Energy Industry History

The modern electricity industry in America was born with the work of Thomas Edison in 1878. People had known about electricity for generations before him -- think Benjamin Franklin and his kite -- and the practical applications of harnessed electric power were clear to everyone. By the time Edison turned his considerable imagination to the problem he already had a reputation as an innovative thinker and clever businessman. It is a bit of an exaggeration to say he 'invented' the lightbulb; rather he fine-tuned the filaments inside the bulb to create the first commercially viable, safe, and efficient means of indoor lighting.

In September 1878 Edison announced his breakthrough design to the world, and in a matter of days potential investors flooded his workshop in Menlo Park, New Jersey, with bids to market the new technology. A month after his discovery, he incorporated the Edison Electric Light Company, and a month after that he devised the first electric meter. A few years later his first power plant opened in lower Manhattan, and an industry was born.

Throughout the 1880s companies sprang up across the country and the globe to provide service. A number of these companies were franchises Edison set up himself, and many of their descendant operations still bear his name. Early power companies were limited to only a few city blocks because of primitive generation and transmission technology. But slowly, new technology emerged, and more and more companies jumped into the growing market in a pell-mell fashion. By the early 20th century, most major cities had a number of utilities, serving the approximately 8 percent of American homes that had electricity. These early days were the wild adolescence of the industry, and business could be cutthroat. There are stories about companies hiring gangs of thugs to chop down competitor's power lines. Overtime, the industry began to understand the value of economies of scale in providing service by using bigger turbine generators. Waves of consolidation began to create industry giants.

Yet the early power system remained inefficient, redundant, and expensive. It was still considered a luxury item, and the emergence of "natural monopolies" where one utility would dominate the market began to worry some reformers. Some states began to experiment with tighter regulation, but the industry changed dramatically in the 1930s, when two major initiatives from President Franklin D. Roosevelt's New Deal recast electricity as an essential service.

The Oil and Gas Industry

The price of oil sends a ripple effect throughout the world's economy, affecting not only how much drivers have to shell out at the pump, but other forms of transportation, the cost of all goods and services, and the availability of basics like food and shelter. Nearly half of petroleum production in the U.S. goes toward gas, according to the NPRA (gasoline is a mixture of hydrocarbons for use in a spark-fueled internal combustion engine, like a car). Other products include asphalt, solvents, and even the wax used in things like chewing gum and crayons. Leading companies, ranked according to sales, are Royal Dutch/Shell, Exxon Mobil, BP, TOTAL S.A., ChevronTexaco, Petroleos de Venezuela, Petroleos Mexicanos, Eni S.p.A., Repsol YPF, S.A., and PetroChina Company Limited, according to Hoover's.

Rockefeller's riches

The modern oil industry in the U.S. was born in the late 19th century, when, after investing in a Cleveland oil refinery during the Civil War, John D. Rockefeller founded Standard Oil in 1870. As of 1880, Standard refined 95 percent of all oil in the U.S. Branded an illegal monopoly in 1911, Standard was divided into 34 companies, including many still around today, like Mobil, Chevron, Shell, and Esso (later renamed Exxon). As Americans took to the road, demand for oil gushed ever higher. In the 1930s, the oil giants turned to Texas to seek their fortunes. Soon thereafter, Chevron, Texaco, Exxon and Mobil went overseas to expand their reserves, buying up rights to oil fields in Saudi Arabia (a bargain at $50,000).

Oil gets organized

In 1960, top oil-producing countries Iran, Iraq, Kuwait, Saudi Arabia and Venezuela met in Baghdad to form the intergovernmental organization OPEC, which stands for Organization of the Petroleum Exporting Countries. Today's list of 11 members, which collectively supply about 40 percent of the world's oil output and control more than three-fourths of total crude oil reserves in the world, are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The members meet twice a year to decide on their total output level of oil, considering actions to adjust it if necessary in response to oil market developments. Basically, it's all about supply and demand --if oil production rises faster than demand, prices fall, which OPEC claims hurts both producers and, eventually, consumers (in the form of inflation). Membership in OPEC is open to any oil-exporting nation that shares the organization's ideals. OPEC countries seek to ensure that oil producers get a good rate of return on their investments and (according to OPEC) that consumers continue to be able to access steady supplies of oil.

Oil stateside

Oil is certainly a slippery subject in the U.S., where high prices at the gas pump and the environmental issues associated with extraction and production always garner plenty of attention. The issue of drilling in the Arctic National Wildlife Refuge, for instance, was a huge topic in the election of 2000, and promises to resurface in 2004. Many of these decisions rest on politics and power: While the Clinton administration had proposed selling some 6 million acres in the Gulf of Mexico, off the coast of Florida, this amount was gutted at the behest of Florida Gov. Jeb Bush in 2001. But at other times, true environmental concerns hold sway. For example, the last oil refinery built in the U.S. was completed in 1976; though a handful more could contribute to lower gas prices, the risks and controversy surrounding their construction (refineries need to be built near water, and disasters like the Exxon Valdez oil spill have contributed to what the industry sees as a NIMBY-- "not in my back yard" -- attitude among the public) have all but scuttled the possibility of any new refineries any time soon.

In the U.S., according to the National Petrochemicals and Refiners Association (NPRA), there are 149 refineries, owned by 57 companies, with aggregate crude oil processing capacity of 17 million barrels per day (a barrel is 42 gallons). Back in 1981, there were 325 refineries, capable of producing 18.6 million barrels per day. Total U.S. demand for oil in 2002 was 17.5 million barrels per day. OPEC puts the world demand for oil at 76 million barrels per day, predicted to rise to more than 90 million barrels per day by 2020. Meanwhile, at the end of 2001, the latest year for which OPEC figures are available, world proven crude oil reserves stood at 1.075 million barrels. Saudi Arabia dominates these holdings, with crude oil reserves of 262,697 million barrels. Iraq comes in a distant second at 112,500 million barrels; these countries are followed by Iran, the UAE and Kuwait.