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1-Page Summary of The Prize
Inside Oil
The history of the oil business is intertwined with modern capitalism and corporations. Oil is the world’s largest business, and it powers many other businesses. Despite that, luck, fate, risk taking and reward have also shaped how this industry works. It’s so profitable that seven of the top 20 Fortune 500 companies are in oil.
Oil is critical to the world’s economy and politics. It was a key factor in World War I, as countries sought control of oil fields to replace horses and coal-fired engines. Oil has also played a huge role in many wars over the last century, including World War II, where Japan attacked Pearl Harbor to gain access to oil in East Asia. The Nazis were also after Russian oil fields because they were looking for more power during WWII. After WWII ended, oil was at the center of conflicts between European colonial powers and Arab nations over who controlled Middle Eastern resources. In 1956 Suez Crisis marked the end of Western colonialism when Britain, France and Israel invaded Egypt after Egyptian President Nasser nationalized their shared canal zone assets (which included most of Egypt’s agricultural land). Since then it has been an important part of U.S.-Iran relations due to Iran’s large reserves.
Oil has been the basis of society for a long time. People use it to power their cars and other things, like light bulbs. Oil made John D Rockefeller rich because he started using kerosene to make gas lamps (which later led to the invention of electric lights). Gasoline was originally just a by-product of oil, but now people actually drive on it.
Oil has created a lot of good things in the world, but it’s also caused some problems. There have been political instabilities and environmental issues as well. As population increases and new energy sources are needed, we’ll probably see more of these same problems.
“Rock Oil”
Entrepreneur George Bissell was the first person to drill for oil in Pennsylvania. He tried adapting rock salt drilling methods to extract oil, but he didn’t know how deep it would be at that time. His venture proceeded under tough circumstances until they hit 69 feet of oil underground just days before their deadline set by investors.
The rule of capture was a part of English common law that said people could drill for oil on their own property and pump as much out as possible. Since it was impossible to determine exactly where the oil resided, everyone had the right to drill for oil on their own property and pump as much out as possible. This created wild swings in prices and population because people dashed to areas where they found more oil. However, installing too many wells would deplete internal pressure, making it harder to recover any additional amounts of oil from that field. Given the primitive state of pumping technology at the time, this made more oil unrecoverable, hastening further exploration.
The oil industry attracted many talented, energetic individuals. John D Rockefeller was one of them, and he became the majority owner of a successful refinery in 1865 when he bought out his fellow senior partner for $72,500. He then began building his oil monolith with Henry Flagler by raising capital to form Standard Oil. Oversupply plagued the industry at that time; a barrel of oil sold for 48 cents, three cents less than water! During this surplus, Rockefeller started buying up competitors and consolidating the industry in his own grasp. By 1879, he controlled 90% of United States’ refining capacity.
John D. Rockefeller is now known as the most influential figure in shaping the oil industry, and his company became one of the first global businesses. He started with refineries and soon began exporting kerosene to many countries around the world. He also manufactured his own barrels, opened warehouses, bought transport ships and train cars for transporting oil, hoarded cash so he would not be dependent on bankers when business conditions worsened, linked supply and distribution by manufacturing his own barrels that were used to store oil before it was transported or sold to customers who needed it for their lamps.
