The 1860s marked a pivotal era in American history, not only due to the start of the Civil War but also because of the birth of the country’s oil industry.
In another article, we told the story of Edwin Drake, who managed to begin the first large-scale crude oil extraction in America. This was in 1859, in Titusville, Pennsylvania.
While Drake’s Well wasn’t a very successful endeavor in the long term, even after a generally successful beginning, the techniques used for it helped unveil that large deposits of oil could exist deep underground. When Drake helped make this public knowledge, he introduced a lot more oil to the market.
And then came the first oil shock in history.
This article will shed more light on the early days of America’s oil industry and its profound effects on the country’s development.
1860s Crude Oil Shock
Drake introduced a significant spike in supply and the promise of more wells to come under operation.
This was a two-edged sword since it also halved oil prices from around $20 per barrel. For context, this reduced price was still over $200 in modern dollars.
As prices dropped, the incentive to enter this new industry was also diminished.
Impact of the American Civil War
The outbreak of the American Civil War in 1861 had far-reaching consequences for various sectors of the economy, including the nascent oil industry.
The conflict disrupted transportation networks and the country’s movement of goods and raw materials. As a result, the supply of crude oil became severely constrained.
The war had a profound effect on the demand for crude oil. The Union, which had a significant stake in the oil industry, faced significant challenges.
The majority of the oil-producing regions were located in Confederate territory, causing significant disruption in the oil supply.
Additionally, the Union Navy relied heavily on petroleum for its operations, further exacerbating the strain on the limited oil resources.
Crude oil prices shot higher than anyone had ever seen, along with smaller price increases for all other goods. The taxes against alcohol-based lighting fuels pushed the demand for crude much further.
Suddenly the crude oil industry was back on its feet, with prices reaching record-high levels.
By 1864, the price topped $121 a barrel, or around $2,000 as of today. That’s approximately 30 times the current price for a barrel of crude. Truly astonishing, especially when you consider that this demand came from a time before automobiles.
Effects on the Economy and Society
The skyrocketing oil prices adversely affected industries such as textiles, which heavily relied on oil for powering machinery.
Manufacturers faced challenges in maintaining profitability, which, in turn, led to increased costs for consumers.
The high oil prices affected the price of kerosene, a crucial source of lighting at the time for many households and businesses.
This sparked a search for alternative energy sources, eventually leading to the widespread adoption of electricity.
The 1860s marked a crucial turning point in America’s oil industry. Edwin Drake’s successful drilling of the first commercial oil well and the subsequent oil price shock during the Civil War set the stage for the industry’s growth and transformation.
The oil industry would continue to evolve, shaping the nation’s economy and society in profound ways in the years to come.
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Takeaway: The Birth of America’s Oil Industry Was Not a Smooth Ride
The unique approach of Edwin Drake paved the way for the booming US oil industry. The oil shock that followed during the Civil War further highlighted its importance and cemented oil as one of the most essential commodities.
Furthermore, despite the challenges, this series of events ignited advancement in alternative energy sources like electricity, which makes it among the most crucial periods in human history.
