Monday, June 02, 2008

Oil: history and future

We have two rather unique articles on the subject of oil to share with you today. If you have any interest in the past and future of the oil and energy industries, I think you'll find these articles very worthwhile.

Our first piece is a brief historical background on the rise of the Middle Eastern oil industry. Taken from Sunday's edition of the Chicago Tribune, this article was written by Tom Hundley and is entitled, "A find rich in history".

Here's an excerpt:

"When the price of oil roared to record highs last week, it was duly noted. But another milestone passed almost unremarked: Monday was the 100th anniversary of the discovery of oil in the Middle East.

Britons William Knox D'Arcy and George Reynolds are not exactly household names in America, but it was D'Arcy's money and gambler's nerve, and Reynolds' hardheaded persistence that brought in the first gusher in what is today Iran. The discovery would change the world.

Over the next century, as America and the Middle East became locked in an extraordinary embrace, the flow of cheap, abundant oil would bring wealth and war; it would fuel mighty economies, determine the destinies of nations, and shape the everyday lives of almost everyone on the planet."

Excellent article and a quick read. Do check it out.

Stretching even farther back into the oil industry's past is this latest article from Edward Chancellor in today's Financial Times print edition, called, "Whale of a future for oil industry".

In this piece, Chancellor notes that while the "peak oil" theory of oil production decline is likely to take effect at some point in the future, higher real prices for oil in a time of diminishing supply will provide incentives to develop new energy substitutes.

Excerpt from "Whale of a future...":

"Long-dated oil futures have recently climbed above the spot price. Contango (the jargon for this situation) in the oil market may be a sign that bears are covering their short positions after the dramatic price spike or that producers are unwinding their hedges.

However, commodity investors are also playing a part. Some are doubtless motivated by a belief that the world is running out of oil. Exponents of “peak oil” might benefit from examining the history of another source of energy that went into decline a century and a half ago. The rise and fall of the American whale oil industry provides certain pointers as to where the modern oil industry could be heading."

Chancellor is a very interesting and engaging writer, always worth a read. So have a look at both articles and get an added bit of perspective on where we've been and where we might be going, energy-wise.

For more on the "peak" crude oil/whale oil analogy, see The Oil Drum's recent post on this subject. Fascinating stuff.

Tune in for our next post, when we'll talk more about the possible future of energy. Until then, enjoy the articles!