Oil and natural gas reservoirs Category: Energy resources By the 1870’s, the hydrocarbon industry had accepted the concept that a subsurface rock volume with suffi-cient porosity, perme
Trang 1the air so that decay by biological means or reaction to
oxygen will not destroy it
Deposition and Transformation
Microscopic plant and animal life is abundant in
much of the oceans When these organisms die, their
remains usually settle to the seafloor When this takes
place in near-shore marine environments, such as on
continental shelves, or where large rivers form marine
deltas, sediments derived from continental erosion
accumulate rapidly In such a setting, the initial
re-quirements for the formation of oil are satisfied: An
abundance of organic matter is rapidly buried by
sedi-ment so that it is free from aerobic and biological
contamination The majority of oil and natural gas
deposits are believed to have been formed by such
ac-cumulated marine organisms Oil fields reflect the
presence of prehistoric marine environments that
now exist below the surface as marine deposited
sedi-mentary rocks
As sedimentary deposition continues to bury the
organic matter, it begins to change into a solid organic
material called kerogen At relatively low
tempera-tures and shallow burial depths, kerogen is chemically
inert Kerogen consists primarily of hydrocarbons
that are in the solid state and that are insoluble not
only in water but also in a variety of organic solvents
Kerogen from the lower plants and animals, with a
high lipid content and a relatively high hydrogen
ra-tio, will produce oil Kerogen from the higher
vascu-lar plants is lower in hydrogen content and will
pro-duce only gas
As pressures increase from the weight of continued
deposition of overlying sediment, the sediments are
gradually transformed into lithified rock
Tempera-tures increase with depth below the Earth’s surface;
slowly, over long periods of time, chemical reactions
take place These reactions break down the large,
complex organic molecules into simpler, smaller
hy-drocarbon molecules The nature of the hyhy-drocarbon
changes with time and continued heat and pressure
In the early stages of petroleum formation, the
de-posit may consist mainly of larger hydrocarbon
mole-cules, which have the thick, nearly solid consistency of
asphalt These are referred to as low-gravity crudes As
the petroleum matures, and as the breakdown of
large molecules continues, successively lighter
hydro-carbons are produced Thick liquids give way to
thin-ner ones, from which are derived lubricating oils,
heating oils, and gasoline In the final stages, most or
all of the petroleum is further broken down into sim-ple, light, gaseous molecules—natural gas Most of the maturation process occurs in the temperature range of 50° to 100° Celsius Above these tempera-tures, the remaining hydrocarbon is almost wholly methane; with further temperature increases, meth-ane can be broken down and destroyed in turn A given oil field yields crude oil containing a distinctive mix of hydrocarbon compounds, depending on the burial history of the material The commercial petro-leum refining process separates the different types of hydrocarbons for different uses through the applica-tion of heat Some of the heavier hydrocarbons are broken up during heat refining into smaller, lighter molecules through a process called cracking Crack-ing is an artificial method of maturCrack-ing the hydrocar-bons and allows lighter compounds such as gasoline
to be produced as needed from the heavier compo-nents of crude oil
Migration of Deposits Once the solid organic matter is converted to liquids and gases, hydrocarbons can migrate from the rocks
in which they formed Such migration is necessary if the oil or gas is to be collected into an economically valuable and practically usable deposit The majority
of petroleum source rocks are fine-grained clastic sed-imentary rocks of low permeability Despite the low permeabilities, oil and gas are able to migrate from their source rocks and move through more perme-able rocks over long spans of geologic time The amount of time required for oil and gas to mature is not known precisely Since virtually no petroleum is found in rocks younger than one to two million years old, geologists infer that the process is comparatively slow
Though many properties of sedimentary rocks in-fluence the generation, migration, and accumulation
of oil and gas, none has more direct control on hydro-carbon movement and entrapment than do the amount and distribution of pore space Interstitial pores must be present in the source rocks and enclos-ing rock layers in order for fluids containenclos-ing oil and gas to be expelled into the migration system Migra-tion itself requires an interconnected system of pores
in order for these fluids to move from the source to impermeable trapping rocks The pores, holes, and cracks in rocks in which fluids can be trapped are commonly full of water Most oil and all natural gases are less dense than water, so they tend to rise as well as
Trang 2to migrate laterally through water-filled pores of
per-meable rock Unless stopped by imperper-meable rocks,
oil and gas may keep rising right up to the Earth’s
sur-face, escaping into the air or the oceans or flowing out
onto the ground The La Brea Tar Pits of California
are an example of such a seep
Randall L Milstein
Further Reading
Chilingar, G V., et al Geology and Geochemistry of Oil
and Gas Boston: Elsevier, 2005.
Devereux, Steve Drilling Technology in Nontechnical
Language Tulsa, Okla.: PennWell, 1999.
Hunt, John M Petroleum Geochemistry and Geology 2d
ed New York: W H Freeman, 1996
Hyne, Norman J Nontechnical Guide to Petroleum
Geol-ogy, Exploration, Drilling, and Production 2d ed Tulsa,
Okla.: PennWell, 2001
Keller, Edward A Environmental Geology 8th ed Upper
Saddle River, N.J.: Prentice Hall, 2000
Link, Peter K Basic Petroleum Geology 3d ed Tulsa,
Okla.: OGCI Publications, Oil & Gas Consultants
International, 2001 Reprint Tulsa, Okla.:
Penn-Well, 2007
Montgomery, Carla W Environmental Geology 7th ed.
Boston: McGraw-Hill, 2006
Selley, Richard C Elements of Petroleum Geology 2d ed.
San Diego, Calif.: Academic Press, 1998
Web Site
U.S Geological Survey
Organic Origins of Petroleum
http://energy.er.usgs.gov/gg/research/
petroleum_origins.html
See also: Oil and natural gas chemistry; Oil and
natu-ral gas distribution; Oil and natunatu-ral gas reservoirs;
Pe-troleum refining and processing
Oil and natural gas reservoirs
Category: Energy resources
By the 1870’s, the hydrocarbon industry had accepted
the concept that a subsurface rock volume with
suffi-cient porosity, permeability, and capping element
effec-tively trapped localized concentrations of crude oil and
natural gas Such a concentration was termed a
hydro-carbon (oil and/or natural gas) reservoir This concept greatly increased early successes in finding hydrocar-bon, and it remains a fundamental tool in worldwide exploration for oil and natural gas.
Background With the advent of the petroleum age in the United States, initiated by the drilling of the first oil well in Pennsylvania in 1859, the search began for scientific methods useful in the direct or indirect indication of the presence of accumulations of subsurface oil and gas Early methodologies included river bottom loca-tions (“creekology”), geographic projection of discov-eries (“ruler geology”), and the presence of surface hydrocarbon seeps (“seepology”) or surface mounds (“topography”) While of varying success in establish-ing new reserves, none of these methods adequately explained the concentration of oil and natural gas in subsurface rocks of the Earth
Subsequently, publications by John F Carll of the Pennsylvania Geological Survey explained that hydro-carbon concentrations were not present in subsurface caverns, pools, or lakes, but rather were contained in the natural pore space common to the sedimentary class of rock By the end of the nineteenth century, consensus suggested that economic hydrocarbon ac-cumulations were associated with subsurface rock of porosity adequate to contain significant volumes of hydrocarbon, sufficient permeability to allow transfer
of the contained hydrocarbon to the surface by way of
a borehole, and the presence of a cap or roof rock which effectively holds the oil and gas in place until re-leased through the borehole This combination of rock porosity, rock permeability, and cap rock defines
an oil and natural gas reservoir
Reservoir Rock Type Throughout the world, hydrocarbon reservoirs are commonly composed of sandstone or carbonate rock, the latter of which is either limestone (calcium bonate) or dolomite (calcium and magnesium car-bonate) Studies indicate that approximately 57 per-cent of all reservoirs are composed of varying types of sandstone; conglomerate, greywacke, orthoquartzite, and siltstone are common types About 40 percent of reservoirs are composed of carbonate rock The re-maining 3 percent of reservoirs are composed of shale, chert, and varieties of igneous and metamor-phic rock
Trang 3Rock Porosity and Permeability
Rock porosity refers to the percentage of rock volume
that is occupied by interstices or voids, whether
con-nected or isolated Under normal conditions,
sub-surface rock porosity is filled with water varying in
chemistry from fresh to very saline In rock provinces
favorable to the formation of hydrocarbon, long-term
geologic processes cause migrating microvolumes of
dissipated oil and natural gas to concentrate into
res-ervoir accumulations by replacing water-filled pore
space with hydrocarbon-filled pore space Sandstone
reservoir porosities normally range from a low of 10
percent to a high of 35 percent Carbonate rock
reser-voir porosity is generally lower than sandstone
po-rosity
Rock permeability is the measure of ease with
which contained gas or liquid under pressure can
move freely through interconnected pore space
Res-ervoir permeability is expressed in terms of millidarcy
units, named for Darcy’s law Sandstone and
carbon-ate reservoir permeabilities generally vary from a low
of 5 to more than 4,500 millidarcies
Porosity and permeability are integral physical
characteristics of the reservoir, as they determine, re-spectively, the amount of oil and gas the reservoir con-tains and the potential volumetric production rate of the reservoir over time Under normal conditions po-rosity and permeability are primary characteristics—
in other words, characteristics that were created at the time of the rock’s formation Secondary porosity and permeability can be created through postdeposition weathering or fracturing of reservoir rocks Oil and natural gas reservoirs possessing high porosities and permeabilities, whether primary or secondary in ori-gin, are greatly valued
Reservoir Cap Rock While porosity and permeability are essential ele-ments of any reservoir, a relative lack of permeability
in the rock forming the reservoir cap is equally essen-tial The reservoir cap, or roof rock, is an imperme-able rock unit that keeps the oil and natural gas in place until that time when reservoir integrity is al-tered by a borehole The presence of oil and natural gas seeps throughout the world is indicative of reser-voirs that have lost their integrity, allowing the
Gas
Salt
Oil
Impermeable cap rock (shale)
Permeable reservoir rock (sandstone)
Impermeable cap rock (shale)
Permeable reservoir rock (sandstone)
Examples of Structural and Stratigraphic Hydrocarbon Traps
Trang 4tained hydrocarbon to leak slowly out of the reservoir
and rise to the surface of the Earth
Reservoir Trap
While a combination of porosity, permeability, and
cap rock is common in subsurface rock, these
reser-voir characteristics must be contained within rock
ge-ometry of a nature such that oil and natural gas can by
concentrated into economic volumes The overall
combination of porosity, permeability, cap rock, and
rock geometry is termed the reservoir trap Reservoir
traps are formed under varying conditions of rock
at-titude (general disposition and relative position of
rock masses) and rock lithology (physical
characteris-tics) Two common types of reservoir traps are
recog-nized: structural and stratigraphic
A basic premise of geology states that sedimentary
rock—that class which forms all but a minor
percent-age of reservoir rock—was deposited originally in a
horizontal or near-horizontal state Any subsequent
deviation from the horizontal is caused by
compres-sive or earthquake forces acting within the crust of the
Earth One of the most common and sought after
structural traps is the anticline, a convex upward
flex-ing of rock strata In an anticline, the inner core of
arched rock, if porous and permeable, allows the
con-centration of migrating microvolumes of
hydrocar-bon Such concentration is achieved because oil and
gas have a lower density than saline or fresh water, the
normal fluids found within the pore space of
sedi-mentary rock Without a proper reservoir cap rock
forming the outer surface of the anticlinal flexure,
usually an impermeable shale, hydrocarbon
concen-trations will slowly leak to the surface An anticline,
composed of an inner porous/permeable rock core
and outer impermeable cap rock, forms the ideal
structural reservoir trap Of the 250 largest oil fields
in the world, approximately 90 percent are classified
as anticlinal reservoir traps
In contrast to the structural trap, the stratigraphic
trap is dependent upon lateral variability of porosity
and permeability within a rock layer as caused by
changes in grain size, shape, cementation,
compac-tion, and degree of weathering For example, in a
se-quence of tilted sedimentary rock, an upward decline
in permeability would block the surface migration of
oil or gas as effectively as would a structural reservoir
trap Such a loss of permeability may be caused by a
combination of a reduction in grain size, an increase in
the degree of cementation filling in the space between
individual rock grains, or an increase in compaction resulting from rock burial Approximately 10 percent
of all reservoir traps are stratigraphic in classification
Examples of Oil and Gas Reservoir Traps Throughout the Middle East (notably Iran, Iraq, Ku-wait, and Saudi Arabia), which contains approximately
49 percent of the recoverable oil and at least 27 per-cent of the total natural gas of the world, the anticline reservoir trap is ubiquitous The Ghawar oil field, in northeast Saudi Arabia, is formed by the merging of several elongate anticlines, creating a gigantic anticli-nal arch extending more than 233 kilometers in length
by 21 kilometers in width The reservoir rock is lime-stone, which is overlain by an anhydrite (calcium sul-phate) cap rock Variable porosity and permeability, ranging from 9 to 14 percent and from 10 to 20 millidarcies respectively, is responsible for the average well in this field having a high potential production, that is, approximately 5,000 barrels of oil per day
In contrast to the Ghawar field, the Santa Fe Springs oil and gas field southeast of Los Angeles, Cal-ifornia, is formed of an anticline approximately 3 kilo-meters in length by 1 kilometer in width Hydrocar-bon production here is enhanced by eight vertically superimposed oil reservoirs overlain by a natural gas reservoir Each reservoir is composed of sandstone, capped by an impermeable shale
The Hugoton gas field of southwestern Kansas is an excellent example of a reservoir formed by changes
in stratigraphy (physical character) The reservoir is formed of porous and permeable carbonate rock, both dolomite and limestone in composition In a westward direction, the carbonate rock gradually al-ters to shale, resulting in a decrease in porosity to the point where commercial quantities of gas cannot be obtained Further north in southern Alberta, Pem-bina, one of the great oil fields of Canada, contains similar stratigraphic changes In this case, four sepa-rate oil-producing sandstone reservoir rocks gradu-ally change to shale, the latter acting as the cap rock The Chapman oil field of Texas is an excellent ex-ample of hydrocarbon production from igneous rocks, normally void of porosity and permeability Originally formed as lava flows, with minimal porosity associated with gas vesicles, these rocks were subsequently al-tered and weathered, resulting in an increase in per-meability Overlying shales act as cap strata for the contained oil
Albert B Dickas
Trang 5Further Reading
Ahr, Wayne M Geology of Carbonate Reservoirs: The
Iden-tification, Description, and Characterization of
Hydro-carbon Reservoirs in Carbonate Rocks Hoboken, N.J.:
Wiley, 2008
Brooks, J., ed Classic Petroleum Provinces London:
Geological Society, 1990
Craig, James R., David J Vaughan, and Brian J
Skin-ner Resources of the Earth: Origin, Use, and
Environ-mental Impact 3d ed Upper Saddle River, N.J.:
Prentice Hall, 2001
Hunt, John M Petroleum Geochemistry and Geology 2d
ed New York: W H Freeman, 1996
Hyne, Norman J Nontechnical Guide to Petroleum
Geol-ogy, Exploration, Drilling, and Production 2d ed Tulsa,
Okla.: PennWell, 2001
Link, Peter K Basic Petroleum Geology 3d ed Tulsa,
Okla.: OGCI Publications, Oil & Gas Consultants
International, 2001 Reprint Tulsa, Okla.:
Penn-Well, 2007
Selley, Richard C Elements of Petroleum Geology 2d ed.
San Diego, Calif.: Academic Press, 1998
Tissot, B P., and D H Welte Petroleum Formation and
Occurrence 2d rev and enlarged ed New York:
Springer, 1984
Web Site
U.S Geological Survey
Organic Origins of Petroleum
http://energy.er.usgs.gov/gg/research/
petroleum_origins.html
See also: Oil and natural gas chemistry; Oil and
natu-ral gas distribution; Oil and natunatu-ral gas drilling and
wells; Oil and natural gas exploration; Oil and natural
gas formation; Oil industry
Oil embargo and energy crises of
1973 and 1979
Category: Historical events and movements
Date: October, 1973, to March, 1974, and January
to September, 1979
The energy crises of 1973 and 1979 produced new
en-ergy consciousness, high unemployment and inflation,
negative economic growth, and foreign policy shifts
within the oil-importing countries of the industrialized world It also left the major oil-exporting states in the world in control of a global oil industry, which had previously been largely under the control of the major (private) international oil corporations, and of the vast majority of the world’s known petroleum reserves.
Background The 1973 and 1979 energy crises differed importantly
in timing and gravity The 1973 crisis emerged in a matter of days; the 1979 crisis unfolded over eight months The 1973 crisis involved the availability and affordability of the petroleum essential to the indus-trialized countries of the Northern Hemisphere In
1979, the availability of oil was never in doubt, only the ability of the oil importers to pay for it At their most basic levels, however, the two crises had much in common Both resulted from sudden, largely unfore-seen political events in the Middle East Both gener-ated periods of global stagflation (high inflation with little or noeconomic growth), and both dramatized the extent to which, by the 1970’s, the lifestyle of de-veloped states had come to depend upon an energy resource that they did not control
The immediate causes of the 1973 oil crisis were the October, 1973, war between Israel and Egypt, Jordan, and Syria (the Yom Kippur War), and the U.S decision to resupply Israel during that war On Octo-ber 17, 1973, the Organization of Arab Petroleum Ex-porting Countries (OAPEC) responded to these events by agreeing to end or reduce oil shipments to countries supporting Israel OAPEC’s decision set petroleum-importing states bidding against one an-other for the oil upon which their economies de-pended Oil’s spot market price soared from under three dollars per barrel to more than twenty dollars per barrel, and the Organization of Petroleum Ex-porting Countries (OPEC) successfully exploited the situation to wrest control over the international petro-leum market from the cartel of private oil companies that had controlled it for half a century
On balance, the Yom Kippur War was less responsi-ble for causing the first oil crisis than influencing its timing By 1973, oil supply and demand trends had combined with political events to make oil-importing states highly dependent on Arab oil producers Fol-lowing World War II, industrialized states began dou-bling their energy use approximately every dozen years To meet energy needs, Japan and the countries
of Europe used ever larger quantities of imported
Trang 6petroleum—the cheapest and most efficient energy
source available Meanwhile, they allowed their
indig-enous coal industries to decay Thus, whereas coal had
accounted for nearly 78 percent of the energy used in
Western Europe and more than 60 percent in Japan in
1950, by 1970, coal was producing less than 25 percent
of their energy needs Conversely, by 1970, imported
oil accounted for more than 55 percent of Western
Europe’s total energy use and nearly 70 percent of
Ja-pan’s Even in the United States, with its large
domes-tic petroleum industry, imported oil became the
post-war means of sustaining the good life On the eve of
the Yom Kippur War, Americans were importing nearly
one-third of their petroleum and one-sixth of their
total energy needs
These shifting demand-supply patterns would have
been less significant were it not for the political
changes that occurred between 1950 and 1970 The
primary source of supply of the oil-importing world
shifted to the Middle East, where many of the
oil-exporting states were shedding pro-Western
govern-ments in favor of more radical regimes These states
were at once more likely to cooperate with one
an-other in using the oil weapon against Israel and less
willing to accept the prices being paid to them by the
seven western oil companies (the “Seven Sisters”),
who as late as 1950 still controlled nearly 90 percent of all production outside the United States and the So-viet Union By 1971, this cartel had already lost its ability to fix the price
of oil on the world market
Against this backdrop, the 1973 oil crisis unfolded as a culmination
of events The higher oil prices be-gan a major shift of wealth toward OPEC states (whose $10-$12 billion surplus on their combined current account in 1973 jumped to a $65 bil-lion surplus in 1974) and ended the 1968-1973 economic boom in the Western industrialized world The crisis also produced significant diplo-matic ruptures within the Western alliance, as Japan and most of the U.S allies in Europe were forced to break ranks with the United States
on Middle East policy in order to avoid having their oil shipments cur-tailed On the domestic front, the
1973 crisis made energy a major policy issue, as im-porting states began to consider the lifestyle changes necessary to reduce their levels of dependency on OPEC oil The choices, however, were inevitably un-pleasant, and by the mid-1970’s, the United States in particular preferred to regard the 1973 crisis as an ab-erration It was a convenient fiction, making it unnec-essary for Americans to rethink their love affair with large cars, their suburban dwelling patterns, and their generally profligate use of energy
The 1979 crisis exploded that myth, as it unfolded between two political events: the fall of the shah of Iran in January, 1979, and the outbreak of war be-tween Iraq and Iran that officially began in 1980 The first event plunged Iran into disarray, effectively shut-ting down its oil industry and depriving an already tight international petroleum market of Iran’s 3 to 4 million barrels per day of oil exports The price of oil rose almost daily with Iran’s continuing political tur-moil Then, in late summer, the turbulence in Iran tempted Iraq into invading the country The resultant war removed Iraq’s more than 3 million barrels of oil per day from the market as well The cost of oil sky-rocketed By late September, 1980, OPEC oil, which had been selling for sixteen dollars per barrel in Janu-ary, cost more than thirty-six dollars per barrel
A gas station owner in Perkasie, Pennsylvania, paints a sign illustrative of the
trickle-down effects of the dual energy crises of the 1970’s (AP/Wide World Photos)
Trang 7This twenty-dollar-per-barrel increase in the price
of oil had a devastating impact on the global economy
Western oil importers hastily employed harsh
mone-tary policies to combat the new inflationary pressure
As countries’ economies sharply contracted,
unem-ployment rates unseen since the Great Depression
en-sued By 1980, Japan’s unemployment rate, which had
averaged 1.0 percent from 1960 to 1978, was 13.5
per-cent; for France and the United States, the 1980 figure
was 15 percent; for the United Kingdom, 23 percent
A decade later, when Saddam Hussein’s army invaded
and temporarily annexed oil-rich Kuwait, double-digit
unemployment, dating from the second oil crisis, still
lingered in much of Western Europe So, too, did the
developed democratic world’s dependency on
im-ported oil from OPEC in general and its Arab
export-ing states in particular
Impact on Resource Use
The link between the cost of energy and economic
growth—and hence the utilization of a broad range of
resources—is generally a direct one It also involves an
inverse relationship Low energy prices keep down
the cost of everything related to energy use, from
heating oil and gasoline to commodities mass
pro-duced and distributed via systems relying on some
form of energy Conversely, because in the immediate
short term the demand for energy is usually inelastic,
high energy prices do not immediately result in less
energy use, only in higher energy costs, which
invari-ably translate into inflationary pressures,
counter-inflationary policies likely to increase unemployment,
and recessionary periods of stagflation, low economic
growth, and low overall resource utilization
Because their operations were rooted in the
devel-oped democratic world, the western oil companies
that largely controlled the petroleum market prior to
1970 were geared to maintaining a stability in the
price of oil that would allow them to make a
consis-tent, small profit on each unit of a commodity used in
abundance in times of steady economic growth They
also controlled a large enough portion of the
interna-tional oil-producing market and sufficient internal
cohesiveness to enable them to do so effectively
dur-ing most of the middle half of the twentieth century
OPEC has never had the same ability for two reasons
First, there are major exporters of oil outside OPEC
who, as in the case of Britain during the 1980’s, have
been willing to undersell OPEC and set into motion a
downward spiral in the price of oil on the world
mar-ket Second, there are major divisions inside OPEC which, in markets of reduced supply or rising de-mand, have often made it difficult for price moder-ates like Saudi Arabia to keep the price of oil from spi-raling upward to global recession-inducing levels Consequently, since OPEC replaced the Seven Sis-ters cartel in the 1970’s, there has been a marked ab-sence of the general stability in the price of oil that characterized the reign of the Seven Sisters, and on the basis of which Western economies recovered from World War II and expanded from 1950 to 1970 In-stead, internal squabbles among OPEC nations have combined with political and economic developments outside its control, producing a roller-coaster effect
on the global economy that has frequently had a pro-found impact on the lives of its citizens and their use
of its resources Thus, the high price of oil at the end
of the 1970’s had a gradual, dampening effect on the demand for oil in the 1980’s, as Western economies contracted and industrial production fell in many states to 60 percent of its pre-recession levels At the same time, the high price of oil encouraged not only the exploration and development of other sources of oil, like the North Sea, the Caspian Sea, and Alaska, but also the development of alternatives to conven-tional petroleum, like the shale oil in Colorado, the tar sands oil in Canada, and oil-from-coal projects similar to those that allowed Germany to fuel its war machine in World War II When, however, the re-duced demand for OPEC oil combined with the over-production and price cheating that occurred inside OPEC by states desperate for development funds in a market to produce a sharp drop (at one point to be-low ten dollars per barrel) in the price of oil in the mid-1980’s, many of these costly, alternative energy projects were abandoned even as consumer demand for oil began to grow again
The same pattern repeated itself near the end of the twentieth century and during the first decade of the twenty-first century The low price of OPEC oil in the 1990’s not only stimulated increased energy con-sumption in the United States and other parts of the developed Western world but also encouraged a series
of developing countries, including India and China,
to accelerate their development plans, and hence the need for imported oil The result was a steady upward pressure on the price of oil, only temporarily dis-rupted in the late 1990’s by an economic crisis in East Asia When the demand of these countries surged in the early twenty-first century at the same time that the
Trang 8United States occupation of Iraq removed its ability to
export large amounts of oil and even turned Iraq
mo-mentarily into an oil-importing state, the resultant
tightness in the energy market produced a steady
up-ward spiral in the price of oil, to a recession-inducing
peak of approximately $150 per barrel Then
fol-lowed a predictable decline in the demand for
im-ported oil and the price of oil and, in turn, the
cancel-lation of many of the alternative-energy schemes born
during the era of $150-per-barrel OPEC oil The global
financial crisis that occurred shortly thereafter
fur-ther reduced Western demand for resources, from
the wood to build homes to the metals to make steel,
but it was the high price of oil preceding that crisis
that had already softened up such key economic
sec-tors as automotive production and the demand for
the resources used by such sectors
Joseph R Rudolph, Jr.
Further Reading
Amuzegar, Jahangir Managing the Oil Wealth: OPEC’s
Windfalls and Pitfalls New York: I B Tauris, 2001.
Feldman, David Lewis, ed The Energy Crisis: Unresolved
Issues and Enduring Legacies Baltimore: Johns
Hopkins University Press, 1996
Horowitz, Daniel, ed Jimmy Carter and the Energy Crisis
of the 1970’s: The “Crisis of Confidence” Speech of July
15, 1979, a Brief History with Documents Boston:
Bedford/St Martin’s, 2005
Learsey, Raymond J Over a Barrel: Breaking Oil’s Grip on
Our Future New York: Encounter Books, 2007.
Mattson, Kevin “What the Heck Are You up to, Mr
Presi-dent?” Jimmy Carter, America’s “Malaise,” and the
Speech That Should Have Changed the Country New
York: Bloomsbury, 2009
Merrill, Karen R The Oil Crisis of 1973-1974: A Brief
History with Documents Boston: Bedford/St
Mar-tin’s, 2007
Randall, Stephen J United States Foreign Oil Policy Since
World War I: For Profits and Security 2d ed Montreal:
McGill-Queen’s University Press, 2005
Silber, Bettina, ed The Arab Oil Embargo: Ten Years
Later Washington, D.C.: Americans for Energy
In-dependence, 1984
Skeet, Ian OPEC: Twenty-five Years of Prices and Politics.
New York: Cambridge University Press, 1988
Tetreault, Mary Ann The Organization of Arab
Petro-leum Exporting Countries: History, Policies, and
Pros-pects Westport, Conn.: Greenwood Press, 1981.
Unander, Fridtjof, and Michael Ting Oil Crises and
Cli-mate Challenges: Thirty Years of Energy Use in IEA Coun-tries Paris: International Energy Agency, 2004 Vernon, Raymond, ed The Oil Crisis New York:
Norton, 1976
Yergin, Daniel The Prize: The Epic Quest for Oil, Money, and Power New ed New York: The Free Press, 2008.
See also: Athabasca oil sands; Coal gasification and liquefaction; Department of Energy, U.S.; Energy eco-nomics; Energy politics; Oil industry; Organization of Arab Petroleum Exporting Countries; Organization
of Petroleum Exporting Countries; Peak oil; Re-sources as a source of international conflict; Saudi Arabia; Synthetic Fuels Corporation
Oil industry
Categories: Energy resources; obtaining and using resources
One of the world’s largest industries, the petroleum in-dustry made the twentieth century the “petroleum age,” enriched and developed numerous third world coun-tries, helped the Allies win World War II and Europe and Japan recover from that war, and powered the U.S rise into a military and economic superpower A major contributor to the shape of the global economy, the pe-troleum industry had itself been significantly reshaped
by that economy by the end of the twentieth century.
Background The oil industry remains a capital-intensive industry, and, therefore, its story generally remains one of enormous wealth and, through wealth, one of politi-cal power and influence The modern form of oil in-dustry began when John D Rockefeller’s Standard Oil monopoly was vertically integrated, spanning pro-duction, refining, transporting, and retailing opera-tions The industry’s fruits were initially spread abroad
by Rockefeller’s fleet of kerosene tankers At the same time, Standard Oil was also securing a tight hold on the U.S oil market At the beginning of the twentieth century, it already controlled 87 percent of produc-tion, 82 percent of refining, and 85 percent of all pe-troleum marketing operations in the United States
In short order, however, a brace of developments turned both the U.S oil market and the petroleum in-dustry into a competitive, global operation The
Trang 9plication of the Sherman Antitrust Act (1890) and
subsequent breakup of Standard Oil into its regional
components in 1911 forced some of its newly
inde-pendent, “oil-short” units (most notably Standard Oil
of New York, later Mobil Oil) to look abroad for the oil
that its gas stations had previously acquired from
other parts of the Standard Oil trust At
approxi-mately the same time, the conversion of navy ships to
oil prompted Britain and the United States to urge
their nascent oil companies to explore abroad for
se-cure sources of oil to service their fleets in remote
parts of the world Soon the ancestors of British
Petro-leum and Standard Oil of New Jersey (originally
Jer-sey Oil and later Exxon in the United States and Esso
in Canada), Rockefeller’s core unit, were competing
with one another for the status of the world’s largest
petroleum corporation That competition would
en-dure throughout the twentieth century
World War I introduced aircraft, tanks, and
ambu-lances to the battlefield, hence further underscoring
the relationship between national security and a
healthy oil industry Taking advantage of that fact, by
the time that Henry Ford introduced the
assembly-line technique for making automobiles an affordable
part of the average American’s life, the United States
oil industry had already used the war to turn the
government in Washington from a trust-busting foe
of big oil into one of its biggest supporters Except
for a few minor disruptions, that relationship lasted
throughout the twentieth century, manifested in
fa-vorable tax laws, support of oil company efforts to
stabilize the markets, and—following the rise of the
Organization of Petroleum Exporting Countries
(OPEC)—a willingness to allow the major oil
corpora-tions to undertake mergers akin to those that the
Sherman Act had been enacted to prevent However,
even before the rise of OPEC and those mergers, U.S
petroleum corporations had remained major players
in the U.S and global economies On the eve of the
1973 oil crisis, the American petroleum industry was
generating 30 percent of all domestic investment and
40 percent of all American investment in the
develop-ing world
The benefits that the U.S government offered to
its smaller oil companies to go abroad and find new
sources of oil to meet the growing demand for oil after
World War II ultimately undermined the cartel of
pri-vate oil companies that had stabilized the
interna-tional price of oil for two generations Known as
the “Seven Sisters,” this cartel—composed of Exxon,
Mobil, SoCal (Standard Oil of California, later Chev-ron), British Petroleum, Royal Dutch Shell, Texaco, and Gulf)—accounted for 90 percent of all global production outside the United States and Russia, 80 percent of all refining operations, and 70 percent of all marketing operations in the early post-World War II years Oil-producing states either sold their oil
to these companies at the proffered price or did not sell their oil at all
Encouraged by government incentives, in the af-termath of World War II, several smaller U.S oil com-panies began to explore for oil abroad More joined the pack when one of the first, Getty Oil, struck it rich
by finding oil in Kuwait Unlike the Sisters, these indi-vidual companies had little bargaining power Grad-ually they cut into the share of the market controlled
by the Sisters (whose control over production outside the United States and the Soviet Union dropped to 70 percent by 1970) More important, their individual operations were usually in one country only, and they either bought their oil from that state on its terms or did not acquire foreign oil at all As the international oil market grew ever tighter during the 1968-1973 era of Western economic expansion, their host gov-ernments demanded—and received from these com-panies—much better financial payoffs than those of-fered by the Sisters to their producing states Given the increasingly tight energy market, the Sisters had
to extend the same deals to their host governments Consequently, even before the October, 1973, Yom Kippur War led to the Arab oil embargo and OPEC’s rise to prominence, the Seven Sisters’ hold on the global industry was already eroding rapidly
OPEC and the Global Economy The 1973 Arab oil embargo on countries friendly to Is-rael created panic in the marketplace, as Western states bid against one another for oil that, in some in-stances, they did not have the storage facilities to ac-commodate The price of oil on the spot market jumped from under three dollars per barrel (the Sis-ters’ last posted price on the eve of the Yom Kippur War) to the twenty-dollar-per-barrel range In turn, this hysteria allowed OPEC to buy out the Seven Sis-ters and other Western oil companies and establish it-self as the new international cartel in charge of setting the price of oil Subsequently, both the fortunes of the international petroleum industry and that of the in-ternational economy have fluctuated in large part with OPEC’s fortunes and its ability to keep the price
Trang 10of oil stable and in a price range affordable enough to
allow for overall economic growth and the economic
development of third world countries In general,
OPEC’s record has been spotty The OPEC-endorsed
price hikes in the 1970’s—to twelve dollars per barrel
in 1973 and to more than thirty dollars per barrel
in 1979 (following the fall of the shah of Iran and
resultant drop in the availability of Iranian oil in
the market)—led to a prolonged recession in the
oil-importing, economically advanced Western world
throughout much of the 1980’s, which depressed
the price of OPEC oil significantly As a result, oil was
relatively cheap in the 1990’s, which not only led to a
renewed expansion of the global economy but also
enabled both India and China to mount significant
development plans fueled by low-cost, imported
pe-troleum With the tightening of the market at the turn
of the twenty-first century and the uncertain market
conditions during the first decade thereof, OPEC
again allowed the price of oil to soar to
recession-inducing levels, slowing the base of globalization and,
in many instances, encouraging countries to adopt
protectionist policies antithetical to the ideals of a
globalized economy
Meanwhile, partly in order to survive the eras of de-pressed oil prices, the global petroleum industry re-shaped itself, from the dominant Seven Sisters cartel
of private oil companies into a complex mixture of private and state oil companies, further complicated
by the fact that not all of the state-owned oil compa-nies in the world are the economic creatures of OPEC members
Diversification, Mergers, and the Western Oil Corporations
When OPEC took over the international oil market in
1973, the possibility remained of discussing Western oil companies in the terminology that had been used for half a century There were the “majors,” the Seven Sisters, and then there were the “independents,” that
is, the comparatively small producers that included family enterprises like Krumme Oil in Oklahoma to large multinational oil companies like Getty Oil and Atlantic Richfield Company (ARCO) During the high-price-energy era of the 1970’s and early years of the following decade, all these companies reaped large profits, and the majors and many of the larger independents reinvested those profits in the pursuit
An oil industry employee turns a control valve at the Daura oil refinery in Baghdad, Iraq, in 2009 (Getty Images)