27 August 1859: The birth of America’s oil industry

Until about 150 years ago, one of the main sources of oil for purposes such as lighting, was whales. People had been collecting “rock oil” from seeps, where it oozes to the surface, for centuries. Unfortunately for the whales, however, scooping it up from the ground wasn't commercially viable.

In efforts to get at the stuff in more commercial quantities, oil wells had been sunk in Poland and Canada. But these were hand-dug affairs. In 1848, a well was drilled in Azerbaijan by Russian engineer FN Semyenov, considered by many to be the first modern-drilled oil well. But it would be Edwin Drake that would have the biggest and most immediate effect on the industry in the USA.

With the backing of the Seneca Oil Company, Drake used new techniques (which he neglected to patent) using an iron pipe to drill a comparatively deep well through the bedrock in Titusville, Pennsylvania. And on this day in 1859, at a depth of 69 feet, he struck oil. His pioneering well produced 25 barrels of oil a day.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

It wasn't all plain sailing for Drake, however. He had spent five months perfecting his drilling method. And soon after production began, his chief driller sparked disaster when he went to inspect the well one dim day, using an oil lamp to light his way. The oil inevitably ignited, and burned down the well buildings and Drake's house.

But Drake's well proved that it was economically feasible to extract oil from the ground, and his success sparked a boom. Imitators sprung up all around the immediate area. And within 13 years, they were producing some 16,000 barrels a day.

Many people got humongously rich. But not Drake; he ended up broke. He only drilled three wells in total, and lost an awful lot of money speculating in oil. But the grateful people of Titusville granted him a stipend, and in 1876, the state of Pennsylvania awarded him a pension.