the air so that decay by biological means or reaction to oxygen will not destroy it. Deposition and Transformation Microscopic plant and animal life is abundant in much of the oceans. When these organisms die, their remains usually settle to the seafloor. When this takes place in near-shore marine environments, such as on continental shelves,orwhere large riversform marine deltas, sediments derived from continental erosion accumulate rapidly. In such a setting, the initial re- quirements for the formation of oil are satisfied: An abundance of organic matter is rapidly buried by sedi- ment so that it is free from aerobic and biological contamination. The majority of oil and natural gas deposits are believed to have been formed by such ac- cumulated marine organisms. Oil fields reflect the presence of prehistoric marine environments that now exist below the surface as marine deposited sedi- mentary rocks. As sedimentary deposition continues to bury the organic matter, it begins to change into a solid organic material called kerogen. At relatively low tempera- tures and shallow burialdepths,kerogenischemically inert. Kerogen consists primarily of hydrocarbons that are in the solid state and that are insoluble not only in water but also in a variety of organic solvents. Kerogen from the lower plants and animals, with a high lipid content and a relatively high hydrogen ra- tio, will produce oil. Kerogen from the higher vascu- lar plants is lower in hydrogen content and will pro- duce only gas. As pressures increase from the weight of continued deposition of overlying sediment, the sediments are gradually transformed into lithified rock. Tempera- tures increase with depth below the Earth’s surface; slowly, over long periods of time, chemical reactions take place. These reactions break down the large, complex organic molecules into simpler, smaller hy- drocarbon molecules. The nature of the hydrocarbon changes with time and continued heat and pressure. In the early stages of petroleum formation, the de- posit may consist mainly of larger hydrocarbon mole- cules, which have the thick, nearly solidconsistency of asphalt. These are referred to as low-gravity crudes. As the petroleum matures, and as the breakdown of large molecules continues, successively lighter hydro- carbons are produced. Thick liquids give way to thin - ner ones, from which are derived lubricating oils, heating oils, and gasoline. In the final stages, most or all of the petroleum is further broken down into sim - ple, light, gaseous molecules—natural gas. Most of the maturation process occurs in the temperature range of 50° to 100° Celsius. Above these tempera- tures, the remaining hydrocarbon is almost wholly methane; with further temperature increases, meth- ane can be broken down and destroyed in turn. A given oil field yields crude oil containing a distinctive mix of hydrocarbon compounds, depending on the burial history of the material. The commercial petro- leum refining process separates the different types of hydrocarbons for different uses through the applica- tion of heat. Some of the heavier hydrocarbons are broken up during heat refining into smaller, lighter molecules through a process called cracking. Crack- ing is an artificial method of maturing the hydrocar- bons and allows lighter compounds such as gasoline to be produced as needed from the heavier compo- nents of crude oil. Migration of Deposits Once the solid organic matter is converted to liquids and gases, hydrocarbons can migrate from the rocks in which they formed. Such migration is necessary if the oil or gas is to be collected into an economically valuable and practically usable deposit. The majority of petroleum source rocks are fine-grained clastic sed- imentary rocks of low permeability. Despite the low permeabilities, oil and gas are able to migrate from their source rocks and move through more perme- able rocks over long spans of geologic time. The amount of time required for oil and gas to mature is not known precisely. Since virtually no petroleum is found in rocks younger than one to two million years old, geologists infer that the process is comparatively slow. Though many properties of sedimentary rocks in- fluence the generation, migration, and accumulation of oil and gas, none has more direct control on hydro- carbon movement and entrapment than do the amount and distribution of pore space. Interstitial pores must be present in the source rocks and enclos- ing rock layers in order for fluids containing oil and gas to be expelled into the migration system. Migra- tion itself requires an interconnected system of pores in order for these fluids to move from the source to impermeable trapping rocks. The pores, holes, and cracks in rocks in which fluids can be trapped are commonly full of water. Most oil and all natural gases are less dense than water, so they tend to rise as well as 868 • Oil and natural gas formation Global Resources to migrate laterally through water-filled pores of per - meable rock. Unless stopped by impermeable rocks, oil and gas may keep rising right up to the Earth’s sur- face, escaping into the air or the oceans or flowingout onto the ground. The La Brea Tar Pits of California are an example of such a seep. Randall L. Milstein Further Reading Chilingar, G. V., et al. Geology and Geochemistry of Oil and Gas. Boston: Elsevier, 2005. Devereux, Steve. Drilling Technology in Nontechnical Language. Tulsa, Okla.: PennWell, 1999. Hunt, John M. Petroleum Geochemistry and Geology.2d ed. New York: W. H. Freeman, 1996. Hyne, Norman J. Nontechnical Guide to Petroleum Geol- ogy, Exploration, Drilling, and Production. 2d ed. Tulsa, Okla.: PennWell, 2001. Keller, EdwardA.EnvironmentalGeology. 8th ed. Upper Saddle River, N.J.: Prentice Hall, 2000. Link, Peter K. Basic Petroleum Geology. 3d ed. Tulsa, Okla.: OGCI Publications, Oil & Gas Consultants International, 2001. Reprint. Tulsa, Okla.: Penn- Well, 2007. Montgomery, Carla W. Environmental Geology. 7th ed. Boston: McGraw-Hill, 2006. Selley, Richard C. Elements of Petroleum Geology.2ded. San Diego, Calif.: Academic Press, 1998. Web Site U.S. Geological Survey Organic Origins of Petroleum http://energy.er.usgs.gov/gg/research/ petroleum_origins.html See also: Oil andnatural gas chemistry; Oil and natu- ral gas distribution; Oil and natural gas reservoirs; Pe- troleum refining and processing. Oil and natural gas reservoirs Category: Energy resources By the 1870’s, the hydrocarbon industry had accepted the concept that a subsurface rock volume with suffi- cient porosity, permeability, and capping element effec - tively trapped localized concentrations of crude oil and natural gas. Suchaconcentrationwastermed ahydro - carbon (oil and/ornaturalgas)reservoir. This concept greatly increased early successes in finding hydrocar- bon, and it remains a fundamental tool in worldwide exploration for oil and natural gas. Background With the advent of the petroleum age in the United States, initiated by the drilling of the first oil well in Pennsylvania in 1859, the search began for scientific methods useful in the direct or indirect indication of the presence of accumulations of subsurface oil and gas. Early methodologies included river bottom loca- tions (“creekology”), geographic projection of discov- eries (“ruler geology”), and the presence of surface hydrocarbon seeps (“seepology”) or surface mounds (“topography”). While of varying success in establish- ing new reserves, none of these methods adequately explained the concentration of oil and natural gas in subsurface rocks of the Earth. Subsequently, publications by John F. Carll of the Pennsylvania Geological Survey explained that hydro- carbon concentrationswerenotpresentinsubsurface caverns, pools, or lakes, but rather were contained in the natural pore space common to the sedimentary class of rock. By the end of the nineteenth century, consensus suggested that economic hydrocarbon ac- cumulations were associated with subsurface rock of porosity adequate to contain significant volumes of hydrocarbon, sufficient permeability to allow transfer of the contained hydrocarbon to the surface by way of a borehole, and the presence of a cap or roof rock which effectively holds theoilandgasinplace untilre- leased through the borehole. This combination of rock porosity, rock permeability, and cap rock defines an oil and natural gas reservoir. Reservoir Rock Type Throughout the world, hydrocarbon reservoirs are commonly composed of sandstone or carbonaterock, the latter of which is either limestone (calcium car- bonate) or dolomite (calcium and magnesium car- bonate). Studies indicate that approximately 57 per- cent of all reservoirs are composed of varying types of sandstone; conglomerate, greywacke, orthoquartzite, and siltstone are common types. About 40 percent of reservoirs are composed of carbonate rock. The re- maining 3 percent of reservoirs are composed of shale, chert, and varieties of igneous and metamor - phic rock. Global Resources Oil and natural gas reservoirs • 869 Rock Porosity and Permeability Rock porosity refers to the percentage of rock volume that is occupied by interstices or voids, whether con- nected or isolated. Under normal conditions, sub- surface rock porosity is filled with water varying in chemistry from fresh to very saline. In rock provinces favorable to the formation of hydrocarbon, long-term geologic processes cause migrating microvolumes of dissipated oil and natural gas to concentrate into res- ervoir accumulations by replacing water-filled pore space with hydrocarbon-filled pore space. Sandstone reservoir porosities normally range from a low of 10 percent to a high of 35 percent. Carbonate rock reser- voir porosity is generally lower than sandstone po- rosity. Rock permeability is the measure of ease with which contained gas or liquid under pressure can move freely through interconnected pore space. Res- ervoir permeability is expressed in terms of millidarcy units, named for Darcy’s law. Sandstone and carbon- ate reservoir permeabilities generally vary from a low of 5 to more than 4,500 millidarcies. Porosity and permeability are integral physical characteristics of the reservoir, as they determine, re- spectively, the amount of oil and gas the reservoir con- tains and the potential volumetric production rate of the reservoir over time. Under normal conditions po- rosity and permeability are primary characteristics— in other words, characteristics that were created at the time of the rock’s formation. Secondary porosity and permeability can be created through postdeposition weathering or fracturing of reservoir rocks. Oil and natural gas reservoirs possessing high porosities and permeabilities, whether primary or secondary in ori- gin, are greatly valued. Reservoir Cap Rock While porosity and permeability are essential ele- ments of any reservoir, a relative lack of permeability in the rock forming the reservoir cap is equally essen- tial. The reservoir cap, or roof rock, is an imperme- able rock unit that keeps the oil and natural gas in place until that time when reservoir integrity is al- tered by a borehole. The presence of oil and natural gas seeps throughout the world is indicative of reser - voirs that have lost their integrity, allowing the con - 870 • Oil and natural gas reservoirs Global Resources Anticline Trap Salt Dome Trap Fault Trap Stratigraphic Trap Oil Gas Oil Gas Oil Gas Gas Salt Oil Impermeable cap rock (shale) Permeable reservoir rock (sandstone) Impermeable cap rock (shale) Permeable reservoir rock (sandstone) Examples of Structural and Stratigraphic Hydrocarbon Traps tained hydrocarbon to leak slowly out of the reservoir and rise to the surface of the Earth. Reservoir Trap While a combination of porosity, permeability, and cap rock is common in subsurface rock, these reser- voir characteristics must be contained within rock ge- ometry of a nature suchthat oil and natural gas can by concentrated into economic volumes. The overall combination of porosity, permeability, cap rock, and rock geometry is termed the reservoir trap. Reservoir traps are formed under varying conditions of rock at- titude (general disposition and relative position of rock masses) and rock lithology (physical characteris- tics). Two common types of reservoir traps are recog- nized: structural and stratigraphic. A basic premise of geology states that sedimentary rock—that class which forms all but a minor percent- age of reservoir rock—was deposited originally in a horizontal or near-horizontal state. Any subsequent deviation from the horizontal is caused by compres- sive or earthquake forces acting within the crust of the Earth. One of the most common and sought after structural traps is the anticline, a convex upward flex- ing of rock strata. In an anticline, the inner core of arched rock, if porous and permeable, allows the con- centration of migrating microvolumes of hydrocar- bon. Such concentration is achieved because oil and gas have a lower density than saline or fresh water, the normal fluids found within the pore space of sedi- mentary rock. Without a proper reservoir cap rock forming the outer surface of the anticlinal flexure, usually an impermeable shale, hydrocarbon concen- trations will slowly leak to the surface. An anticline, composed of an inner porous/permeable rock core and outer impermeable cap rock, forms the ideal structural reservoir trap. Of the 250 largest oil fields in the world, approximately 90 percent are classified as anticlinal reservoir traps. In contrast to the structural trap, the stratigraphic trap is dependent upon lateral variability of porosity and permeability within a rock layer as caused by changes in grain size, shape, cementation, compac- tion, and degree of weathering. For example, in a se- quence of tilted sedimentary rock, an upward decline in permeability would block the surface migration of oil or gas as effectively as would a structural reservoir trap. Such a loss of permeability may be caused by a combination of a reduction in grainsize, an increase in the degree of cementation filling in the space between individual rock grains, or an increase in compaction resulting from rock burial. Approximately 10 percent of allreservoir traps arestratigraphicin classification. Examples of Oil and Gas Reservoir Traps Throughout the Middle East (notably Iran, Iraq, Ku- wait, and Saudi Arabia), which contains approximately 49 percent of the recoverable oil and at least 27 per- cent of the total natural gas of the world, the anticline reservoir trap is ubiquitous. The Ghawar oil field, in northeast Saudi Arabia, is formed by the merging of several elongate anticlines, creating a gigantic anticli- nal arch extending more than 233 kilometersin length by 21 kilometers in width. The reservoir rock is lime- stone, which is overlain by an anhydrite (calcium sul- phate) cap rock. Variable porosity and permeability, ranging from 9 to 14 percent and from 10 to 20 millidarcies respectively,isresponsible for the average well in this field having a high potential production, that is, approximately 5,000 barrels of oil per day. In contrast to the Ghawar field, the Santa Fe Springs oil and gas field southeast of Los Angeles,Cal- ifornia, is formed of an anticline approximately3kilo- meters in length by 1 kilometer in width. Hydrocar- bon production here is enhanced by eight vertically superimposed oil reservoirs overlain by a natural gas reservoir. Each reservoir is composed of sandstone, capped by an impermeable shale. The Hugotongasfieldof southwestern Kansasisan excellent example of a reservoir formed by changes in stratigraphy (physical character). The reservoir is formed of porous and permeable carbonate rock, both dolomite and limestone in composition. In a westward direction, the carbonate rock gradually al- ters to shale, resulting in a decrease in porosity to the point where commercial quantities of gas cannot be obtained. Further north in southern Alberta, Pem- bina, one of the great oil fields of Canada, contains similar stratigraphic changes. In this case, four sepa- rate oil-producing sandstone reservoir rocks gradu- ally changetoshale,the latter acting asthecap rock. The Chapman oil field of Texas is an excellent ex- ample of hydrocarbon production from igneous rocks, normally void ofporosity and permeability. Originally formed as lava flows, with minimal porosity associated with gas vesicles, these rocks were subsequently al- tered and weathered, resulting in an increase in per- meability. Overlying shales act as cap strata for the contained oil. Albert B. Dickas Global Resources Oil and natural gas reservoirs • 871 Further Reading Ahr, Wayne M. Geology of Carbonate Reservoirs: The Iden- tification, Description, and Characterization of Hydro- carbon Reservoirs in Carbonate Rocks. Hoboken, N.J.: Wiley, 2008. Brooks, J., ed. Classic Petroleum Provinces. London: Geological Society, 1990. Craig, James R., David J. Vaughan, and Brian J. Skin- ner. Resources of the Earth: Origin, Use, and Environ- mental Impact. 3d ed. Upper Saddle River, N.J.: Prentice Hall, 2001. Hunt, John M. Petroleum Geochemistry and Geology.2d ed. New York: W. H. Freeman, 1996. Hyne, Norman J. Nontechnical Guide to Petroleum Geol- ogy, Exploration, Drilling, and Production. 2d ed. Tulsa, Okla.: PennWell, 2001. Link, Peter K. Basic Petroleum Geology. 3d ed. Tulsa, Okla.: OGCI Publications, Oil & Gas Consultants International, 2001. Reprint. Tulsa, Okla.: Penn- Well, 2007. Selley, Richard C. Elements of Petroleum Geology.2ded. San Diego, Calif.: Academic Press, 1998. Tissot, B. P., and D. H. Welte. Petroleum Formation and Occurrence. 2d rev. and enlarged ed. New York: Springer, 1984. Web Site U.S. Geological Survey Organic Origins of Petroleum http://energy.er.usgs.gov/gg/research/ petroleum_origins.html See also: Oil andnatural gas chemistry; Oil and natu- ral gas distribution; Oil and natural gas drilling and wells; Oil and natural gas exploration; Oil and natural gas formation; Oil industry. Oil embargo and energy crises of 1973 and 1979 Category: Historical events and movements Date: October, 1973, to March, 1974, and January to September, 1979 The energy crises of 1973 and 1979 produced new en - ergy consciousness, high unemploymentandinflation, negative economic growth, and foreign policy shifts within the oil-importing countries of the industrialized world. It also left the major oil-exporting states in the world in control of a global oil industry, which had previously been largely under the control of the major (private) international oil corporations, and of the vast majorityoftheworld’s known petroleum reserves. Background The 1973 and 1979 energy crises differed importantly in timing and gravity. The 1973 crisis emerged in a matter of days; the 1979 crisis unfolded over eight months. The 1973 crisis involved the availability and affordability of the petroleum essential to the indus- trialized countries of the Northern Hemisphere. In 1979, the availability of oil was never in doubt, only the ability of the oil importers to pay for it. At their most basic levels, however, the two crises had much in common. Both resulted from sudden, largely unfore- seen political events in the Middle East. Both gener- ated periods of global stagflation (high inflation with little or noeconomic growth), and both dramatized the extent to which, by the 1970’s, the lifestyle of de- veloped states had come to depend upon an energy resource that they did not control. The immediate causes of the 1973 oil crisis were the October, 1973, war between Israel and Egypt, Jordan, and Syria (the Yom Kippur War), and the U.S. decision to resupply Israel during that war. On Octo- ber 17, 1973, the Organization of Arab Petroleum Ex- porting Countries (OAPEC) responded to these events by agreeing to end or reduce oil shipments to countries supporting Israel. OAPEC’s decision set petroleum-importing states bidding against one an- other for the oil upon which their economies de- pended. Oil’s spot market price soared from under three dollars per barrel to more than twenty dollars per barrel, and the Organization of Petroleum Ex- porting Countries (OPEC) successfully exploited the situation to wrestcontroloverthe international petro- leum market from the cartel of private oil companies that had controlled it for half a century. On balance, the Yom Kippur War was less responsi- ble for causing the first oil crisis than influencing its timing. By 1973, oil supply and demand trends had combined with political events to make oil-importing states highly dependent on Arab oil producers. Fol- lowing World War II, industrialized states began dou- bling their energy use approximately every dozen years. To meet energy needs, Japan and the countries of Europe used ever larger quantities of imported 872 • Oil embargo and energy crises of 1973 and 1979 Global Resources petroleum—the cheapest and most efficient energy source available. Meanwhile, they allowed their indig- enous coal industriestodecay. Thus, whereas coal had accounted for nearly 78 percent of the energy used in Western Europeandmore than 60 percentinJapan in 1950, by 1970,coalwasproducing less than 25 percent of their energy needs. Conversely, by 1970, imported oil accounted for more than 55 percent of Western Europe’s total energy use and nearly 70 percent of Ja- pan’s. Even in the United States, with its large domes- tic petroleum industry, imported oil became the post- war means of sustaining the good life. On the eve of the Yom Kippur War, Americans were importing nearly one-third of their petroleum and one-sixth of their total energy needs. These shifting demand-supply patterns would have been less significant were it not for the political changes that occurred between 1950 and 1970. The primary source of supply of the oil-importing world shifted to the Middle East, where many of the oil- exporting states were shedding pro-Western govern- ments in favor of more radical regimes. These states were at once more likely to cooperate with one an- other in using the oil weapon against Israel and less willing to accept the prices being paid to them by the seven western oil companies (the “Seven Sisters”), who as late as 1950 still controlled nearly 90 percent of all production outside the United States andthe So- viet Union. By 1971, this cartel had already lost its ability to fix the price of oil on the world market. Against this backdrop, the 1973 oil crisis unfolded as a culmination of events. The higher oil prices be- gan a major shift of wealth toward OPEC states (whose $10-$12 billion surplus on their combined current account in 1973 jumped to a $65 bil- lion surplus in 1974) and ended the 1968-1973 economic boom in the Western industrialized world. The crisis also produced significant diplo- matic ruptures within the Western alliance, as Japan and most of the U.S. allies in Europe were forced to break ranks with the United States on Middle East policy in order to avoid having their oil shipments cur- tailed. On the domestic front, the 1973 crisis made energy a major policy issue, as im- porting states began to consider the lifestyle changes necessary to reduce their levels of dependency on OPEC oil. The choices, however, were inevitably un- pleasant, and by the mid-1970’s, the United States in particular preferred to regard the 1973 crisis as an ab- erration. It was a convenient fiction, making it unnec- essary for Americans to rethink their love affair with large cars, their suburban dwelling patterns, and their generally profligate use of energy. The 1979 crisis exploded that myth, as it unfolded between two political events: the fall of the shah of Iran in January, 1979, and the outbreak of war be- tween Iraq and Iran that officially began in 1980. The first event plunged Iran into disarray, effectively shut- ting down its oil industry and depriving an already tight international petroleum market of Iran’s 3 to 4 million barrels per day of oil exports. The price of oil rose almost daily with Iran’s continuing political tur- moil. Then, in late summer, the turbulence in Iran tempted Iraq into invading the country. The resultant war removed Iraq’s more than 3 million barrels of oil per day from the market as well. The cost of oil sky- rocketed. By late September, 1980, OPEC oil, which had been selling for sixteen dollars per barrel in Janu - ary, cost more than thirty-six dollars per barrel. Global Resources Oil embargo and energy crises of 1973 and 1979 • 873 A gas station owner in Perkasie, Pennsylvania, paints a sign illustrative of the trickle- down effects of the dual energy crises of the 1970’s. (AP/Wide World Photos) This twenty-dollar-per-barrel increase in the price of oilhadadevastating impact on theglobaleconomy. Western oil importers hastily employed harsh mone- tary policies to combat the new inflationary pressure. As countries’ economies sharply contracted, unem- ployment rates unseen since theGreatDepressionen- sued. By 1980, Japan’s unemployment rate, which had averaged 1.0 percent from 1960 to 1978, was 13.5 per- cent; forFranceandthe United States, the1980figure was 15 percent; for the United Kingdom, 23 percent. A decade later, when Saddam Hussein’s army invaded and temporarily annexed oil-rich Kuwait, double-digit unemployment, dating from the second oil crisis, still lingered in much of Western Europe. So, too, did the developed democratic world’s dependency on im- ported oil from OPEC in general and its Arab export- ing states in particular. Impact on Resource Use The link between the cost of energy and economic growth—and hence the utilizationofabroad range of resources—isgenerallyadirect one. It also involvesan inverse relationship. Low energy prices keep down the cost of everything related to energy use, from heating oil and gasoline to commodities mass pro- duced and distributed via systems relying on some form of energy. Conversely, because in the immediate short term the demand for energy is usually inelastic, high energy prices do not immediately result in less energy use, only in higher energy costs, which invari- ably translate into inflationary pressures, counter- inflationary policies likely to increase unemployment, and recessionary periods of stagflation, low economic growth, and low overall resource utilization. Because their operations were rooted in the devel- oped democratic world, the western oil companies that largely controlled the petroleum market prior to 1970 were geared to maintaining a stability in the price of oil that would allow them to make a consis- tent, small profit on each unit of a commodity used in abundance in times of steady economic growth. They also controlled a large enough portion of the interna- tional oil-producing market and sufficient internal cohesiveness to enable them to do so effectively dur- ing most of the middle half of the twentieth century. OPEC has never had the same ability for two reasons. First, there are major exporters of oil outside OPEC who, as in the case of Britain during the 1980’s, have been willing to undersell OPEC and set into motion a downward spiral in the price of oil on the world mar - ket. Second, there are major divisions inside OPEC which, in markets of reduced supply or rising de- mand, have often made it difficult for price moder- ates like Saudi Arabia to keep the price of oil from spi- raling upward to global recession-inducing levels. Consequently, since OPEC replaced the Seven Sis- ters cartel in the 1970’s, there has been a marked ab- sence of the general stability in the price of oil that characterized the reign of the Seven Sisters, and on the basis of which Western economies recovered from World War II and expanded from 1950 to 1970. In- stead, internal squabbles among OPEC nations have combined with political and economic developments outside its control, producing a roller-coaster effect on the global economy that has frequently had a pro- found impact on the lives of its citizens and their use of its resources. Thus, the high price of oil at the end of the 1970’s had a gradual, dampening effect on the demand for oil in the 1980’s, as Western economies contracted and industrial production fell in many states to 60 percent of its pre-recession levels. At the same time, the high price of oil encouraged not only the exploration and development of other sources of oil, like the North Sea, the Caspian Sea, and Alaska, but also the development of alternatives to conven- tional petroleum, like the shale oil in Colorado, the tar sands oil in Canada, and oil-from-coal projects similar to those that allowed Germany to fuel its war machine in World War II. When, however, the re- duced demand for OPEC oil combined with the over- production and price cheating that occurred inside OPEC by states desperate for development funds in a market to produce a sharp drop (at one point to be- low ten dollars per barrel) in the price of oil in the mid-1980’s, many of these costly, alternative energy projects were abandoned even as consumer demand for oil began to grow again. The same pattern repeated itself near the end of the twentieth century and during the first decade of the twenty-first century. The low price of OPEC oil in the 1990’s not only stimulated increased energy con- sumption in the United States and other parts of the developed Westernworldbutalso encouraged a series of developing countries, including India and China, to accelerate their development plans, and hence the need for imported oil. The result was a steady upward pressure on the price of oil, only temporarily dis- rupted in the late 1990’s by an economic crisis in East Asia. When the demand of these countries surged in the early twenty-first century at the same time that the 874 • Oil embargo and energy crises of 1973 and 1979 Global Resources United States occupation of Iraq removed its ability to export large amounts of oil and even turned Iraq mo- mentarily into an oil-importing state, the resultant tightness in the energy market produced a steady up- ward spiral in the price of oil, to a recession-inducing peak of approximately $150 per barrel. Then fol- lowed a predictable decline in the demand for im- ported oil and the price of oil and, in turn, the cancel- lation of many of the alternative-energy schemes born during the era of $150-per-barrel OPEC oil. The global financial crisis that occurred shortly thereafter fur- ther reduced Western demand for resources, from the wood to build homes to the metals to make steel, but it was the high price of oil preceding that crisis that had already softened up such key economic sec- tors as automotive production and the demand for the resources used by such sectors. Joseph R. Rudolph, Jr. Further Reading Amuzegar, Jahangir. Managing the Oil Wealth: OPEC’s Windfalls and Pitfalls. New York: I. B. Tauris, 2001. Feldman, David Lewis, ed. The Energy Crisis: Unresolved Issues and Enduring Legacies. Baltimore: Johns Hopkins University Press, 1996. Horowitz, Daniel, ed. Jimmy Carter and the Energy Crisis of the 1970’s: The “Crisis of Confidence” Speech of July 15, 1979, a Brief History with Documents. Boston: Bedford/St. Martin’s, 2005. Learsey, RaymondJ.Overa Barrel: Breaking Oil’sGripon Our Future. New York: Encounter Books, 2007. Mattson, Kevin. “What the Heck Are You up to, Mr. Presi- dent?” Jimmy Carter, America’s “Malaise,” and the Speech That Should Have Changed the Country. New York: Bloomsbury, 2009. Merrill, Karen R. The Oil Crisis of 1973-1974: A Brief History with Documents. Boston: Bedford/St. Mar- tin’s, 2007. Randall, Stephen J. United States Foreign Oil Policy Since World War I: For Profits and Security. 2d ed. Montreal: McGill-Queen’s University Press, 2005. Silber, Bettina, ed. The Arab Oil Embargo: Ten Years Later. Washington, D.C.: Americans for Energy In- dependence, 1984. Skeet, Ian. OPEC: Twenty-five Years of Prices and Politics. New York: Cambridge University Press, 1988. Tetreault, Mary Ann. The Organization of Arab Petro- leum Exporting Countries: History, Policies, and Pros - pects. Westport, Conn.: Greenwood Press, 1981. Unander,Fridtjof,andMichael Ting.OilCrisesand Cli - mate Challenges: Thirty Years of Energy Use in IEA Coun - tries. Paris: International Energy Agency, 2004. Vernon, Raymond, ed. The Oil Crisis. New York: Norton, 1976. Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power.Newed.New York:The Free Press,2008. See also: Athabasca oil sands; Coal gasification and liquefaction; Department of Energy, U.S.; Energy eco- nomics; Energy politics;Oil industry; Organization of Arab Petroleum Exporting Countries; Organization of Petroleum Exporting Countries; Peak oil; Re- sources as a source of international conflict; Saudi Arabia; Synthetic Fuels Corporation. Oil industry Categories: Energy resources; obtaining and using resources One of the world’s largest industries, the petroleum in- dustry made the twentieth century the “petroleum age,” enriched and developed numerous third world coun- tries, helped the Allies win World War II and Europe and Japan recover fromthatwar,andpoweredtheU.S. rise into a military and economic superpower. A major contributor to the shape of the global economy, the pe- troleum industry had itself been significantly reshaped by that economy by the end of the twentieth century. Background The oil industry remains a capital-intensive industry, and, therefore, its story generally remains one of enormous wealth and, through wealth, one of politi- cal power and influence. The modern form of oil in- dustry began when John D. Rockefeller’s Standard Oil monopoly was vertically integrated, spanning pro- duction, refining, transporting, and retailing opera- tions. The industry’s fruits were initially spread abroad by Rockefeller’s fleet of kerosene tankers. At the same time, Standard Oil was also securing a tight hold on the U.S. oil market. At the beginning of the twentieth century, it already controlled 87 percent of produc- tion, 82 percent of refining, and 85 percent of all pe- troleum marketing operations in the United States. In short order, however, a brace of developments turned boththe U.S. oil market and the petroleum in - dustry into a competitive, global operation. The ap - Global Resources Oil industry • 875 plication of the Sherman Antitrust Act (1890) and subsequent breakup of Standard Oil into its regional components in 1911 forced some of its newly inde- pendent, “oil-short” units (most notably Standard Oil of New York, laterMobilOil)to look abroad for theoil that its gas stations had previously acquired from other parts of the Standard Oil trust. At approxi- mately the same time, the conversion of navy ships to oil prompted Britain and the United States to urge their nascent oil companies to explore abroad for se- cure sources of oil to service their fleets in remote parts of the world. Soon the ancestors of British Petro- leum and Standard Oil of New Jersey (originally Jer- sey Oil and later Exxon in the United States and Esso in Canada), Rockefeller’s core unit, were competing with one another for the status of the world’s largest petroleum corporation. That competition would en- dure throughout the twentieth century. World War I introduced aircraft, tanks, and ambu- lances to the battlefield, hence further underscoring the relationship between national security and a healthy oil industry. Taking advantage of that fact, by the time that Henry Ford introduced the assembly- line technique for making automobiles an affordable part of the average American’s life, the United States oil industry had already used the war to turn the government in Washington from a trust-busting foe of big oil into one of its biggest supporters. Except for a few minor disruptions, that relationship lasted throughout the twentieth century, manifested in fa- vorable tax laws, support of oil company efforts to stabilize the markets, and—following the rise of the Organization of Petroleum Exporting Countries (OPEC)—a willingness to allow the majoroilcorpora- tions to undertake mergers akin to those that the Sherman Act had been enacted to prevent. However, even before the rise of OPEC and those mergers, U.S. petroleum corporations had remained major players in the U.S. and global economies. On the eve of the 1973 oil crisis, the American petroleum industry was generating 30 percent of all domestic investment and 40 percent of all American investment in the develop- ing world. The benefits that the U.S. government offered to its smaller oil companies to go abroad and find new sources ofoilto meet the growingdemandforoil after World War II ultimately undermined the cartel of pri- vate oil companies that had stabilized the interna - tional price of oil for two generations. Known as the “Seven Sisters,” this cartel—composed of Exxon, Mobil, SoCal (Standard Oil of California, later Chev - ron), British Petroleum, Royal Dutch Shell, Texaco, and Gulf)—accounted for 90 percent of all global production outside the United States and Russia, 80 percent of all refining operations, and 70 percent of all marketing operations in the early post-World War II years. Oil-producing states either sold their oil to these companies at the proffered price or did not sell their oil at all. Encouraged by government incentives, in the af- termath of World War II, several smaller U.S. oil com- panies began to explore for oil abroad. More joined the pack when one of the first, Getty Oil, struck it rich by finding oil in Kuwait. Unlike the Sisters, these indi- vidual companies had little bargaining power. Grad- ually they cut into the share of the market controlled by the Sisters (whose control over production outside the United States and the Soviet Union dropped to 70 percent by 1970). More important, their individual operations were usually in one country only, and they either bought their oil from that state on its terms or did not acquire foreign oil at all. As the international oil market grew ever tighter during the 1968-1973 era of Western economic expansion, their host gov- ernments demanded—and received from these com- panies—much better financial payoffs than those of- fered by the Sisters to their producing states. Given the increasingly tight energy market, the Sisters had to extend the same deals to their host governments. Consequently, even before the October, 1973, Yom Kippur War led to the Arab oil embargo and OPEC’s rise to prominence, the Seven Sisters’ hold on the global industry was already eroding rapidly. OPEC and the Global Economy The 1973Araboilembargooncountriesfriendly to Is- rael created panic in the marketplace, as Western states bid against one another for oil that, in some in- stances, they did not have the storage facilities to ac- commodate. The price of oil on the spot market jumped from under three dollars per barrel (the Sis- ters’ last posted price on the eve of the Yom Kippur War) to the twenty-dollar-per-barrel range. In turn, this hysteria allowed OPEC to buy out the Seven Sis- ters and other Western oil companies and establish it- self as the new international cartel in charge of setting the price of oil. Subsequently, both the fortunes ofthe international petroleum industry and that of the in - ternational economy have fluctuated in large part with OPEC’s fortunes and its ability to keep the price 876 • Oil industry Global Resources of oil stable and in a price range affordable enough to allow for overall economic growth and the economic development of third world countries. In general, OPEC’s record has been spotty. The OPEC-endorsed price hikes in the 1970’s—to twelve dollars per barrel in 1973 and to more than thirty dollars per barrel in 1979 (following the fall of the shah of Iran and resultant drop in the availability of Iranian oil in the market)—led to a prolonged recession in the oil- importing, economically advanced Western world throughout much of the 1980’s, which depressed the price of OPEC oil significantly. As a result, oil was relatively cheap in the 1990’s, which not only led to a renewed expansion of the global economy but also enabled both India and China to mount significant development plans fueled by low-cost, imported pe- troleum. With the tightening ofthemarketatthe turn of the twenty-first century and the uncertain market conditions during the first decade thereof, OPEC again allowed the price of oil to soar to recession- inducing levels, slowing the base of globalization and, in many instances, encouraging countries to adopt protectionist policies antithetical to the ideals of a globalized economy. Meanwhile, partly in order to survive the eras of de - pressed oil prices, the global petroleum industry re- shaped itself, from the dominant Seven Sisters cartel of private oil companies into a complex mixture of private and state oil companies, further complicated by the fact that not all of the state-owned oil compa- nies in the world are the economic creatures of OPEC members. Diversification, Mergers, and the Western Oil Corporations When OPEC took over the international oil market in 1973, the possibility remained of discussing Western oil companies in the terminology that had been used for half a century. There were the “majors,” the Seven Sisters, and then there were the “independents,” that is, the comparatively small producers that included family enterprises like Krumme Oil in Oklahoma to large multinational oil companies like Getty Oil and Atlantic Richfield Company (ARCO). During the high-price-energy era of the 1970’s and early years of the following decade, all these companies reaped large profits, and the majors and many of the larger independents reinvested those profits in the pursuit Global Resources Oil industry • 877 An oil industry employee turns a control valve at the Daura oil refinery in Baghdad, Iraq, in 2009. (Getty Images) . roller-coaster effect on the global economy that has frequently had a pro- found impact on the lives of its citizens and their use of its resources. Thus, the high price of oil at the end of the 1970’s had. ideals of a globalized economy. Meanwhile, partly in order to survive the eras of de - pressed oil prices, the global petroleum industry re- shaped itself, from the dominant Seven Sisters cartel of. era of the 1970’s and early years of the following decade, all these companies reaped large profits, and the majors and many of the larger independents reinvested those profits in the pursuit Global