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A black-and-white photograph showing a field of oil derricks and thin wooden boardwalks built over the water.
Goose Creek Oil Field, c. 1919

Petroleum, or oil, has been one of the most important economic resources in the history of the U.S. state of Texas. It was, in fact, instrumental in transforming Texas from a relatively unpopulated, rural region into one of the most populous and wealthiest states in the nation.

One of the first significant wells in Texas was developed near Nacogdoches in 1866. In 1894 the oil field near Corsicana became the first economically significant petroleum discovery. Texas' first refinery was built soon after in 1898. It was, however, the discovery of a field at Spindletop near Beaumont that began a period known as the "Oil Boom".

The discovery at Spindletop and others near the Texas Gulf Coast were among the largest the world had ever seen. During the first half of the 20th century Texas became the leading producer of petroleum in the United States and the U.S. became the leading producer in the world. Texas expanded dramatically during this period both in terms of its population and its economy. By the end of World War the city of Houston had broken into the top 20 cities nationwide. The leaders of Texas' petroleum industry became nationally influential.

As petroleum production in the U.S. peaked in the late 1960s and problems in the Middle East led to an energy crisis during the 1970s, the price of oil skyrocketed. Texas once again entered a boom period led by its oil industry.

Background

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Post-Civil War Texas

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A drawing showing a grid of streets lying on the north side of a winding river, surrounded by forest
Houston, circa 1873

Following the American Civil War, Texas’s economy began to develop rapidly centered heavily on cattle ranching, cotton farming, and lumber.[1][2] By the early 1900s Texas was the leading cotton producer and the third leading lumber producer. Lumber had become the leading manufacturing industry in the state, but Texas was still fundamentally a rural state.

Galveston became the world's top cotton shipping port and Texas' largest commercial center.[3] By 1890, however, Dallas had exceeded Galveston's population, and in the early 1900s the Port of Houston began to challenge Galveston's dominance.[4] In 1900 a massive hurricane struck Galveston, destroying much of the city.[5] That and another storm in 1915 shifted much of the focus from investors away from Galveston's insular location and toward nearby Houston, which was seen as a safer location for commercial operations. Because of these events, the coming oil boom would have only a limited effect on the island.[6]

Early history of petroleum

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A black-and-white photograph showing a field of derricks each completely enclosed within its own oddly shaped wooden building.
Early petroleum wells in Balakhani/Sabunchi, Azerbaijan

In the 1850s, the process to distill kerosene from petroleum was invented by Abraham Gesner. The demand for the petroleum as a fuel for lighting around the world quickly grew.[7] Petroleum exploration developed in many parts of the world with the Russian Empire, particularly the Branobel company in Azerbaijan, taking the lead in production by the end of the 19th century.[8]

In 1859, Edwin Drake of Pennsylvania invented a drilling process to extract oil from deep within the earth.[9] Drake's invention is credited with giving birth to the oil industry in the U.S. The first oil refiner in the United States opened in 1861 in Western Pennsylvania, during the Pennsylvanian oil rush.[10] Standard Oil, which had been founded by John D. Rockefeller in Ohio, became a multi-state trust and came to dominate the young oil industry in the U.S.[11]

Early history in Texas

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Pre-statehood

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Native American tribes were well aware of petroleum seepages in Texas long before the arrival of Europeans. Many used natural oil to treat wounds and other ailments.[12] The Tejas tribe, for which Texas is named, particularly frequented Sour Lake as a healing source.[13] The Spanish later used oils from various springs both for treating wounds and axle lubrication for wagons.[12]

One of the earliest instances of petroleum being exported from Texas occurred in 1832. A German school teacher, traveling through the region near Nacadoches, collected two barrels of oil for its medicinal value. These were subsequently shipped to Liverpool, England and Germany.[14] Sour Lake became widely known as a medicinal source; R.C. Taylor's Statistics of Coal (Philidelphia, 1848) and Frederick Law Olmstead's A Journey Through Texas (1857) both mention it.[13]

Mid 1800s

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Demand for kerosene and other petroleum derivatives drove oil prospecting in Texas after the American Civil War at known oil-producing springs and accidental finds while drilling for water.[15][16]

In 1859 Lyne Taliafero Barrett, a partner in a mercantile firm, obtained a lease for a tract of land near Oil Springs (the Skillern tract) in an attempt to drill for petroleum. However, the American Civil War delayed his plans until 1965. In that year Barrett and his associates acquired a new lease on the tract in Oil Springs and opened the first petroleum well in Texas.[13] The well reached oil at a depth of 106 feet (32 m).[13] Though the well was productive, low oil prices at the time and uncertainties around Reconstruction made Barrett's investors in New York and Pennsylvania led to the field's ultimately being abandoned.[17]

Also in 1865 Edward von Hartin and William Hart established a partnership to drill wells in what is now known as the Saratoga Field. Von Hartin built a test well that, though it encountered oil, did not establish that the available equipment could efficiently extract it.[18] Others acquired leases in the Sour Lake/Hardin County area and other parts of Southeast Texas, including a venture led by Confederate war hero Richard W. Dowling.[19]

DOne of the first significant wells in Texas was developed near the town of Oil Springs, near Nacogdoches. The site began production in 1866.[20] The first oilfield in Texas with a substantial economic impact was developed in 1894 near Corsicana.[21] In 1898, the field built the state's first modern refinery.[21] The success of the Corsicana field and increasing demand for oil worldwide led to more exploration around the state.[21]

Late 1800s

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Ironically even after oil began to be exploited economically many in Texas still saw the abundance of oil as a difficulty. Rancher W. T. Waggoner, who later became an influential oil businessman, struck oil while drilling for water in 1902, and was quoted as saying "I wanted water, and they got me oil. I tell you I was mad, mad clean through. We needed water for ourselves and for our cattle to drink."[22]

The first refining operations at Corsicana were built by Joseph S. Cullinan, a former manager for Standard Oil in Pennsylvania. His company, which was later absorbed by Magnolia Petroleum Company and then acquired by Standard Oil of New York, built the first modern refinery west of the Mississippi River.[23]

Gusher age

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Main article: Texas Oil Boom

Spindletop to the 1920s

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Black-and-white photograph of an oil derrick with a gusher of oil shooting from the top
The Lucas gusher at Spindletop, the first major gusher in Texas

In 1901 a team led by Croatian/Austrian mechanical engineer Anthony F. Lucas, working for the Gladys City Oil, Gas, and Manufacturing Company struck oil at Spindletop Hill near Beaumont. The new well produced approximately 100,000 barrels of oil per day making it the most productive well in world history at the time.[24] Beaumont almost instantly became a boomtown with investors from around the state and the nation participating in land speculation. Investment in Texas speculation in 1901 reached approximately $235 million US (approximately $8.61 billion in present day terms).[24] Though the Lucas gusher itself was short-lived it was only the beginning of a much larger trend.[24][15]

Exploration of salt domes across the plains of the Texas Gulf Coast took off with major oil fields opening at Sour Lake in 1902, Batson in 1903, Humble in 1905, and Goose Creek (modern Baytown) in 1908.[15] Pipelines and refineries were built throughout much of Southeast Texas, leading to substantial industrialization, particularly around Houston and the Galveston Bay. The first offshore oilfield in the state opened in 1917 at Black Duck Bay on the Goose Creek field, although serious offshore exploration did not begin until the 1930s.[25]

Initially, oil production was conducted by many small producers. The early exploration and production frenzy produced an unstable supply of oil and major price fluctuations. The situation led exploration to spread into the neighboring states who competed with Texas for dominance in oil production.[26][27] Texas soon lagged behind Oklahoma and California, it was still a major producer.[28] During the late 1910s and 1920s, oil production became established in North Texas, Central Texas, the Panhandle, and the Permian Basin in western Texas.[15] The finds in North Texas, beginning with the 1917 strike in Ranger west of Dallas-Fort Worth, were particularly significant, bringing substantial industrialization to the area.[29]

Top Texas oil producers
Late 1920s
Gulf Production Company Humble Oil and
Refining Company
Southern Crude Oil
Purchasing Company
(later absorbed by Amoco)		 Texas Company
(later Texaco)
Shell Petroleum Corporation Yount-Lee Oil Company
Magnolia Petroleum Company J. K. Hughes Oil Company
Pure Oil Company Mid-Kansas Oil and
Gas Company
(later Marathon Oil)

In 1905, the Texas Fuel Company of Beaumont (later absorbed by the Texas Company and renamed Texaco), a venture started by Cullinan, moved its corporate headquarters to Houston.[23][30] The company's strength in the oil industry established Houston as the center of the industry in Texas.[23]

Standard Oil initially chose not to become directly involved in oil production in Texas, and instead formed Security Oil Company (later Magnolia Petroleum Company) as a refining operation utilizing Guffey-Gulf and Texas Company as suppliers.[31] The Humble Oil Company (today Exxon Corporation) was formed by Ross Sterling and Walter William Fondren in Humble, Texas but soon moved to Houston.[32] The company, which established a long-term partnership Standard Oil of New Jersey, went on to build the Baytown Refinery, today Texas' largest refining operation.

Depression to World War II

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In 1930, Columbus Marion Joiner, a self-educated prospector, discovered the East Texas Oil Field, the largest oil discovery that had ever been made.[33] Because East Texas had not been significantly explored for oil before then, numerous independent prospectors, known as "wildcatters", were able to purchase tracts to exploit the new field. This new oil field helped to revive Dallas’s economy during the Great Depression, but sharply decreased interest in West Texas as the new supply led to another major drop in oil prices. The uncontrolled production in the eastern field destabilized the state's oil industry, which had been trying to control production levels to stabilize prices.[33] Overproduction in East Texas was so great that then-governor Ross Sterling attempted to shut down many of the wells. During one of the forced closures, he ordered the Texas National Guard to enforce the shutdown. These efforts at controlling production, intended to protect both the independent operators and the major producers, were largely unsuccessful at first and led to widespread oil smuggling. In the later 1930s, the federal government intervened and brought production to sustainable levels, leading to a stabilization of price fluctuation.[34] The income provided by the stabilization allowed less populated West Texas and the Panhandle to be more fully explored and exploited.[15]

During the 1930s, a Dallas company known as the General American Finance System, struggling through the Great Depression, began to finance drilling operations in the state using oil reserves as collateral. This allowed Dallas to establish itself as the financing center for the oil industry. The Great American Finance System eventually reorganized itself as the General American Oil Company of Texas, which became an oil producer in its own right and, decades later, was purchased by Phillips Petroleum.[35]

By 1940, Texas production was twice that of California, the next largest U.S. producer.[26][36]

Post-war era

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By the 1940s, production in the East Texas Oil Field and oil prices stabilized.[15] Though the major urban areas continued to grow, the extreme growth patterns of the first three decades began to slow.[37] As western Texas and the panhandle region began to be more fully explored, the Permian Basin gradually became the top producing area of the state.[15] Though independent oil companies were still an important part of the industry for some time, the major new strikes were increasingly made by established companies. World War II helped complete the state's transition to an industrialized and urbanized state with oil facilitating the transition.[15]

The Humble Oil Company became the largest crude oil transporter in the United States, and built pipelines connecting Baytown to Dallas-Fort Worth and West Texas to the Gulf of Mexico.[38]

In 1951 proven crude oil reserves in Texas reached 15,581,642,000 barrels, the highest the state would ever reach.[15]

Energy crisis

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Further information: 1970s energy crisis
Petroleum prices (imported crude oil refiner acquisition costs), from 1968 to 2000

In 1973 the tensions in the between Israel and its neighbors in the Middle East rose to a crisis level. U.S. support of Israel led to an embargo by the OPEC nations in October. Though regulated oil prices remained at US$5.05 per barrel (US$34.66 in today's terms), the price of unregulated petroleum in the U.S. rose to US$10.82 per barrel (US$74.26 in today's terms).[15] The result was an increase of 35% in the number of oil rigs between 1973 and 1974, and 26% between 1974 and 1975.[15]

Texas had entered a new oil boom causing a new wave of growth in the state.[37][39]

By 1979 oil prices had risen to US$12.64 per barrel (US$53.06 in today's term) and in 1980 prices reached US$34 (US$126 in today's term).[15]

As Texas' onshare oil fields became increasingly depleted Texas' major oil companies turned to increasingly expensive secondary and tertiary extraction processes, including carbon dioxide injection, to push production. At the same time conversation and fuel substitution in Europe and other areas was gradually lowering demand for petroleum.[15] The bubble in oil prices began to recede in the early 1980s as OPEC cut its prices.[15] The economy in much of Texas, particularly Houston, entered recession in 1982.[40] In 1986 prices fell to US$7 per barrel (US$19 in today's terms).[15]

The Texas economy declined dramatically. Houston was particularly battered; real estate records indicated that the city had more than 46 million feet of empty "Class A" space in 1986 and 1987.[41] By 1987 one out of every seven jobs in Houston that had existed in 1982 was gone.[40]

1990s and the 21st century

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As of 1999 the Cowden North and South fields were the largest oil fields in the state. The prolific East Texas field was still the third largest.[42]

Notable enterprises and people

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Oil boom

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A black-and-white bust portrait of a distinguished man in a suit.
H. Roy Cullen, industrialist and philanthropist, considered one of the key figures in the early Texas oil industry

Four businessmen were emblematic of the 1920s and 30s boom years — H. Roy Cullen, H. L. Hunt, Sid W. Richardson, and Clint Murchison.[43] Cullen was a self-educated cotton and real-estate businessman who moved to Houston in 1918 and soon began oil prospecting.[44] Cullen's success led to his founding the South Texas Petroleum Company (with partner Jim West Sr.) and Quintana Oil Company.[45] Cullen and his wife established the Cullen Foundation, which became one of the largest charitable organizations in the state, and donated heavily to the University of Houston, the Texas Medical Center, and numerous other causes in Texas, particularly in the Houston area.[46]

Hunt’s first successes were in the oilfields of Arkansas, but he lost most of his fortune by the outset of the Depression as overproduction depleted his fields and his speculation on land and oil drained his resources.[47] He joined in Columbus Joiner's venture which opened the East Texas Oil Field. Hunt bought most of Joiner's interests in eastern Texas and his company, Placid Oil, owned hundreds of wells. He became established in Dallas and was labeled the richest man in the nation in 1948 by Fortune Magazine.[47] A scandal emerged in 1975, after his death, when it was discovered that he had had a hidden bigamous relationship, with his second wife living in New York.[47]

Richardson was a cattle trader who established an independent oil production business in Fort Worth in 1919.[48] He soon expanded into numerous businesses and owned the Texas City Refining Company, cattle ranches, radio and television networks, among other businesses. He was a very private man who was sometimes referred to as the "bachelor billionaire."[48] Murchison, who began his career at his father's bank, soon became an oil lease trader working with Richardson.[49] He expanded into exploration and production in northern Texas, then around San Antonio, and finally the Dallas area. He went on to create the Southern Union Gas Company and became a developer on the East Texas field. He expanded his business into international oil and gas operations in Canada and Australia. His son Clint Jr. went on to form the Dallas Cowboys football franchise. For their part, Murchison and Richardson were known to have been major national political operatives and had close ties to President Dwight D. Eisenhower and his vice president Richard M. Nixon, as well as FBI chief J. Edgar Hoover and President Lyndon B. Johnson.[50]

Other wealthy Texans involved in the oil industry, though not as influential, became well known, often as much for their eccentricities as their wealth. Glenn McCarthy was a modest oil worker who pioneered wells around what the Houston area. In 1932, he struck oil at Anahuac near the Galveston Bay. Over the next decade, he made dozens of other strikes and quickly became one of Texas' richest men.[51] His extravagance was legendary leading to his becoming $52 million dollars in debt in 1952 ($597 million in present day terms). His love of bourbon led him to establish the WildCatter bourbon label. His excesses made him an unwilling national celebrity during the 1940s and 1950s as the media became enamored with tales of Texas oil wealth.[51]

Jim West Jr. was the heir to the fortune of Jim West Sr., an early Houston businessman who helped shape the city and the state before the boom and during the early years of the boom.[52] Known as "Silver Dollar Jim", for his habit of carrying silver dollars and tossing them to doormen, the poor, and anyone that waited on him, West Jr. is regarded by many as the most flamboyant of Houston oilmen. His lavish spending habits and his proclivity for amateur law enforcement were well known.[53] Using his many cars, which were kept loaded with weapons, sirens, and radios, he regularly chased criminals in Houston alongside the police.[54]

See also

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Notes

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  1. ^ Reavis (2004), p. 125.
  2. ^ Britton, Karen Gerhardt; Elliott, Fred C.; Miller, E. A.: Cotton Culture from the Handbook of Texas Online. Retrieved 17 Oct 2009., Texas State Historical Association
    Richardson, T. C.; Hinton, Harwood P.: Ranching from the Handbook of Texas Online. Retrieved 17 Oct 2009., Texas State Historical Association
    Melosi (2007), p. 188
  3. ^ Galveston Commercial Association (1922), p. 8
  4. ^ McElhaney, Jackie; Hazel, Michael V.: Dallas, Texas from the Handbook of Texas Online. Retrieved 19 Oct 2009., Texas State Historical Association
  5. ^ Weems, John Edward: Galveston Hurricane of 1900 from the Handbook of Texas Online. Retrieved 4 Nov 2009. Texas State Historical Association.
  6. ^ McComb, David G.: Galveston, Texas from the Handbook of Texas Online. Retrieved 4 Nov 2009. Texas State Historical Association.
  7. ^ Maugeri (2006), p. 3
  8. ^ Akiner(2004), p. 5
  9. ^ Maugeri (2006), p. 4
  10. ^ Maugeri (2006), p. 5
  11. ^ Jenkins (1991), p. 51.
  12. ^ a b Warner (2007), p. 18.
  13. ^ a b c d Warner (2007), p. 19.
  14. ^ Warner (2007), p. 18–19.
  15. ^ a b c d e f g h i j k l m n o Olien, Roger M.: Oil and Gas Industry from the Handbook of Texas Online. Retrieved 18 Oct 2009., Texas State Historical Association
  16. ^ Petty, O. Scott: Oil Exploration from the Handbook of Texas Online. Retrieved 17 Oct 2009., Texas State Historical Association
  17. ^ Devereaux, Linda E.: Barrett, Lyne Taliafero from the Handbook of Texas Online. Retrieved 30 April 2010. Texas State Historical Assocation.
  18. ^ Warner (2007), p. 23.
  19. ^ Warner (2007), pp. 23–24.
  20. ^ Folsom, John: Oil Springs, Texas from the Handbook of Texas Online. Retrieved 5 Nov 2009. Texas State Historical Association.
  21. ^ a b c Hinton (2002), p. 4–8
  22. ^ Hinton (2002), p. 75-76
  23. ^ a b c Cullinan, Joseph Stephen from the Handbook of Texas Online. Retrieved 19 Oct 2009., Texas State Historical Association
  24. ^ a b c Wooster, Robert; Sanders, Christine Moor: Spindletop Oilfield from the Handbook of Texas Online. Retrieved 18 Oct 2009., Texas State Historical Association
  25. ^ Hinton (2002), p. 215
  26. ^ a b Brown, Norman D.: Texas in the 1920s from the Handbook of Texas Online. Retrieved 24 Oct 2009. Texas State Historical Association
  27. ^ Cozine (2004), p. 52.
  28. ^ Malone (1989), p. 35.
  29. ^ Olien (2002), p. 79
  30. ^ Singer (2002), p. 68
  31. ^ Singer (2002) p. 67
  32. ^ Kleiner, Diana J.: Humble, Texas from the Handbook of Texas Online. Retrieved 20 Oct 2009. Texas State Historical Association
  33. ^ a b Olien (2000), p. 188
  34. ^ Burrough (2009), p. 77
  35. ^ Kleiner, Diana J.: General American Oil Company from the Handbook of Texas Online. Retrieved 7 Nov 2009. Texas State Historical Association.
  36. ^ Olien (2002), p. 219.
  37. ^ a b "Texas Almanac: City Population History from 1850–2000" (PDF). Texas State Historical Association. Retrieved 20 Oct 2009.
  38. ^ Clark, James A.; Odintz, Mark: Exxon Corporation from the Handbook of Texas Online. Retrieved 20 Oct 2009. Texas State Historical Association
  39. ^ "The Changing Face of Texas: Population Projections". Dallas Federal Reserve. Retrieved 7 Nov 2009. However, during the Texas oil boom, the state's population growth accelerated. From 1970 to 1980, as oil prices spiraled upward and people flocked to Texas ...
  40. ^ a b Institute of Medicine (2005), p. 33.
  41. ^ Tully, Tom (Oct 1989). "Major Commercial Real Estate Markets Leading the Texas Comeback". Texas Monthly. p. 194.
  42. ^ Halbouty (2004), p. 65.
  43. ^ Burrough, Bryan (October 2008). "The Man Who Was Texas". Vanity Fair.
  44. ^ Crabbe, Rita: Cullen, Hugh Roy from the Handbook of Texas Online. Retrieved 24 Oct 2009. Texas State Historical Association
  45. ^ Sizer (2008), p. 244-245
  46. ^ Graf, Joseph C.: Cullen Foundation from the Handbook of Texas Online. Retrieved 6 Nov 2009. Texas State Historical Association.
  47. ^ a b c Palmer, Jerrell Dean: Hunt, Haroldson Lafayette from the Handbook of Texas Online. Retrieved 24 Oct 20099. Texas State Historical Association
  48. ^ a b Procter, Ben H.: Richardson, Sid Williams from the Handbook of Texas Online. Retrieved 24 Oct 2009.
  49. ^ Van Buren, Ernestine Orrick: Murchison, Clinton Williams Sr. from the Handbook of Texas Online. Retrieved 24 Oct 2009. Texas State Historical Association
  50. ^ McEnteer (2004), p. 105
  51. ^ a b Kelly, Evan: Glenn McCarthy from the Handbook of Texas Online. Retrieved 23 Oct 2009. Texas State Historical Association
  52. ^ Burrough (2009), p. 191
  53. ^ Burrough (2009), p. 192–193
  54. ^ Burrough (2009), p. 192

References

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