The birth of the oil industry
On August 27th, 1859, Edwin Drake struck oil with his pioneering new method for producing oil from the ground. It is considered to be the date the oil industry officially began.
In 1857, Edwin Drake, aged 38, had to retire from his job as a railroad conductor due to ill health. Two years later when he was living with his family in Titusville, Pennsylvania, it so happens he was staying at the same hotel as members of the Pennsylvania Rock Oil Company. Although Drake had no engineering background of any kind, his previous job as a railroad conductor allowed him to travel on the railroad free of charge and it was decided that this could save the company money. He was hired on a salary of $1,000 a year (equivalent to $22,000 today) to investigate oil seeps in the area.
There had already been water wells but when these struck oil it was considered a nuisance. A method of refining crude oil to produce kerosene that could be used in lamps had only just been established.
The significant step that Drake took was to drive a thirty two foot iron pipe through the ground into the bedrock below. This allowed Drake to drill inside the pipe, without the hole collapsing from the water seepage. Within a day of Drake striking oil, others began copying his method.
Drake's well only produced 25 barrels of oil a day but by 1871, the entire area was producing 5.8 million barrels a year. The first oil millionaire was Jonathan Watson who lived in Titusville and owned the land where Drake's well was drilled. Titusville grew from a population of 250 to over 10,000 and up until the Texas oil boom of 1901, Pennsylvania was producing half of the worlds oil.
If oil prices seem volatile now, consider that in 1860, the year after the first strike, a barrel of oil was $20 ($492 today). In 1861, it was 10 cents a barrel (around $2 today) and sometimes cost less than water which is where the term "the bottom fell out of the market" originated.
Unfortunately for Drake, he did not patent his invention and by 1863, he lost all of his savings in oil speculation. Ten years later, in 1873, the state granted Drake a life pension of $1,500 a year for the contribution his drilling method made to the commonwealth. In 1880, aged 61, Drake died an invalid and penniless in Bethlehem, Pennsylvania.