History of Energy

The Story of Petroleum and its Effects on Texas

Wiess Energy Hall

One of the discoveries that had the biggest effect on the story of Texas was the discovery of oil. After the Civil War, the Southern states struggled to rebuild their farms. Texas succeeded in rebuilding its cattle and cotton production, but oil became the largest business in the state during the 20th century.

Cities grew rapidly to support the industrialization that followed the discovery of oil at Spindletop in 1901.

Before the invention of the automobile there were minor uses for oil. The Native Americans used it to water proof their baskets and for medicine. The Spaniards who came to the coast of Texas used it to caulk their ships. In the 1800’s kerosene made from oil was used for lighting.

During the Industrial Revolution, oil products began to be used to lubricate the machinery.

Starting in the late 1800’s inventions such as the automobile caused the demand for oil to rise rapidly.

Spindletop History

After oil was found at Spindletop in 1901, the American free enterprise spirit led many people to Texas to drill for oil. Wildcatters started looking all over the state for more oil reserves. A wildcatter is a person who looks for oil where it has not yet been found. When an industry increases fast, it is called a boom.

Boom towns grew up around the oil fields. A boom town is a town that grows due to a rapid increase in the need for workers and supplies. Lumber and steel were needed to build the derricks that are used to drill for oil.

Oil was found under most counties in Texas. By 1928 Texas was the largest oil producing state in the country.

As the supply of oil went up, the demand continued to rise due to continued research and inventions. The price of oil continued to rise also.

The oil industry is a good example of how the free enterprise system works.

Free enterprise is an economic system in which people have the power to operate a business without much government interference. People can own their own business and keep the profits that they make. This encourages people to invent and create new products and services in order to make money or for the good of people and the country. For example, in the oil industry, many new tools have been invented in order to make drilling and refining oil faster and more efficient.

Some refineries were built near where the oil was pumped from the ground, but most of it was brought to the Houston area by trucks and the railroads.

The oil industries concentrated along the Gulf Coast in Houston, Port Arthur, and Beaumont, where it was easy to send the products to other states and countries by water.

During World War II, Texas accounted for ½ of the gas and oil used by the nation. After the war, cheaper foreign imports caused a decrease in the per cent of oil that was from Texas, but the amount of the demand for petrochemicals increased greatly. The petrochemical industry became the largest in the state. Money came in to Texas from other states and many other countries.

Since oil is found under the ground, Texas landowners benefited from the increase in demand for petrochemicals. Land ownership continued to be the only way to obtain wealth in Texas; first in cotton and cattle, and now also in oil.

Other settlement patterns developed around the major areas where oil was found in the state such as the Panhandle, the Midland-Odessa area and the East Texas Oil field.

In the Houston area, many businesses started in order to help the oil industry during the oil boom. These oil companies became leaders in the worldwide oil industry. Selling oil products made Texas very prosperous.

Houston needed a seaport in order to ship the oil products worldwide. Galveston has a seaport, but since it is right on the Gulf, it is dangerous during a storm. Since Houston is inland, it is not as dangerous. In 1917, a channel was dug in Galveston Bay to the Houston area. It is called The Houston Ship Channel. Texas exports many oil products and crops through this port. It caused the city of Houston to become the largest city in Texas. Today, Houston is the 4th largest city in the United States.

Houston Ship Channel

After the oil boom began, the government saw a need for better transportation. Not only did they build a system of roads across the nation, but they improved water transportation as well.

The Gulf Intracoastal Waterway extends from Florida to Brownsville, Texas. It is a canal at least 12 feet deep and 125 feet wide used for commercial transportation of goods, and for recreation. This 18,000 mile waterway is also connected to the Mississippi River and its tributaries, the Great Lakes and the Atlantic Ocean. It was completed in 1949 by the federal government, but is now maintained by the state government. It goes along the inside of the barrier islands along the coast which protect the ships from the ocean waves.

Before the 20th century, most people worked on farms in order to produce enough food for everyone to eat. Texas and the rest of the world were mostly rural. Rural means living in the country, not a city. Then machinery was invented that did much of the farm work that people used to do.

Farmers began moving to cities to work in the factories. The spread of roads and the availability of the automobile made it possible for young adults living on farms to move to towns. This supply of labor made it possible for even more goods and services to be provided. The increased oil production led to profits that led to more research and thus more inventions. Most of these inventions involved petroleum products in some way. The quality of life in the U.S. and around the world got better and better.

Texas became mostly urban, meaning that most Texans now live in cities. Some Texas cities, such as Houston are called metropolitan areas. This means that many cities are joined together.

After World War II, the state government did not put strict environmental rules on the oil industry. The state government wanted the oil industry to prosper because it brought in much revenue.

The Texas economy relied heavily on the oil industry. When money comes into Texas from the sale of oil products to other states and countries, it helps the rest of the state’s economy. For example, when people in New York buy oil from a Texas oil company to heat their homes, that money is used to pay the workers in the oil company in Texas. Those workers may spend their money to buy a new home made from lumber from East Texas. The East Texas loggers are then paid with the money spent to buy the houses. This is how the oil money spreads into businesses all over the state.

The oil industry helped pay for schools and roads through the revenues it generated. Many people’s jobs were related to the oil industry. By the 1970’s the oil industry income was 3 times that of the state’s farm income.

Even though Texas and other states produced millions of barrels of oil a year, it was not enough to supply the growing need for petrochemicals in the U.S. Our country had to also buy oil from other nations.

Events around the world affected the Texas economy because of our reliance on the oil industry. In the 1970’s other oil producing countries lowered their prices on oil. A group called the Organization of Petroleum Exporting Countries or OPEC, formed in order to take more control over the oil industry. Most of the countries were Arab nations in the Middle East who American oil companies had helped get established in the oil business.

Middle East

In 1973, Israel and Egypt went to war with each other. The United States supported Israel. The Arab nations supported Egypt. The Arab nations wanted to punish the countries that backed Israel. They put an embargo on oil to the United States. An embargo is when a country stops trade with another nation. The oil embargo led to a great shortage of oil in the U.S. This created an energy crisis in the nation. Because of the increase in the demand for oil, the price of Texas oil tripled. Even though the state government and oil industries benefited from the energy crisis, most Texas citizens suffered.

But in the early 1980’s, other oil producing nations lowered their price of oil and increased production. In order to compete, Texas oil companies had to decrease their prices also. This loss of profit caused many problems. Employment in the oil and gas industry fell by 1/3. This caused a bust in the real estate and banking industries as well.

This is called a boom and bust cycle when there is a period of profit for an industry and then a period when the profits go down drastically. Another effect of the oil bust was that the state lost 1/4 of their tax revenue from oil. The state government had to raise taxes in order to operate. Texans learned that they had to diversity their industries in order for the state to prosper. They started to increase the electronics and communications industries as well.

Arab nations continue to dislike the United States because we support Israel. In 1990, Iraq attacked Kuwait. The United States helped to get Iraq out of Kuwait. The Iraqi troops had damaged the oil wells before they left, causing them to catch on fire. Houston-based companies put the fires out. One of the men who helped put out the fires was Red Adair who was from Houston. Red Adair is a hero for developing techniques and helping to put out oil well fires not only in Kuwait but around the world.

Even though the petroleum industry has greatly improved our lives, it has created many problems. Because the state government did not regulate the oil industry, many people came to Texas to build petrochemical plants. This made Texas one of the country’s worst producers of chemical waste. Air and water quality near the plants has been considered a contributing factor in the incidence of cancer and other illnesses.

Another danger has been seen too many times in the Houston area- fires and explosions caused by highly flammable petrochemicals.

On April 16, 1947, in a Texas City harbor, south of Houston, a small fire started on a freighter carrying ammonium nitrate fertilizer. The ship was headed to Europe to help rebuild after World War II. The fire quickly spread out of control and a huge column of smoke shot 2,000 feet into the air. Many people came to see the spectacle. Another explosion caused the nearby chemical plant to go into flames and fires quickly spread to other refineries. A miniature tidal wave caused by the explosion caused more disaster as it swept through the area.

The next day, another freighter containing ammonium nitrate and sulfur was on fire but could not be tugged out of the harbor. It exploded in an even more violent blast than the one the day before. Almost the entire fire department of Texas City was killed along with many plant workers, and school children nearby. The Texas City Disaster resulted in nearly 600 deaths, over 2,000 injuries, and property loss of over $67 million.

More recently the Deepwater Horizon Oil Spill in the Gulf of Mexico, reminds us of the continued dangers of our modern age.

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