Peak oil in Pennsylvania

Here I pass along a few items on the early history of the oil industry that I found interesting.

The first commercial oil well was completed in Pennsylvania in 1859 under the supervision of Colonel Edwin Drake. Williamson and Daum’s The American Petroleum Industry: The age of illumination, 1859-1899, p. 75 have this colorful description of how Drake earned his colonel’s eagle:

Following [Pennsylvania Rock Oil Company President James] Townsend’s instructions literally, Drake’s first act on arriving in Titusville [PA] brought him what was probably the cheapest, if not the most spurious, colonelcy ever acquired outside the state of Kentucky. Alert to the promotional value of a little showmanship to impress the local citizenry, Townsend had mailed the legal documents ahead to “Colonel” E.L. Drake in care of Brewer, Watson & Company… When Drake called for his mail, he found the townsfolk already interested in and receptive to the great man affairs in their midst, and himself adorned with a new title that would remain with him for life.

Aided by more than a little luck, the colonel did strike oil, and the boom was on. For two decades the state of Pennsylvania was to be the world’s main producer of crude oil. Although production rates from the initial wells on Oil Creek dropped off quickly as the oil was taken out, these were more than replaced by other sources within the state. For example, in 1865, Pithole City, PA became a phenomenal boom town, accounting for a third of the 2.5 million barrels produced in the world that year, only to turn into a ghost town as production rates fell substantially by 1868.

Source: The Oil Well Driller, Charles Whiteshot (1905).

Pennsylvanian production continued to increase as ever-more-productive new fields within the state were developed, reaching almost 32 million barrels in 1891. But I was interested to learn that, despite amazing improvements in technology since the nineteenth century, that was the highest annual production rate that Pennsylvania would ever achieve.

Pennsylvania crude oil production, 1859-1990, in millions of barrels per year. Source:
Michael Caplinger (1997).

Here’s an update to the above graph with more recent data. The price increases of the 1970s and 2000s were sufficient to stimulate some increases in Pennsylvanian production. But note that the two graphs here are drawn on the same scale– we’re still under 4 million barrels per year, less than 1/8 of what the sturdy Pennsylvanians of 1891 were able to accomplish. And in 1891, by the way, oil sold for 67 cents a barrel, which corresponds to about $16 in 2009 dollars.

Pennsylvania crude oil production, 1981-2009, in millions of barrels per year. Data source:

33 thoughts on “Peak oil in Pennsylvania

  1. Steven Kopits

    Pennsylvania was convenient, but not really a great oil resource, with max production, as I read the graph, of about 85,000 bpd. North Dakota’s Bakken will increase shale oil production by about as much in 2010.
    Of course, the Bakken, while helping to revive US crude oil ouput modestly, is not that much in total US production of 5.5 million bpd either.

  2. Steven Kopits

    I had lunch with Uncle George today. He managed to make the pages of The Economist this week: “Has Orban Over-Reached?
    The story is about political events in Hungary, notably the government’s attempt to terminate Hungary’s independent budget watchdog, the Fiscal Council.
    When my uncle founded the Fiscal Council, established by legislation under a Socialist government a couple of years ago, we discussed approaches. He, a dyed-in-the-wool macroeconomist, was looking for independence and transparency to facilitate accountability and fiscal responsibility.
    I believed then, as I believe now, that aligning incentives matters more–a notion he resisted at the time, as there is neither precedent (except, as always, Singapore) nor an accepted theoretical basis for doing so. Notwithstanding, the Fiscal Council, having fallen afoul of the current conservative government, is being de-funded; the Supreme Court has been emasculated; and private pensions are being seized in all but name. Transparency has come up short and civil society in Hungary looks to be unwinding.
    If we want progress, in my opinion, economists have to become comfortable with the notion that aligning incentives matter, and to do that, in my opinion, you need to understand and apply the three ideology model.

  3. jonathan

    On a single block in Cleveland later in the 19th Century lived the richest men in the US: John D. Rockefeller, Henry Flagler and some of the other principals of Standard Oil. Their wealth was greater by far than any others. All on one block in Cleveland. Cleveland.

  4. Lyle

    In Titan a biography of John D. it is pointed out in the 1880s some of his associates wanted to diversify as oil was about to run out because they thought NW Pennsylvania was the only place oil occured. John D. thought otherwise, and then came the discoveries near Lima Oh, all be it it took some new refining techniques to get the sulfur out of the lamp kerosene.
    So peak oil folks have been pushing the meme since about 20 years after Drake.

  5. Bruce Wilder

    Andrew Carnegie, age 29 or 30, made a $40,000 investment in oil works at the Story Farm, on Oil Creek, in 1864, an investment, which yielded more than $1,000,000 in dividends in the first year.

  6. eric

    Glad to know that Lyle thinks oil will last forever. (Maybe now that oil has peaked globally, we can go off to Mars to get more?) I thought the point of the post was that the “new techniques” Lyle refers to didn’t suffice to stop the decline in PA, and may not suffice worldwide, either.

  7. Jeffrey J Brown

    I frequently use Texas and the North Sea as my “Peaks Happen” examples. These two regions were developed by private companies, using the best available technology, with virtually no restrictions on drilling. Furthermore, in both cases the initial declines corresponded to sharply rising oil prices.
    Through 2005, the combined cumulative production from the two regions accounted for about 9% of total global cumulative crude oil production.
    This article shows the 1972 Texas peak lined up with the 1999 North Sea peak:

  8. Bob_in_MA

    I don’t think peak oil is a big deal. As the price rises, we’ll decrease our usage through substitution and conservation. Plastics will go back from being made from cellulose, solar/wind power will become viable without subsidy, hybrid cars will be the norm, etc.
    Right now, the price or natural gas in the U.S. is equivalent to oil at $25bbl, in other words, it’s about 70% less expensive than oil. The main limit on gas production is price, thousands of wells were capped when the price plummeted during the recession. Tractor trailers, buses and some other fleet vehicles already run on gas and that will obviously increase.
    I bet 100 years from now they will still have oil, it will just be used for a fraction of the things we use it for.

  9. calmo

    Love those old photos
    Peak Oil is no big deal, Bob?
    Right…just switch to the many alternatives as the invisible hand of the market works its wonders:
    “As the price rises, we’ll decrease our usage through substitution and conservation.”
    I feel the same way about $5 bread (can I connect to Menzie’s Core thread and the not-so-near-to zero Food component?), I can resort to rice and beans…then to rice…and then fasting…I am nowhere near my Peak, you?
    As the previous administration illustrated, American interests are partial to any oil deposits you may wish to develop and not so partial to these bothersome substitutes, yes?
    Could be a less comfortable transition than we can imagine esp if the downside of that Peak is anything like the revised “proven reserves” estimates (Shell a few years ago).
    I bet a 100 years from now the cockroaches will be using it as their main food source.

  10. Marty

    “… solar/wind power will become viable without subsidy …”

    A reasonable hope, except for the fact that renewable power machines are currently made, shipped, installed, and serviced using energy from fossil fuels.

    It seems just as likely to me that the cost of renewables will increase in parallel with the cost of lower-energy-return-on-energy-investment fossil fuels.

  11. Bob_in_MA

    When I was in the sixth grade, about the time of the first Earth Day, we were taught about how all sorts of resources would be used up in the 15-20 years. And that it was inevitable. Copper was at the top of the list then, oil not far behind, etc.
    Actually, none of those uses of fuel couldn’t be replaced by electric power provided by solar/wind power. I’m not saying that will happen anytime soon, but there is no necessity to burning oil.
    Right now, powering vehicles is least expensive using oil. At this price of oil, it is cheaper to power some vehicles with natural gas. As oil rises even further, hybrid/electric cars will be more competitive.
    What is not going to happen is that will will consume oil at the same rate until it just disappears. Cost will rise before that happens.

  12. OiI_Lady

    You said:
    “Actually, none of those uses of fuel couldn’t be replaced by electric power provided by solar/wind power. I’m not saying that will happen anytime soon, but there is no necessity to burning oil.
    Right now, powering vehicles is least expensive using oil. At this price of oil, it is cheaper to power some vehicles with natural gas. As oil rises even further, hybrid/electric cars will be more competitive.”

    But solar and wind cannot provide the same power that oil can. A single barrel of oil contains the same amount of energy as 20 human slaves working 8 hours a day, every day, 7 days a week for an entire year. The amount of enegry we can harvest from solar and wind doesn’t even come close to that.
    And your insistence that there is no need to burn oil for the ongoing production of renewables is also incorrect. We need oil to fabricate solar panels. We need oil to fabricate wind turbines. There is no such thing as a factory that manufactures wind turbines running off of just solar and wind, and there never will be such a factory either. Wind turbines are made of very special and exotic metal alloys that need to be smelted into existence. You can’t smelt with the meager handfuls of energy that get ladeled out to us by solar and wind. You need oil and natural gas to achieve temperatures high enough for the smelting process.

  13. William Korthof

    Great article. I was surprised how early and dramatically Pennsylvania’s oil production peaked, and then declined.
    Solar, wind, and other substitutes will invariably have an increasing role, regardless of policy or ideology. Yes oil is convenient and dense, but substitution is feasible… and underway.
    The useful work you can get from a barrel of oil can be roughly matched by the annual output of a single 230 watt solar panel. Over a 30 years, that solar panel produces enough electricity to replace 30 barrels of oil.
    The solar panel itself costs roughly $500, compared to $85 (today) for a barrel of oil. Many situations already today show a economically viable break-even… also true of the situation for wind power. It shouldn’t be a surprise that solar and wind are now, year-over-year, the fastest growing sources of electricity. You may or may not yet have solar panels on your home, or own an electric car, but they are coming to a neighbor’s home near you.

  14. Bengt Randers

    # OiI_Lady
    One barrel of oil is ~1570 kWh of energy, if you could have one single 230 watt solar panel that have direct sunlight half a year you only get ~1000 kWh.
    That is not roughly matched, and you have less sunlight than that even i Sahara over one year.

  15. Jeremy

    Solar thermal doesn’t need exotic materials like PV does–just mirrors, water, and steam turbines. You could make solar thermal using 1800s technology (except for the generators, which obviously are more modern).

  16. lilnev

    My predictions: We’re at the beginning of “plateau oil”. Quantities will remain roughly constant for 30+ years with higher prices ($150-200). That’s high enough to support the larger investments required on the supply side, and to drive efficiency and substitution on the demand side. The remaining oil is mostly lower quality and/or less accessible than what we’ve burned so far; but there is a lot of remaining oil, if the price is high enough. Expect efficiency and substitution to reduce usage in the developed world while the developing world claims a larger share.
    Substitution: besides its current low price ($/kWh), the great advantage of petroleum is its density/portability. Aviation will probably always run on liquid fuel. Heavy vehicles can use NG as a decent substitute — inferior, but worth it when it’s significantly cheaper. That’s already happening, expect more of it. Personal transport is more difficult, and the most important sector. If we had batteries that supported the energy density of gasoline, we’d all be driving electric already. Batteries will never get that good, or even very close. But realize that most people are hauling 4000 pounds worth of car with them everywhere they go, and most trips are short. We won’t stop using gasoline altogher any time soon, but there’s a lot of room to use less, without reducing personal mobility.

  17. Frank in midtown

    Now let’s find some cool stuff about the US’s great whaling families and peak whale oil. Economist who don’t believe in substitution, hah hah hah too funny. Can you suggest a blog where I can find physicists who don’t believe in gravity.

  18. Lyle

    How about peak charcoal as well. Recall that in the late 18th century the forests of england had been burned up to make iron, and iron making had to move to Sweden to find the charcoal. Then a number inventors figured out how to smelt iron with coke, since straight coal put to many impurities.
    Or on topic when the pennsylvania oil ran out it turned out that the Lima oil as it existed made an absolutely terrible lamp fuel (the main use of oil back then) This lead to the thoughts on diversifying out of oil. Rockefeller however hired a chemist and he figured out a new refining process that fixed the problems with the oil. (Recall that Rockefeller started out in the downstream or refining business, and then eventually moved upstream to producing in the Lima Oh area.

  19. Bob_in_MA

    Professor Hamilton,
    On a related topic, have you read this paper at VoxEU, “The financialisation of commodities?”
    by Ke Tang & Wei Xiong
    It shows how commodities that make up popular indexes have had much higher price correlation over the last several years, since investing in the indexes has become so popular.

  20. Jeremy

    There is plenty of oil & gas left for hundreds & possibly thousands of years. We will never run out. Ultimately, cheaper oil & gas will become scarce and substitution will occur towards cheaper coal, nuclear and, as yet to be tractable, fusion power. Ultimately, more expensive oil may be used for a diminishing number of things (aircraft) but this is likely to be several generations away.
    Solar and Wind power is arrant nonsense. None of these forms of energy are competitive – neither do they produce enough energy to be practicable and nor are they low cost forms of energy – being five to ten times more expensive than fossil fuels (at current prices).
    The “Greens” should bear in mind the strong correlation between energy consumption (fossil fuels), GDP and living standards. Green wind and solar energy is not just bordering on delusion it is completely delusional. Anyone who can do the maths and physics knows this all to well. Meanwhile politicians are playing the King Canute trick when they preach of a Utopian green world that defies the laws of physics (which inherently determine the laws of economics – as all economic activity is inherently has energy as the basic raw input).

  21. JDH

    Spock: Your comment is addressed to Jeremy.

    Jeremy: And where is the oil of which you speak? Not in Pennsylvania, I presume you’d agree, nor Texas, Mexico, or the North Sea. Iraq, perhaps?

  22. Ed Rendell

    Jeremy did mention gas as well as oil. And I hear there is some in the Marcellus shale. But I’ll try to tax it so much no one will drill for it.

  23. Johny Lee

    I just love those comments that “peak oil doesn’t affect me!” I’m alright Jack! Just try and run your car on sunlight or recovered restaurant scrapings. Or maybe a small wind powered or nuclear generator in your local Boeing 797. If you think oil doesn’t matter or that we have a substitute then do some elementary physics and calculate the energy density of oil vs coal vs sunlight. If you can figure those calculations out (about grade 11 level) then you can comment about our real alternatives.

  24. Jeremy

    Peak Oil & Gas in the context of “running out of supply” is not true. It is a lie.
    There are so many prospective basins as well as new horizons in existing areas that have yet to see the bit (or have seen a mere handful of wells). Furthermore, higher prices will always unlock more supply (the great thing about economics).
    For example, the boom in North American Shale Gas illustrates how higher gas prices and technology can completely change the picture on reserves. (North America might even become a Gas exporter – if there is no major switch to use all this natural gas as a transport fuel!)
    Heavy Oil in Canada illustrates the same effect – what was uneconomic heavy oil is now viable at current prices – unleashed by a combination of technology and higher prices. (Canada currently has reserves second only to Saudi Arabia)
    Has $20 oil peaked? In all probability YES – for starters nobody could envisage supply growing at a $20 price – hence we may never see those kind of prices again until oil has well and truly been supplanted by something else.
    But consider $100 oil, at this price we unlock a whole lot more supply (as more basins and horizons become economic and more expensive technology can be applied in harsher environments) It takes many years for the industry to respond – due to huge time scale/commitment involved in new projects – but eventually supply responds to price, as it always does.
    And who is to say that Oil could not go up to $500 and still be a valuable commodity that is in high demand? The stuff is definitely valuable and beats a horse with a plough even at a $500 price!
    To be clear, there is absolutely NO geological threat/limit to fossil fuels – we will never run out.
    The only credible threat to fossil fuels is quite simply one of substitution – one day prices will be so high that other cheaper (possibly new) sources of energy will start to displace fossil fuels and then, Ladies and Gentlemen, you will have your “peak”.
    Three things have a big influence price:
    1. Resource holders (Governments everywhere set the royalties, taxes and determine access to their reserves, as well as taxation on consumption, as well as, sadly, wars)
    Demand (world economic growth with a spotlight cureently on China, in particular)
    Technology (breakthroughs in fossil fuel technology will continue to have impact – in future, new more competive forms of energy may be found)
    It is just economics but it seems delusional to think that we will ever run out. Things just don;t work that way although 100 years from now, it is anyone’s guess as to whether fossil fuels will contuinue to dominate as they currently do.

  25. JDH

    Jeremy: Nobody has claimed that “we are running out of oil.” You are attacking a strawman.

    Instead the observations above are that Pennsylvania is producing 1/8 the level it used to even though the inflation-adjusted price is 5 times the level it was then.

  26. Jeremy

    My apologies, “Peak oil” has become a term which has connotations and I immediately jumped to the wrong conclusion that it was being applied in the recent usual context of the meaning of those two words with Pennsylvania being an example.
    I believe there are several websites devoted to “Peak Oil” – to me it has become just another “Urban Legend” – a bit like “alligators in the sewers” or “man-made Global Warming” being the explanation for anything & everything that happens to our environment – silly but many people end up actually believing this stuff.
    Back to Pennsylvania Rock Oil – we are indeed unlikely to see a resurgence and a new peak production there. It was once a highly prospective place due to its proximity to market and to rail infrastructure. Of course, rising tides (higher prices) do indeed lift all boats but as long as there are more competitive prospective areas to exploit then a new peak seems unlikely.
    You mentioned Mexico – indeed it is not impossible to imagine a new future peak in production (from deeper waters) although only mother nature knows the answer to that!

  27. westslope

    Fascinating history! Thanks for sharing. People in eastern North America tend to forgot just how boom ‘n bust much of the economy once was. Does White Pine ring a bell?

    Once drilling moratoria are lifted, Pennsylvania and New York states could significantly grow natural gas as well as natural gas liquids (NGLs) which often fetch a higher price per barrel than oil.

    Jeremey: Peak oil is an engineering concept based on geological science. By itself it is devoid of economic content. Oil has become and will continue to become harder to find and extract and more expensive to find and extract.

    At some point, total barrels produced and consumed globally will likely decline but frankly, does it really matter? I suppose it does if you take the price of oil as a reverse indicator of US influence and power. Frankly, expensive scarce oil only matters if public policy is firmly wed to popular entitlement attitudes to cheap energy.

  28. keith

    Are there any large deposites of oil in beaver county pennsylvania specifically in racoon, potter townships? and if so what is the estimated amount.

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