Petrochemical Industry

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PETROCHEMICAL INDUSTRY

PETROCHEMICAL INDUSTRY. This industry and the products it makes play an enormous role in our daily lives. Imagine life without gasoline, cosmetics, fertilizers, detergents, synthetic fabrics, asphalt, and plastics. All of these products—and many more—are made from petrochemicals—chemicals derived from petroleum or natural gas.

Crude oil, or petroleum fresh out of the ground, has been used sporadically throughout history. Many hundreds of years ago, Native Americans used crude oil for fuel and medicine. But the start of the oil industry as it is known today can be traced back to 1859. In that year, retired railroad conductor Edwin L. Drake drilled a well near Titusville, Pennsylvania. The well, powered by an old steam engine, soon produced oil and sparked an oil boom. By the 1860s, wooden derricks covered the hills of western Pennsylvania. In 1865, the first successful oil pipeline was built from an oil field near Titusville to a railroad station five miles away. From there, railcars transported oil to refineries on the Atlantic coast.

The business of refining oil was largely the domain of John D. Rockefeller. The New York–born industrialist financed his first refinery in 1862. He then went on to buy out competitors, and, along with his brother, William, and several associates, he created Standard Oil Company. By 1878, Rockefeller controlled 90 percent of the oil refineries in the United States.

Drilling for oil quickly spread beyond Pennsylvania. By 1900, Texas, California, and Oklahoma had taken the lead in oil production, and eleven other states had active oil deposits. Annual U.S. oil production climbed from two thousand barrels in 1859 to 64 million barrels in 1900. Other countries were also getting into the oil business. Russia was producing slightly more than the United States around the beginning of the twentieth century. Smaller producers included Italy, Canada, Poland, Peru, Venezuela, Mexico, and Argentina. The first major oil discovery in the Middle East occurred in Iran in 1908. Prospectors struck oil in Iraq in 1927 and in Saudi Arabia in 1938.

The Petrochemical Industry Soars

Kerosene, a fuel for heating and cooking, was the primary product of the petroleum industry in the 1800s. Rockefeller and other refinery owners considered gasoline a useless by product of the distillation process. But all of that changed around 1900 when electric lights began to replace kerosene lamps, and automobiles came on the scene. New petroleum fuels were also needed to power the ships and airplanes used in World War I. After the war, an increasing number of farmers began to operate tractors and other equipment powered by oil. The growing demand for petrochemicals and the availability of petroleum and natural gas caused the industry to quickly expand in the 1920s and 1930s. Many chemical companies, including Dow and Monsanto, joined the industry. In 1925, annual crude oil production surpassed a billion barrels.

During World War II, vast amounts of oil were produced and made into fuels and lubricants. The United

States supplied more than 80 percent of the aviation gasoline used by the Allies during the war. American oil refineries also manufactured synthetic rubber, toluene (an ingredient in TNT), medicinal oils, and other key military supplies.

Plastics: A Petrochemical Gold Mine

The demand for petroleum products became even greater after World War II. Petroleum use in the United States went from about 1.75 billion barrels in 1946 to almost 2.5 billion barrels in 1950. By the early 1950s, petroleum had replaced coal as the country's chief fuel. And plastic was the primary reason.

Originally, most plastics were made from the resins of plant matter. But it wasn't long before plastics were developed from petrochemicals. The packaging industry, the leading user of plastics, accounts for about one-third of total U.S. production. The building industry ranks second, which uses plastic to make insulation, molding, pipes, roofing, siding, and frames for doors and windows. Other industries, including automobile and truck manufacturing, also rely heavily on plastics.

The United States was hardly alone in its rising use of petroleum products. Throughout the world, increased industrialization and rapid population growth created new and greater demands for oil. By the late 1950s, petrochemicals became one of the largest industries, and control over the sources and transportation of oil became a major national and international political issue.

The Petrochemical Industry Slowdown

The environmental movement, spawned in the 1960s and 1970s, led Americans to be wary of industries that pollute—and the petrochemical industry was seen as a primary suspect. A backlash against the industry contributed to a slowdown. Around the same time, other events also led to lean times within the industry, including the buildup of European and Japanese petrochemical industries, a demand for natural gas that exceeded the supply, the 1979 OPEC (Organization of the Petroleum Exporting Countries) crisis, and an economic recession in the United States. These events led many chemical companies to abandon the petrochemical industry altogether.

Slowed but not stopped, the petrochemical industry in the 1980s and 1990s was largely restructured, as individual production plants were purchased or refinanced and chemical companies reformed. Major petrochemical companies, such as Shell and Mobil, became involved in mergers in an effort to strengthen their positions in the marketplace.

The Geography of Petrochemicals

By the last decade of the twentieth century, there were almost a million oil wells in more than one hundred countries

producing more than 20 billion barrels per year. Most experts give Saudi Arabia credit for having the largest original oil endowment of any country, and the Middle East as a whole is believed to have about 41 percent of the world's total oil reserve. North America is a distant second. Because of the large deposits in Russia, Eastern Europe is also well endowed with oil. Most of Western Europe's oil lies below the North Sea. Many believe that an estimated 77 percent of the world's total recoverable oil has already been discovered. If so, the remaining 23 percent, mostly located in smaller fields or in more difficult environments, may be more expensive to find and to recover.