled his famous “Kier’s Rock Oil” and sold it throughout the United States.

Western Pennsylvania was extremely well situated for the eventual expansion of the oil industry and its related enter­prises. It was not too far removed from urban centers and other industries. Although it could be difficult to travel the muddy, rutted roads to Titusville, the focal point of the re­gion, the area was advantageously located relative to the core of the country at that time. The Oil Creek Railroad linked Titusville with Corry in 1862, and at Corry, that railroad tied in with the Philadelphia and Erie (now the Pennsylvania Rail­road) and the Atlantic and Great Western (now the Erie Rail­road). The Oil Region was also centrally located relative to the large ports of the East Coast, such as Philadelphia, Baltimore and New York, from which much American oil would be shipped to other pans of the world.

While the physical presence of oil and its location were im­portant, another element vital to the growth of the industry was a body of men with enough foresight to envision the pos­sibilities for the future. What was needed was not merely a group of visionaries, but the right combination of entrepre­neurs willing to risk the necessary capital on a commodity for which there was not yet any great demand. Convinced of the value of petroleum, a number of enterprising men, including George Bissell and J .G. Eveleth, founded the Pennsylvania Rock Oil Company of New York on December 30, 1854. Pro­fessor Benjamin Silliman, Jr., a chemist at Yale University, was commissioned to analyze a sample of Pennsylvania oil and to write a report on its properties and potential uses. Silli­man’s report of 1855 indicated that, beyond its uses as a lubricant, petroleum could be an extraordinary illuminant. Based to a great degree upon this report, the next step by Bissell and Eveleth was the establishment of a Connecticut affiliate of the Pennsylvania Rock Oil Company: the Seneca Oil Company.

Edwin L. Drake was selected as general agent of Seneca Oil and began to set up operations for the company in Titusville on April 1, 1858. To give their agent more prestige, the direc­tors of Seneca Oil, located in New Haven, addressed his mail to “Colonel” E.L. Drake. The honorary title stuck, and Drake was to be remembered as the “Colonel.” Actually, Drake’s only qualification for the job seems to have been that he needed the money. since he was out of work as a railroad conductor on the New York and New Haven Railroad. Drake was not a lawyer, nor was he a real estate agent. He had no knowledge of petroleum, salt wells or drilling; he was not even a successful businessman. Two of Drake’s attributes, how­ever, were very important: he was loyal and persistent.

After a disappointing period of drilling with few results, the directors of Seneca Oil abandoned hope and directed Drake to pay off the bills and close the drilling operation. But Drake’s persistence came to the fore; he kept on for another month, and finally muck oil along Oil Creek south of Titusville on August 27, 1859. He was fortunate tO find oil at such a shal­low depth, only 69 1/2 feet (most of the wells drilled soon after­ward were between 400 and 600 feet deep), because the opera­tion, referred to by local people as “Drake’s Folly,” could not be financed much longer.

Because Drake had been successful in locating oil in the lowlands near the water, others sought similar sites along streams, a practice which came to be known as “creekology.” During the early stages of petroleum development, there was no science involved in the location of drilling sites. It was to be some time before the scientific study of the geology of pe­troleum was to become useful. Some geologists did come to the Oil Region in 1864 to record rock strata and drillings, but many were engaged as teachers in universities and had little opportunity to view the wells first hand. As a result, many of the theories of these geologists proved to be incorrect, and they were in general discredited and scoffed at by oilmen in these early days. Indeed, Drake’s selection of a site with a shallow oil deposit was quite fortunate.

Because the United States was involved in the early stages of its industrial revolution in the 1850s, the technologies and skills necessary for the growth of the new petroleum in­dustry were available to Pennsylvania oilmen. What materials did not exist were developed and manufactured as needed. Events unfolded rapidly following Drake’s discovery, and the design and production of new kinds of equipment, including drills, adapted steam engines, casing pipes, pumps, pipelines, transport vehicles and storage tanks, quickly followed.

In 1865, Colonel E.A.L. Roberts, a former Union Army of­ficer, exploded his first oil well torpedo – a device used in oil­-bearing sands to increase flow and total output – in the Ladies well near Titusville. Also in 1865, Samuel Van Syckel success­fully built a five-mile-long, two-inch-wide, lap-welded pipe­line from Pithole to the Oil Creek Railway which revolution­alized the oil transport industry. Up to that time, oil was transported to the railroads in barrels by teamsters, who op­posed the pipeline and sabotaged it on several occasions. The fact could not be ignored, however, that Van Syckel’s pipeline moved eighty-one barrels of oil per hour, thereby doing the work it had previously taken 300 teamsters ten hours to do.

Another new device was the railroad tank car. In 1865, Amos Densmore, an oil buyer in western Pennsylvania, built the first wooden oil tank car: two large, forty-five barrel tanks mounted on a flat railroad car. In 1869, the iron boiler tank car was introduced.

All of these rapid developments were made possible by the existence of capital made available within a flexible economic system which was becoming more sophisticated all the time. By the 1860s, the United States possessed a well-established fi­nancial system and enough domestic capital to manage land and lease sales, to create joint stock companies, to provide loans, and to carry out other transactions. In September 1864, there were one hundred joint stock oil companies in the United States with a combined capital of $52 million. By Feb­ruary 1865, the number of companies had increased to over five hundred, with an aggregate capital of over $365 million. By the autumn of 1864, a separate petroleum board had been organized in New York; others followed in Boston, Balti­more, Cincinnati, Philadelphia and Pittsburgh. During one brief period, Oil City had the third most active board of trade in the country!

The existence of an established financial infrastructure was indeed an essential factor in facilitating the rapid domestic de­velopment of the petroleum resource, but so were the ad­vances in transportation such as the region’s penetration by railroads, the movement of oil in barrels by teamsters, the pipeline, the wooden tank car and the iron boiler tank car. Control of several vital transportation modes, for example, gave John D. Rockefeller’s Cleveland-based Standard Oil Company a significant accessibility-cost advantage over other refinery locations.

One interesting mode of transportation, developed by lum­bermen in western Pennsylvania, involved the use of river freshets. Because Oil Creek was generally too shallow to carry loaded barges down to the Allegheny River, oilmen paid log mill owners upstream to hold back the waters of tributaries behind small dams until a specified time. When released, the flood of water carried the oil barges helter skelter down the narrow, sinuous Oil Creek on a high-risk adventure. Much of the oil was lost before it even reached Pittsburgh: a third by leakage before the boats started and another third before they reached their destinations. Despite all of the difficulties in lo­cating, drilling and transporting oil, however, the supply kept increasing.

Soon after oil production began, more oil was being pro­duced than the market could absorb. In the 1850s the United States had a population of approximately 40 million, a do­mestic market not nearly large enough for all the oil produced in the state (the internal combustion engine and oil furnace had not yet come into use). Yet, during the early period, Pennsylvania oilmen had no way of successfully controlling the flow of wells. Since oil had to be barreled immediately and there was a great shortage of barrels, much oil ran out over the ground and into the rivers, resulting in a dramatic deterio­ration in the environment of the Oil Region. Still, even with this waste, enthusiastic adventurers kept coming to drill new wells and add to the oil glut. On several occasions, the price of oil dropped to one cent per barrel. At other times, oilmen could not give it away, nor could they find barrels in which to store the crude.

In 1859, most of Drake’s oil, which he found difficult to market because there were still few uses for it, went to one buyer in Jersey City. Most of the oil was refined into kerosene as an illuminant, the major use of petroleum until the coming of the automobile and the need for gasoline in the early 1900s. Kerosene, which was introduced in this country in 1854, soon replaced whale oil as the predominant fuel used as a light source. Due to the decline in the whaling industry since the 1840s, there was a serious shortage of illuminating oil in the world. In fact, many of the oilmen of western Pennsylvania were former New Bedford and Nantucket seamen. Until it could be produced in large quantities, however, kerosene was expensive, costing one dollar per gallon in 1859.

Although the price of kerosene was down to fifteen cents per gallon by 1862, which helped increase demand, it required the opening of the large, wealthy European market to give the new industry the boost it needed. In 1861, President Lincoln appointed Dr. A.W. Crawford from Venango County (lo­cated in the Oil Region) as the United States Consul at Ant­werp. Soon afterward, Crawford introduced American oil in­to Europe, as did Consul A.J. Stevens at Leghorn, Italy. Be­fore long, the United States was supplying Pennsylvania oil to nearly every country in the world.

As the oil industry began to “take off” in a period of un­precedented growth, a number of astute businessmen recog­nized that a good opportunity had presented itself. Beginning in the late 1860s, a second wave of entrepreneurs began invest­ing large amounts of capital in the petroleum industry. These strong-willed men developed the transportation, refining, and marketing aspects of the industry. Under the direction of men like John D. Rockefeller, large, vertically-integrated com­panies began to emerge, the first of these being the Standard Oil Company, incorporated in 1870.

The early success and development of the modern petro­leum industry in western Pennsylvania after 1859, there­fore, resulted from a combination of major social, economic and geographic factors. These factors converged in time and space to create the human and physical environment necessary for the birth of one of the world’s largest and most vital in­dustries.

Not a day passes that petroleum supply, demand and price are not in the news. Today, this highly sophisticated industry has become intricately interwoven into the economic, social, political and military affairs of the world. Paul Giddens, an authority on the early history of the petroleum industry, has described it as a unique basic industry, born in America. Nur­tured through its infancy by the oilmen of western Pennsylva­nia, it all began along the banks of Oil Creek.

James E. DiLisio is currently the chairman of the department of geography and environmental planning at Towson State University in Towson, Maryland. His most recent publica­tion, Maryland: A Geography, is a full-length textbook on the state, but he has also written a number of articles which reflect his interest in the historical development of environ­mental landscapes and resource utilization. The author was awarded his Ph.D. from The University of Oklahoma.