Over the last few days, you’ve probably come across the 150th anniversary story of the Drake well in Titusville, PA, somewhere in the news.
If you haven’t, there’s a good chance you’ve at least heard of it once or twice before. After all, many consider Titusville the birthplace of the modern oil industry.
Unfortunately, I’d also bet there are much fewer people who actually know the story of the well, besides merely the name of Edwin Drake or the town of Titusville.
It wasn’t as easy an endeavor as you might believe. Patience was truly a virtue. Imagine drilling at the grueling pace of just 3 feet per day. After reaching a depth of nearly 70 feet, Drake finally struck oil, which was then hand-pumped out of the well and into a bathtub.
Over the next 16 years, more than 56 million barrels of oil were pumped out of the Oil Creek oil fields.
But what you don’t hear about is how Drake lived his remaining years on an annual annuity of $1,500, given to him by the state of Pennsylvania for his contribution to the industry. Another misplaced fact in the story is that Drake lost his entire savings in oil speculations in the years following the Titusville well’s drilling.
Although things have changed quite a bit since oil derricks cluttered the Western Pennsylvania landscape, one thing that hasn’t diminished is our oil addiction.
The Race for U.S. Energy Independence
Energy independence has been a resonating theme for decades. Please don’t make the mistake of thinking this is a sudden issue.
In fact, every single president since Nixon has declared some plan or another to gain our energy independence. As you are grossly aware, it all comes down to our oil addiction.
As you can see below (courtesy of the Energy Information Administration), eliminating our thirst for foreign oil wasn’t exactly what happened, despite the talk about weaning ourselves from our oil addiction:
Quite the opposite, actually.
The only good news (that I can think of, at least), is that our top supplier for oil has changed hands. The Saudis no longer hold that title. Canada is now our main source of oil, shipping us approximately 2.5 million barrels of oil per day in 2008. That fact alone provides investors with a window of opportunity, but that really isn’t a surprise to most of my readers.
Today, however, it’s starting to come down to a race between depletion rates and technology. The most optimistic of my readers have reiterated their idea that technology will progress to keep a peak in global oil production from happening.
Let’s take a look all the way back at Titusville, for example, and Drake’s use of a steam-powered engine to run his drill. Since those early days, drilling technology has advanced in a considerable way. Companies are continually drilling further and deeper than ever before. Just think, we aren’t too far away from companies drilling the arctic seabed in their never-ending search for crude oil.
Anyone else remember Russia’s publicity stunt of actually planting a flag on the ocean floor?
Considering the U.S. consumes one-quarter of the world’s oil, you’d think we’d be a little more concerned in coming up with an energy solution. Before I hear about the huge growth in the renewables sector, just remember that they still only make up a very small part of our overall energy picture.
The depletion story shouldn’t be sudden news to anyone, either.
U.S. Producers appear to be in a hopeless struggle to increase production. Even after crude prices burgeoned to a high of $147 per barrel in 2008, production has still fallen to levels not seen since the 1940’s.
Back to Titusville. . .
Interestingly, there’s one figure that seems forgotten in the famous Titusville oil story.
If I were to ask you the name of the man that comes to mind when I mention the Titusville oil well, the answer is usually a no-brainer: Edwin Drake, right?
However, that’s not the name that immediately comes to my mind. Rather, the first person I always think of is Jonathan Watson.
Doesn’t ring a bell?
Don’t feel too bad, I don’t expect many people to know him.
He was the first oil millionaire in the United States. Drake’s famous well was drilled on Watson’s property. In fact, soon after the oil derricks became a cluttered sight across the area, the small community of Titusville had more millionaires per thousand people than anywhere else in the world.
If anything else, Watson and the other residents of Titusville are a stark reminder of the fortunes that can be made in oil. The game may have changed, dear reader, but the stakes are the same.
And even though Watson may have been the first millionaire, he certainly wasn’t the last. In fact, a similar story is being played out today on the North Dakota landscape. Except this time, it’s not just the landowners who are smiling. . .
Until next time,
P.S. Don’t let oil’s grim outlook cloud your vision. The truth is, there are still fortunes to be made, for both producers and investors alike. Members of the $20 Trillion Report, for example, have been closing winner after winner in the oil sector lately. Gains like 115%, 55%, 33%, 37%, 41%, 14%, and 29%. And — believe me — the profit taking’s far from ending. Find out how our readers are padding their portfolios in this new report.