It’s known as ‘black gold’, but it started off as plankton. So how did a commodity described by one of OPEC’s founders as “the devil’s excrement” become so valuable?
The first refineries appeared in Europe, Canada and the US in the 19th century, after chemist James Young set up a business refining locally mined shale and coal in Derbyshire in 1848. Meanwhile, reports of oil wells date back to 347AD.
Crude oil formed millions of years ago when pressure and rising temperatures heated layers of mud and dead sea creatures to form seams of the viscous liquid, trapped under rock.
The US uses the most crude oil (at 20.5% of the world’s consumption), while China comes second (12.6%). In 2017, Chinese imports averaged 8.5m barrels per day from January to September.
The price of oil
As world leaders met in Davos in January, the price of Brent crude reached $71 a barrel (the highest since the 2014 price slump) and speculators held “the single largest bullish position in the history of crude-oil futures”, according to Mad Money’s Jim Cramer.
Crude oil is distilled and separated into a range of gases and liquids, from propane and butane (used as cooking gas) at the top, to bitumen (for roads and roofs) at the bottom. Stops in between include aircraft fuel, diesel, and fuel for power stations and ships.
The top five oil-producing countries globally are Saudi Arabia, the US, Russia, China and Iran, closely followed by Canada. It is estimated that the world consumes about 95m barrels per day.
In 2014, BP estimated the world had 53 years of oil left, while recent calculations say that it’s nearer 34 years. Some predict fossil fuels will never run out, but their scarcity will force greater reliance on alternative energy.
As well as causing global warming by producing ozone and sulphur dioxide when burned, oil, if spilled – either from ruptured pipelines or capsized vessels – causes damage to both land and oceans.
What they say
“The Trump administration’s approach puts oil and gas profits first – and will place coastal communities at risk of the next BP-style disaster.”
Rhea Suh, US Natural Resources Defense Council president
“Across the globe, oil and gas companies are under pressure to cut costs, rather than risks, from the supply chain, but this is a false economy because the cost of doing business with a risky supplier can be astronomical.”
Mike Viator, global director of oil and gas at Achilles
“I call petroleum the devil’s excrement. It brings trouble…Look at this locura – waste, corruption, consumption, our public services falling apart. And debt, debt we shall have for years.”
Juan Pablo Pérez Alfonso, OPEC founding member
It is a tempestuous time for the oil and gas industry. Emboldened by the ‘shale revolution’, President Trump looks set to continue a historic feud with OPEC, but analysts expect the global market will come into balance this year or next. OPEC, along with other key players, has agreed to maintain its current curb on production until March 2018, which should keep prices under control. And while oil companies look to the future, they would do well to keep an eye on the present – pipeline ruptures in Nigeria and Peru continue to cause environmental damage and health problems in the local populations as well as increasing supply chain risk.