If you are thinking of investing in oil, this article aims to give you some background information before making an investment decision. We look at how oil as a commodity has evolved throughout history and also the main uses of oil in today’s economy.
The first use of oil as a commodity
While we may consider the oil and gas industry to be a relatively modern innovation, China used petroleum at least 2,000 years ago. Natural asphalt was used in constructing the Tower of Babylon, and the first oil and bitumen well dates to around 450 BC.
In more modern times, a Scottish chemist named James Young discovered how to distil paraffin from crude oil and coal. The world’s first oil refinery opened in Bathgate, Scotland in 1851.
Using oil derived from shale and bituminous coal, it produced naphtha, lubricating oils, and paraffin.
In Canada, James Miller Williams discovered the nation’s first significant oil source in Oil Springs, Ontario, in 1858. He refined the crude oil and sold it as lamp oil.
A little later, in 1859, Colonel Drake established the first modern oil well in Pennsylvania; a discovery often cited as heralding the birth of the modern US petroleum industry.
How the use of oil has evolved over time?
Following these early applications, oil refineries were built to convert crude oil into kerosene for lamps, lubricating oils, and as a replacement for coal, which had been the power source of the steam driven machines emerging from the industrial revolution.
The invention of the petroleum-powered internal combustion engine in 1885; and the diesel engine in 1892; revolutionised transport, providing a new role for petrol which had previously been considered a relatively useless by-product.
By the early 20th Century, mass production of cars further fuelled demand which grew exponentially and gas, which had previously been regarded as a waste by-product that was usually flared off, found a new role.
Gas was developed as a fuel for industrial and domestic heating and electric power and became a valuable product in its own right.
What are the main uses of oil today?
Oil provides the fuel that powers the internal combustion engines used in automobiles, ships and generators. Oil provides the kerosene-based fuels used by jet engines and rockets.
Oil and gas also play a significant role in electricity generation, domestic heating and air conditioning. They are essential for maintaining much of the world’s infrastructure; without them, military and police forces would cease to function.
Oil is also an essential raw material for producing a wide range of products including plastics, paints, chemicals, pharmaceuticals, fertilisers, detergents, synthetic fibres, synthetic rubber, and many more.
Investing in oil
Oil and gas are powerful and versatile sources of energy, but they are also a finite resource. As we consume more of that resource, remaining reserves become increasingly difficult and expensive to extract. Eventually, it is expected that economically viable supplies will be exhausted.
If you want to learn more about the oil and gas industry or investing in oil, please follow the links.
