Weaning consumers off fossil fuels is no quick fix

The history of transportation is studded with discovery and mishap

By Gordon Jaremko

December 01, 2009

Before German engineer Karl Benz built the first internal combustion engine vehicle in 1885 and American entrepreneur Henry Ford made it a mass consumption item in his 1908 Model T, gasoline was regarded as an unwanted byproduct. Early refineries often discarded the stuff into the soil as hazardous waste left over from making their mainstays of less flammable lamp oil, lubricants, and marine and railway boiler fuel.

For a brief period, early Canadian production rivaled American wells. In 1860, recorded southern Ontario production was 118,000 barrels, not counting output in the booming Oil Springs area. Better documented Pennsylvania output was 220,000 barrels. As of 1862, rapidly spreading American production exceeded three million barrels then kept on climbing into the 50-million-barrel range by the mid-1890s. The Canadian total took until 1866 to struggle up to 403,000 barrels and stayed in a modest, sub-million barrel range until the first Alberta discovery in 1914 south of Calgary at Turner Valley.

The pioneer era rapidly established the industry’s notoriety as a wild economic ride. From the beginning, oil prices set a roller-coaster pattern as industry conditions oscillated between gluts and shortages. The feast-or-famine pattern prevailed on both sides of the market: supply and demand. New discoveries caused gluts. Drilling failures brought on shortages. New uses for petroleum dried up surpluses. Uneven availability of critical services such as pipelines, railway tank cars and refineries affected the markets.

Disputes among industry factions added political and legal twists ranging from prototype production cartels to forays into government regulation. Perennial conflicts broke out between coalitions formed by fiercely independent small entrepreneurs and the Standard Oil “integrated” empire of operations spanning drilling to retailing that John D. Rockefeller founded in 1870.

North American oil prices hit a peak in 1860 that has yet to be equaled again. Fevered markets skyrocketed to US$9.60 a barrel – the equivalent of $256.44 in today’s money. The resulting drilling rush quadrupled production. The oil price tumbled back to $0.50 a barrel ($12.60 in current dollars) in 1861.

Prices bounced around between $1 and $8.25 ($22 and $117 in today’s money) until the Texas Railroad Commission created an element of stability, with much but not unanimous industry support, by evolving a system of production and sales “pro-rationing” in the early 20th century. The ancestor of Alberta’s Energy Resources Conservation Board developed a Canadian counterpart.

As now, a flair for finding oil in the pioneer era was good for fame but no sure-fire ticket to lasting great wealth or stature. The entrepreneur who drilled the first U.S. well, Edwin Drake, went broke, fell ill and was reduced to appealing to friends to help feed his family within a decade of making the discovery, reports historian William R. Brice. The Pennsylvania legislature eventually granted Drake and his wife, Laura, a lifetime pension of $1,500 a year ($27,840 in today’s funds).

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