The history of oil in America started way back in 1859 in a creek valley in Pennsylvania. Before that petroleum was found in salt wells drilled in Ohio and Kentucky in 1814. The drillers used an ancient technology called the ‘spring pole’. The production of oil by this technology from the salt wells was a byproduct initially. After understanding the usage and benefits of oil production, the first oil well that was launched was 69.5 feet. Before the origin of oil, coal fuel lamps, candles, vegetable oils, etc. were used as illuminants. Then in early 1850s, a Canadian chemist Gesner, introduced a revolutionary new lamp fuel. He found Kerosene oil as a cleaner fuel in lamps as a replacement for whale oil. The kerosene oil was extracted from Coal, so sometimes it was called the Coal oil and before the American Civil War, more than 30 companies used Gesner’s process to produce coal oil.
Gesner soon got a competitor who focused on oil as a medicine. It was Samuel Kier of Pittsburgh whose wife had TB and he used the oil to cure her which was available for 50 cents and was called ‘American Oil’. When his wife’s health improved, Kier realized that it was made from the same black substance that often contaminated his Pennsylvania brine wells. Kier soon started skimming oils from natural seeps and packaging his own bottles for a curative for all manner of aches and pains. Soon after this, many people found the oil business to be very profitable and hence they joined in companies like Pennsylvania Rock oil company and Seneca Oil Company were developed.
In the 20thcentury, the oil production gained more value because US developed commercial transportation such as railroads and motor vehicles. Following the oil production, the oil consumption also increased because oil was now being used for electricity production. After the electricity production, oil became more important for the commercial sector, manufacturing and residential sector for things like heating and cooking. Market demand for oil increased and US started to look for the supply internationally. Also, there were price fluctuations in oil prices and the last crisis that occurred was in 1990 which caused an increase in the price of oil and a fall in its consumption.
The oil prices have both direct and indirect relations and they affect the US economy in very different ways. Oil prices affect the energy inputs and the inputs used in transportation and aviation. Talking about the recent times, in 2014, the oil prices added to 4% of the GDP thereby adding directly to the economy. Oil prices have also shown a positive correlation with prices of other things in the economy. Rising oil prices seem to cause positive changes in inflation and inflation-adjusted bonds. Considering the exchange rate impact, US economy has a two way consideration when it comes to dealing with oil. US produces oil but also is a major importer of oil. Records have shown that many times the oil imports have accounted for around 40% of the deficit in the US. But this effect is balanced because US is a major producer of other goods and services.
Other than the history and economics of the oil relation of US, there have been major health issues because of production of oil in Pennsylvania. When oil was first extracted, it was cleaner, easier to transport and more versatile than biomass and coal. But now, after so many developments and growth of the population, the need for oil has increased thus causing pollution and harm to many environmental aspects. Also, by 2040 the oil consumption is going to increase further and would cause increase in things like earthquakes, hydraulic fracturing, etc. amongst other issues.
Considering the patterns of trade and growth of the oil industry over the years, we can say that Oil can also be considered as one of the many causes of war. This can be understood from the US and Iraq wars in 1991 and 2003 where it can be said that the reason of the war could be focused on conflicting views of US about the oil. Furthermore, policy makers believe that the fluctuating oil prices (especially the high price of oil) are a major cause of grabbing attention, thus forming a basis for war.
Looking at the current patterns of oil consumption, there has been a decline in the recent years. The exact reason for this decline has not been pointed out yet but many policymakers believe that the Great Recession of 2008 could be one of the reasons for the same. Focusing on all the scenarios, we can observe that US is definitely not an exporter of oil but a major influencer in the Oil market. Also, because of the degrading environmental effects of the oil extraction there is an urgent need for the US to look for alternative measures of energy creation.