Summary: The discovery of refining oil into valuable products transformed crude oil from a liability to a critical resource. Since the first successful oil drilling in 1859, global oil reserves have continued to increase. Technological advancements such as hydraulic fracturing and horizontal drilling have helped make the United States the world’s largest crude oil producer, illustrating how human ingenuity and freedom drive both resource discovery and knowledge expansion.

What would you rather discover: a new oil well that doubles the amount of your inventory or a way to double your gas mileage? Either discovery would double the distance you could drive your car.

Crude oil was once considered a liability rather than a valuable resource, especially by farmers or people drilling water wells. Then, Yale University chemistry professor Benjamin Silliman Jr. discovered how to refine oil into a variety of valuable products using fractional distillation – a technique developed by his father Benjamin Silliman Sr.

Many consider Silliman Sr. to be the father of American chemistry. He founded the American Journal of Science and was a founding member of the National Academy of Sciences.

In 1855, Pennsylvania entrepreneur George Bissell hired Silliman Jr. to analyze the possibility of using petroleum as a fuel for illumination. Silliman noted in his report:

Your company have in their possession a raw material from which, by simple and not expensive process, they may manufacture very valuable products. It is worthy of note that my experiments prove that nearly the whole of the raw product may be manufactured without waste, and this solely by a well-directed process which is in practice in one of the most simple of all chemical processes.

With this report, Bissell was able to create a corporation and raise the money to start drilling for oil. He hired Edwin Drake and put him in charge of drilling a well, and after many setbacks, Drake’s crew struck oil in quiet rural Titusville, Pennsylvania, on August 27, 1859.

One barrel of oil equals 42 gallons, and 7.44 barrels equals one tonne. (A tonne equals 2,204 pounds, while a ton equals 2,000 pounds.) The world currently has around 230 billion tonnes, or 1.7 trillion barrels in proven oil reserves.

What is also interesting is that the more oil we use, the more we discover. Reserves have increased 158 percent since 1980, from 93 billion tonnes to over 240 billion tonnes today. That occurred at the same time global population increased 82 percent from 4.4 billion to over 8 billion. For every 1 percent increase in population, oil reserves have increased 1.92 percent. We really have no idea how much oil the planet contains.

Global oil reserves have increased at a positive rate from 1980 to 2020.

Finding more oil is great, but finding more knowledge about how to discover more oil is even better. We use up the oil, but we don’t use up knowledge. In fact, the more knowledge you consume, the more it grows. These experiences illustrate the truth that it is knowledge that transforms atoms into resources. In fact, atoms without knowledge have no economic value.

After peaking at 9.6 million barrels per day in 1970, annual US crude oil production flattened and then generally declined for decades to a low of 5 million barrels per day in 2008. Then US entrepreneurs and petroleum engineers discovered two technologies: hydraulic fracturing and horizontal drilling.

Fracking is a multi-step process that has helped increase US crude oil production significantly.

US crude oil production reversed and has increased steadily since.

US field production of crude oil has seen its share of peaks and valleys since 1900.

Because of these entrepreneurs and innovators, the United States has become the largest producer of crude oil on the planet.

Nowadays, the US has the largest share of production in crude oil globally.

How about miles per gallon? The top-selling car in 1980 was the Oldsmobile Cutlass. Gas mileage on this vehicle averaged 20 miles per gallon (17 city/23 highway). By 2023, the Honda CR-V claimed the title as the most popular two-wheel drive car. The CR-V reported mileage at 31 miles per gallon (28 city/34 highway). That represents an increase of 55 percent over the 43-year period. The time required for a blue-collar worker to earn the money to buy a Cutlass in 1980 is about the same as it is today for a much safer and more comfortable CR-V.

America has energized the world by giving its citizens the freedom to discover more oil and create more knowledge. We enjoy a virtuous circle as more knowledge gives us more oil and more oil gives us more knowledge. We discover new knowledge with every new oil well that we drill. Human freedom truly is our most valuable resource.

This article was published at Gale Winds on 6/4/2024.