Iran’s blockade of oil tankers through the Strait of Hormuz—20 million barrels, equal to 20 percent of world demand— caused supply disruptions, price shocks and international tensions. Oil (petroleum, crude, natural gas) rose from $60 a barrel to $112. Gasoline cost more than $4 a gallon. It is not the first but the latest crisis in a world that consumes 100 million barrels every day.
Shortages have caused human suffering. In India the absence of cooking oil has produced extreme difficulty. In Pakistan lines of cars and motorcycles at filling stations wind for city blocks. A lack of petroleum in fertilizer production threatens growth of food crops. Fertilizer, made with natural gas from the Persian Gulf, is central to the world’s fertilizer trade, by as much as 30 percent. This includes urea and anhydrous ammonia, both critical products for agriculture.
The Economist predicts that if the blockage continues hunger looms. Forty-five million people will be at riskon top of an estimated 300 million people who already struggle to feed themselves. The Hormuz crisis removes all doubt: the global economy depends on oil supply chains stretching thousands of miles. Furthermore, the blockade confirms that among nations oil contracts are binding, connected and enforceable.
“Oil” writes Ed Conway, “is the great accelerator of life, igniting a transportation revolution beginning with motor vehicles and reaching the jet airplane.” He adds that chemicals from petroleum are used in everything from toothpaste to electricity. Oil remains the single largest energy source globally, ahead of coal and natural gas.
Underpinning the oil age is a massive industry, the largest business enterprise in human history. Of the 20 largest corporations by revenue listed in the Fortune 500 index, seven are oil companies. They include such giants as Chevron, Mobile, Exxon, Shell and Saudia Aramco.
Birth of the oil industry is attributed to a 69 foot well drilled at Titusville, Pennsylvania August 27, 1859. The well produced a thick dark material known as “crude petroleum.” It excited the interest of other drillers because petroleum could yield kerosene, a widelyused substance that illuminated darkness.
Gasoline was a by-product of kerosene. It had little commercial value until perfection in 1876 of the internal-combustion- engine powered by gasoline. Drillers, therefore, foresaw a market of endless potential — in a new society mounted on wheels. Oil became “black gold.”
The oil industry, in its early years, placed a heavy emphasis on drilling, mineral rights and land leases, along with the endless drive for wealth and power among ambitious “oil men.” Fabulous fortunes were realized.
Little was known of petroleum’s chemistry or how it was formed. Then the 20th century “oil patch” witnessed breakthroughs. Chemists determined petroleum is a mix of hydrogen and carbon and some lesser elements. Engineers developed processes for refining crude into gasoline and diesel fuel. Geologists learned that petroleum is formed from marine matter laid down layer upon layer for millions of years.
Geologists found ways of looking for it. Their quests carried them to the vast deserts among poor nations and wandering tribes of the Middle East, where beneath the sands lay oil deposits of enormous size. Oil was found in Iran in 1908, Iraq in 1927 and Kuwait in the 1930s. The biggest discovery ever was Ghawar field in Saudia Arabia. Production began in 1951. Ghawar has already produced more than 70 billion barrels and the pumping continues. It was oil that propelled the Persian Gulf countries to power on the world stage.
Oil was found in Texas in 1894. The U.S. is and has been a major oil producer. For decades it was the largest oil producer. By 1947, however, production declined. In the mid-1970s, the U.S. S. R. and then Saudia Arabia exceeded American output. But, between 2001 and 2007 U.S. oil production doubled and once more production exceeded that of Russia and Saudia Arabia.
Various crises and disruptions aside, for a long time the notion spread that Earth’s petroleum deposits are inexhaustible. Today, many knowledgeable people question that idea.
Sources: Material World, Ed Conway, 2023,Vantage Books 1745 Broadway, New York, N.Y. 10019;The Prize, Daniel Yeargin, 1991,Rockefeller Center, New York, N.Y.10020; The Economist, April 18, p.59.
• Retired attorney Jim Thomas lives in Atlanta. Email jmtlawyerspeak@ yahoo. com
