The History of Oil Energy: The Big Picture
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Oil is considered a dirty fuel source because of its high rate of carbon dioxide (CO2) emissions, toxic heavy metals, and other chemicals that contribute to global climate change. Its history dates back millions of years, and today it has evolved into our primary fuel for transportation. So, we had to ask: What is the history of oil energy?
Oil energy began millions of years ago with the formation of crude oil. The invention of kerosene and petroleum in the 1840s, followed by the automobile in 1855, sparked a huge demand for oil. After the first oil wells were drilled in the 1850s, oil steadily became our primary transportation fuel.
Keep reading to learn how oil energy came to be, who and what pioneered its development, how effective it has been thus far, and what the future of oil energy could entail.
Here’s the History of Oil Energy in a Nutshell
Oil is one of the three main fossil fuels (e.g., coal, oil, and natural gas).
“Oil: petroleum (= the black oil obtained from under the earth’s surface from which gasoline comes)”
Cambridge Dictionary
Oil energy is produced via the combustion of pressurized plant and animal remains. The heat created upon combustion creates steam which spins a turbine and spins a generator to produce electricity.
Oil energy has gone through three distinct development phases in its development:
- Early market formation and innovation: The early history of oil energy dates back millions of years ago when, under the right conditions, buried plant and animal remains were subjected to intense heat and pressure. Surface occurrences (natural seepages) of oil have been known since ancient times, and the Babylonians and Egyptians used crude oil more than 5,000 years ago for medicinal and military practices.
- Consolidation and strengthening: The invention of kerosene and petroleum in the 1840s, followed by the gasoline-powered automobile in 1855, sparked a huge demand for oil. Some of the first oil wells were drilled in the 1850s, kickstarting the modern oil industry.
- Mainstreaming: The oil industry boomed with the invention of the automobile in 1885, quickly establishing itself as the world’s primary transportation fuel in the 1900s. The establishment of the International Energy Agency (IEA) and International Renewable Energy Agency (IRENA) have since facilitated the transition away from oil and toward cleaner forms of energy as the climate crisis continues to worsen.
| Oil Energy Milestones | Historical Event |
| Initial start | The early history of oil energy dates back millions of years when plant and animal remains gradually built up on the earth’s surface and the ocean floor. Under the right conditions, some of these remains were converted into oil. |
| Milestones in oil energy development | 1846: Abraham Gesner invented kerosene, which replaced previous fuel products (e.g., whale oil). 1847: James Young distilled an early form of petroleum. He is widely known as the father of the oil industry. 1850: James Young and Edward William Binney created the world’s first commercial oil refinery. 1852: Ignacy Łukasiewicz invented the kerosene lamp and co-founded the first petroleum extraction company. 1854: Ignacy Łukasiewicz, Tytus Trzecieaki, and Karol Klobassa established some of the world’s first oil wells in Bóbrka, Poland. 1857: The first drilled oil well was established in La Brea, Trinidad. 1859: Edwin Drake drilled the world’s first viable oil well in the US. This started an oil rush and led to the establishment of several, large oil corporations. 1865: John Rockefeller founded Standard Oil Company, an oil monopoly in the US. Rockefeller is known as the world’s first oil baron. 1882: Thomas Edison’s opening of Pearl Street Station, the first electrical power station in the US, reduced the demand for oil as a source of light. 1885: The oil industry found new demand and a new market with Karl Friedrich Benz’s invention of the gasoline-powered automobile. 1920-1970: The Seven Sisters, the largest oil companies in the world, dominated the global oil industry. 1928: The Red Line Agreement was signed, marking the beginning of an oil monopoly. 1960: Iran, Iraq, Kuwait, Venezuela, and Saudi Arabia formed the Organization of the Petroleum Exporting Countries (OPEC). These nations produce approximately 30% of the world’s crude oil. Today, OPEC consists of 13 member countries. 2016: OPEC formed an alliance with 10 other oil-producing countries to form OPEC+. Today, OPEC+ consists of 10 member countries that produce approximately 40% of the world’s crude oil. |
| Current status | Currently, 31% of our primary energy comes from oil, and we consume almost 53,000 terawatt-hours (TWh) of oil energy a year. The top 10 largest oil producers in the world account for 74% of global oil production, approximately 98 million barrels of oil per day. Global oil markets are still rebounding from the COVID-19 pandemic in 2020 and Russia’s invasion of Ukraine in 2022. |
| Future outlook | The future of oil energy will be heavily influenced by ambitious government targets, policy support, as well as increasing competitiveness and decreasing costs of renewable energies. |
| Key policy developments | 1974 – The International Energy Agency (IEA) 1995 – The International Hydropower Association (IHA) 2001 – World Nuclear Association (WNA) 2005 – Global Wind Energy Council (GWEC) 2009 – The International Renewable Energy Agency (IRENA) 2013 – Ocean Energy Europe (OEE) 2015 – International Solar Alliance (ISA) |
Understanding oil energy’s history can provide insight into how it has evolved into the primary energy source it is today.
When and How Did Oil Energy Get Started
Oil energy comes from the combustion of petroleum, a fossil fuel known as crude oil.
Crude oil was formed millions of years ago when plant and animal remains gradually built up on the earth’s surface and the ocean floor, mixing with sand, silt, and calcium carbonate. Under immense heat and pressure, some of these remains were converted into oil depending on the combination of organic matter present, how long it was buried, and pressure conditions.
Surface occurrences (natural seepages) of oil have been known since ancient times, with the Assyrians and Babylonians first using crude oil more than 5,000 years ago. Ancient Egyptians used oil for wound dressings and laxatives.
Some of the world’s first oil was discovered in China as early as 600 BC when it was transported via bamboo pipelines. The Persians used incendiary arrows soaked in oil in 480 BC, and the Arabs and Persians distilled oil for military use early in the Common Era. Some of the earliest known oil wells date back to China in 347 AD.
How Has Oil Energy Developed Over Time
Fossil fuel consumption began with the Industrial Revolution, and consumption has increased exponentially over the past 70 years. In the 1900s, new technologies and environmental concerns forced a switch from solely coal to a mix of coal, oil, and natural gas. Today, oil is our primary fuel for transportation.
What Are Milestones in Oil Energy Development
The modern history of oil energy began in the mid-1800s with the discovery of kerosene and boomed with the invention of the automobile in 1885.
1846: Canadian geologist Abraham Gesner invented kerosene by refining liquid from coal, oil shale, and bitumen. Kerosene burned brighter and was more economical than previous fuel products (e.g., whale oil).
1847: Scottish chemist James Young continued to experiment with coal, discovering how to distill an early form of petroleum and paraffin wax, commonly used in candles. Young is widely known as the father of the oil industry.
1850: James Young partnered with geologist Edward William Binney to create the world’s first commercial oil refinery. They manufactured oil and paraffin wax from locally mined coal.
1852: Polish pharmacist Ignacy Łukasiewicz invented the kerosene lamp and co-founded the first petroleum extraction company. He was the first to implement crude oil on an industrial scale.
1854: Ignacy Łukasiewicz, Tytus Trzecieaki, and Karol Klobassa established some of the world’s first oil wells in Bóbrka, Poland.
1857: The first drilled oil well was established in La Brea, Trinidad by the American Merrimac Company. The well was closed two years later because it had not yielded enough oil to be commercially viable.
1859: Edwin Drake drilled the world’s first viable oil well in Pennsylvania (US). This started an oil rush and led to the establishment of several large oil corporations.
1865: John D. Rockefeller founded the Standard Oil Company. It operated as a monopoly in the US from 1870 until it was forced to dissolve in 1911. Rockefeller is widely regarded as the world’s first oil baron.
1882: Thomas Edison established Pearl Street Station, the world’s first full-scale central power station in New York (US) that distributed electricity to consumers. The development of the electricity industry meant oil was no longer needed as a source of light.
1885: Karl Friedrich Benz invented the world’s first gasoline-powered automobile. The oil industry found new demand with this invention and shifted to automobiles.
1920-1970: The Seven Sisters, the seven largest oil companies in the world, dominated the global oil industry. They were composed of 5 American and 2 international companies.
1928: The Red Line Agreement, a deal between several American, British, and French oil companies over the discovery of immense oil fields in the Middle East, was struck. It marked the beginning of an oil monopoly that would span several decades.
1960: Iran, Iraq, Kuwait, Venezuela, and Saudi Arabia formed the Organization of the Petroleum Exporting Countries (OPEC). These nations produce approximately 30% of the world’s crude oil. (Today, OPEC consists of 13 member countries.)
2016: OPEC formed an additional alliance of oil-producing countries that they are named OPEC+. Today, OPEC+ consists of 10 member countries that produce approximately 40% of the world’s crude oil. OPEC+ works with OPEC to stabilize the global crude oil market.
How Has the Oil Energy Market Developed Recently
Following a decrease due in large part to the COVID-19 pandemic in 2020, the oil industry has rebounded to reach all-time highs in 2022.
2019: The global demand for crude oil was 100 million barrels per day (mb/d). We consumed 53,513 TWh and produced 52,093 TWh of oil.
2020: The global demand for crude oil decreased by almost 10% to 91 mb/d, largely as a result of the COVID-19 pandemic and ensuing global shutdowns. We consumed 48,610 TWh and produced 48,561 TWh of oil.
2021: The global demand for crude oil rebounded to reach 97 mb/d, almost pre-pandemic levels. We consumed 51,350 TWh and produced 41,192 TWh of oil.
2022: The global demand for crude oil increased slightly to 99 mb/d. We consumed 52,970 TWh and produced 51,256 TWh of oil.
What Is the Present Status of Oil Energy
We consumed almost 53,000 terawatt-hours (TWh) worth of oil in 2022, the most out of the fossil fuels.
Oil is our largest energy source and the dominant source of energy for the transportation sector. In 2022, oil accounted for 31% of our primary energy.
The top 10 largest oil producers in the world account for 74% of global oil global production, which is approximately 98 million barrels of oil per day. The US, Saudi Arabia, Russia, Canada, and Iraq are the top 5 oil-producing countries currently.
In 1960, the Organization of the Petroleum Exporting Countries (OPEC) was formed. OPEC is an intergovernmental organization consisting of 13 member countries: Saudi Arabia, United Arab Emirates, Kuwait, Iraq, Iran, Algeria, Angola, Libya, Nigeria, Congo, Equatorial Guinea, Gabon, and Venezuela. These nations produce approximately 30% of the world’s crude oil, with Saudi Arabia being responsible for more than 10 mb/d.
In 2016, OPEC formed an alliance with 10 other oil-producing countries that are similarly named OPEC+. OPEC+ consists of 10 member countries: Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei, Malaysia, Mexico, Oman, South Sudan, and Sudan. These nations produce approximately 40% of the world’s crude oil, with Russia being responsible for more than 10 mb/d.
OPEC and OPEC+ nations work together to stabilize the oil market, adjusting crude oil prices as necessary. Combined, the 23 countries hold over 90% of the world’s proven oil reserves and have the ability to disrupt or enhance the supply of crude oil.
The US and China by far consume the most oil, accounting for roughly 33% of global consumption.
In terms of carbon emissions, we collectively emit almost 12 billion tons of CO2 from oil every year, an amount second only to coal.
How Will the Future of Oil Energy Look Like
Global oil markets are still rebounding from the COVID-19 pandemic in 2020 and Russia’s invasion of Ukraine in 2022. Ambitious government targets, policy support, and increasing competitiveness plus decreasing costs of renewable energies will heavily influence the future of oil energy.
How Oil Energy Will Likely Develop in the Future
In the short term, global demand for crude oil is predicted to increase to 102 mb/d in 2023, its highest-ever annual total, before slowing to 1 million barrels per day (mb/d) in 2024. The IEA predicts demand for oil from combustible fossil fuels – excluding biofuels, feedstocks, and other non-energy uses – to peak at 82 mb/d in 2028 whereas oil used as transportation fuel is set to decline after 2026 due to the expanding electric vehicle and biofuel markets.
In the long term, global demand for oil is predicted to slow to a halt and later decline due to emphasis put on the global energy crisis and the need to pivot towards cleaner sources of energy. We will also run out of oil because it is a finite resource. If we continue to use oil at our current rate, we can expect to run out of it in approximately 50 years.
Oil is considered a dirty fuel source because of its high rate of CO2 and CH4 emissions, toxic heavy metals, and other chemicals that contribute to global climate change. Although there are ways to minimize its environmental impact, there are still many environmental drawbacks.
Phasing out oil energy will be crucial to mitigating climate change because:
- Oil has a high carbon footprint: On a life-cycle basis, oil emits 970 grams of carbon dioxide (CO2) equivalent per kWh of electricity produced. Which is the highest carbon footprint of all energy types – and higher than all the other ones in the illustration below.
- Oil energy exacerbates global warming: This phenomenon occurs when CO2 and other air pollutants absorb sunlight and solar radiation in the atmosphere, trapping the heat and acting as an insulator for the planet. Oil combustion produces over 12 billion tons of CO2 emissions every year which accelerates the insulating effect. In addition, oil collection and combustion produce methane (CH4) emissions, which are 25 times more potent than CO2 at trapping heat in our atmosphere.
- Oil energy degrades air quality: The oil industry contributes significant amounts of CH4, volatile organic compounds (VOCs), and air toxics into the environment which can cause respiratory problems and even premature death. VOCs are a group of chemicals that lead to the formation of ground-level ozone (smog). Air toxics are suspected carcinogens and include benzene, ethylbenzene, and n-hexane.
- Oil energy can cause water pollution: Large amounts of water and potentially hazardous chemicals are required when fracking, which can decrease water availability for people and aquatic life and can result in leaks and spills of fracking fluids. Fracking also produces large amounts of wastewater which require treatment before disposal, and injecting it back underground can cause earthquakes that are large enough to be felt.
- Oil energy can cause oil spills: Small oil spills occur when refueling a ship, and large oil spills occur when pipelines break, oil tankers sink, or drilling operations go wrong. In general, oil spills cause serious environmental harm by contaminating water and soil, causing explosions and fires, harming wildlife, and contaminating seafood. When oil enters the environment it is often difficult and expensive to remediate.
What Policies Are Put in Place to Support/Reduce Oil Energy Usage
The most well-known piece of legally binding, international climate mitigation legislation is The Paris Agreement, the goal of which is to limit global warming to below 2 degrees Celsius (C), preferably to 1.5C, compared to pre-industrial levels.
The Paris Agreement specifically notes a transition away from fossil fuels (e.g., coal) and towards renewable energies (e.g., solar, wind, hydropower) as being a critical part of meeting these goals.
Check out the highlights of the 2015 COP21 directly from the UN Climate Change channel:
In addition, The International Energy Agency’s (IEA) Net Zero Emissions by 2050 Scenario is one framework for the global energy sector to achieve net zero CO2 emissions by 2050 and universal energy access by 2030.
There are many global and country-specific policies and organizations aimed at reducing fossil fuel usage, including oil, and meeting the 2050 net zero scenario, including:
- 1974 – The International Energy Agency (IEA): The IEA was founded in response to the major oil disruptions in 1974. It promotes international energy cooperation and is made up of 31 member countries.
- 1995 – The International Hydropower Association (IHA): The IHA is a nonprofit membership association that serves as a global voice for hydropower energy. They operate in over 120 countries and manage over 1/3rd of global installed hydropower capacity.
- 2001 – World Nuclear Association (WNA): The WNA was established as the leading international organization to represent the global nuclear energy industry.
- 2005 – Global Wind Energy Council (GWEC): The GWEC was founded as an international trade association for the wind energy industry. Their members represent 99% of the global installed wind power capacity.
- 2009 – The International Renewable Energy Agency (IRENA): IRENA was founded as a global intergovernmental agency focused on scaling renewable energy. It is comprised of 167 member countries as well as the European Union.
- 2013 – Ocean Energy Europe (OEE): They are the largest global network of marine energy professionals, with over 120 member organizations. They aim to advance tidal and wave energy technologies.
- 2015 – International Solar Alliance (ISA): The ISA is a treaty-based organization established to create cooperation among solar energy-resource-rich countries and the rest of the world. There are currently 94 member countries.
If you are interested in learning more about country-specific energy policies, you can visit the IEA’s policies database and filter by specific energy type.
What Are Some Additional Facts About Oil Energy
Oil is referred to as crude oil when it is first extracted and then as petroleum products after it has been refined and processed. Petroleum products made from crude oil include gasoline, distillates (diesel fuel and heating oil), jet fuel, waxes, lubricating oils, and asphalt.
Drilling exposes oil reservoirs for extraction. And extracting oil involves seven main steps:
- Preparing the rig site
- Drilling
- Cementing and testing
- Well completion
- Fracking
- Production and fracking fluid recycling
- Well abandonment and land restoration
Once the oil is extracted it is transported via pipeline to be refined, or broken down into various components and reconfigured into new products. Oil refinement occurs via the following steps:
- Distilling: Crude oil is heated until it becomes a vapor. The vapor is lifted upwards in a distilling column and collects at different levels in trays, separating the liquids. Lighter products (butane) rise to the top of the column whereas gasoline, naphtha, kerosene, diesel, and heavy gas oil collect in trays going from top to bottom in the column.
- Cracking: Because there is a demand for lighter distilled products like gasoline, refineries convert heavy liquids into lighter liquids via cracking. Cracking breaks up long hydrocarbon chains into smaller ones, converting heavy oil into gasoline. Cat cracking, catalyst-driven cracking, is the most common form of cracking.
- Reforming: Refineries again use a catalyst to increase the quality and volume of gasoline. Reforming increases the octane number by rearranging the naphtha hydrocarbons to create gas molecules. A high octane number is more beneficial because it can withstand more compression before detonating. And the higher the octane number, the more stable the fuel.
- Treating: Crude oil contains pollutants including sulfur, nitrogen, and heavy metals that must be removed. The treating process removes these pollutants either by binding them to hydrogen, absorbing them in columns, or adding acid to them.
- Blending: Finished petroleum products are a blend of various streams of hydrocarbons that are then mixed into motor fuels. Refineries can also mix additives such as octane enhancers, metal deactivators, anti-oxidants, anti-knock agents, rust inhibitors, or detergents.
Oil is not environmentally friendly. But there have been practices implemented in order to mitigate some of the negative environmental effects, including:
- Improved technology: Satellites, GPS, and remote sensing technology can detect oil reserves underground which negates the need to drill multiple exploratory wells.
- Efficient drilling methods: Horizontal and directional drilling allows a single well to produce oil from a much larger area, reducing the overall number of wells needed.
- Controlling CH4 leaks: Detecting, fixing, and repairing CH4 leaks from well-pads, processing plants, compressor stations, and large distribution facilities is crucial. Doing this can reduce CH4 output by 1.70-1.80 million metric tons per year. Plugging abandoned oil wells also prevents the seepage of methane into the atmosphere.
- Recycle water and use efficient production practices: Fracking uses a large amount of water, so recycling water and avoiding utilizing freshwater sources can reduce water requirements. Constructing wells properly and maintaining them after drilling is complete is crucial for efficiency.
- Implement practices that reduce the risk of induced seismicity: Fracking can cause seismic activity that leads to earthquakes. Avoiding water injection into active fault lines, limiting injection rates, installing seismic monitors, establishing a protocol for when seismic activity is induced, and abandoning wells with seismic activity are all ways to mitigate this threat.
To minimize the negative environmental impacts of oil, technological advances in drilling, production, and transportation of oil as well as strict safety and environmental laws and regulations must be enforced.
Final Thoughts
The early history of oil energy dates back millions of years when, under the right conditions, buried plant and animal remains were subjected to intense heat and pressure. Surface occurrences (natural seepages) of oil have been known since ancient times, and the Babylonians and Egyptians used crude oil more than 5,000 years ago for medicinal and military practices.
The invention of kerosene and petroleum in the 1840s, followed by the gasoline-powered automobile in 1855, sparked a huge demand for oil. Some of the first oil wells were drilled in the 1850s, kickstarting the modern oil industry.
The oil industry boomed with the establishment of several monopolies and quickly established itself as the world’s primary transportation fuel in the 1900s. In the 2000s, fears about climate change spurred policy that shifted away from fossil fuels and toward renewable energies. The establishment of the International Energy Agency (IEA) and International Renewable Energy Agency (IRENA) have helped to facilitate this transition.
Stay impactful,
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