Our world is dominated by the need to control oil, the most important source of energy on this planet. The lifeline of industrialized nations, often the cause of wars, oil has brought several economies down to their knees, it has also built shiny skyscrapers in deserts.
We all know its importance in the transportation and industrial sector. But you may be surprised to find out how many everyday objects wouldn’t exist had it not been for oil.
Every time you blow bubbles with your chewing gum, you should be grateful that there’s oil on this planet, yes, this flavory gum we toss into our mouth every now and then contains petroleum, so does your toothpaste, perfumes, lipsticks, deodorants, contact lenses, dentures, you get it, we are literally surrounded by objects that are made from oil.
Today, even big tech is in the oil business. Google, Amazon, and Microsoft are teaming up with the fossil fuel industry to get as much oil and gas out of the ground as possible.
But how did this black sticky substance come to run our world and as we move towards renewable sources of energy, what becomes of it?
Our enslavement to oil dates back a millennium. Some of the world’s earliest civilizations exploited it as a resource. The Mesopotamians used it in jewels and mosaics, the Babylonians used it to waterproof their boats, the Egyptians used it to embalm mummies and in ancient Greece, oil was used as a fuel for lamps.
But the modern oil industry as we know it was born in the mid 19th century thanks to Scottish Chemist James Young. You will be forgiven for never having heard of his name. But he is arguably the father of the petrochemical industry.
In 1848, this wise man noticed oil seeping from the ceiling of a coal mine and from this seepage, Mr. Young distilled a thin oil suitable for lamps and a thicker oil suitable for lubricating machines. He patented these oils and three years later, partnered with geologist Edward William Binney to form the world’s first commercial oil refinery.
The news spread, more discoveries followed, interest in oil intensified around the world from the Russian empire to Europe to North America, drilling sites and modern wells propped up in different parts of the world. New businesses were created, most of them in the United States, where there was a rush for the black gold.
By the end of the 19th century, America became the largest oil producer in the world. Then came the 20th century and oil consumption rose exponentially, especially in the field of transport with the development of automobiles, reconversion of ship engines, and the aviation boom. But the most decisive point in oil’s history came in 1908 when a British company struck oil in Persia, modern-day Iran.
This was the first big petroleum find in West Asia, it set off a wave of exploration and extraction and changed the history of West Asia and the world. There were discoveries of oil reserves every few years, Iraq in 1927, Bahrain in 1932, Qatar in 1935, Saudi Arabia and Kuwait in 1938, and the United Arab Emirates in 1958.
With each discovery, new companies were formed backed by investors from the West, each hoping to secure concessions, each trying to determine the prices, so the Arab nations formed a body to end the West’s monopoly and secure fair and stable prices.
They called it the Organization Of The Petroleum Exporting Countries (OPEC). Created at the Baghdad conference of 1960. The founding members were Iran, Kuwait, Iraq, Saudi Arabia, along with Venezuela, the second largest producer of oil at that time. Over the years, more and more oil rich countries became members, Qatar, Indonesia, Libya, The UAE, Algeria, Nigeria, Ecuador and Gabon.
Together these countries ended up controlling 80% of the world’s proven crude oil reserves and 44% of the world’s crude oil production. OPEC strength, unity and dominance made it a monumental success . During the Arab-Israeli war of 1973, OPEC placed an embargo on America and its allies that supported Israel. Prices quadrupled from $3 dollars per barrel to $12 dollars globally. This embargo was called the first oil shock.
The second oil shock as some of you may be aware came in 2020 thanks to a double whammy. First, the Corona virus and secondly the price war between Saudi Arabia and Russia. OPEC witnessed its biggest bust in decades, air travel was halted, electricity demand fell by 20%, people stopped driving to work, oil prices fell to historic lows.
In January 2020, one barrel of crude oil was being sold at $67.5 dollars, by March, it crashed to $18 dollars, and at one point in April, it fell to an unthinkable -$38 dollars. In 2020, oil lost its sheen as liquid gold. It lost the tag of being the golden goose of the gulf.
We are in 2021 now and some say the end of the oil age is near but is it? Well, not really.
Yes, the oil industry is in an existential crisis, yes, the world is aggressively exploring even adopting green alternatives but oil will remain a major component of the global energy mix for decades to come.
The global oil demand is still 92.8 million barrels a day. There are an estimated 4.8 billion cars on the roads in the world, and just 4.8 million electric vehicles in use.
If 100% of the vehicles sold were electric starting today, it will still take 25 years to replace the entire vehicle fleet. All of this is not changing overnight.
Plus oil is used not just as fuel, it is central to almost all industries. Most of the things we use are manufactured from crude oil and you cannot get those products made through renewables, at least not yet.
This includes beddings, cameras, carpets, computers, detergents, furniture, golf balls, bottles, packaging, pesticides, pipes, curtains, tires, x-rays, even electric vehicles need crude oil generated fluids, lubricants, and motors.
Here are some of the latest figures.
The International Energy Agency (IEA) says, the demand for oil will plateau not declined by 2040. Petrochemicals says the IEA will drive this growth. ExxonMobil, one of the world’s largest oil companies by revenues says demand for oil will increase by 8% per year in the short term.
The transportation revolution will transform the oil market and that’s a fact but it won’t really lead to its collapse. For now, it looks like oil is not disappearing from our lives in a hurry.