oil boom and oil bust -- 10/22/20
In today's encore selection -- from The Prize by Daniel Yergin. With the price of oil dropping again, it is worth recalling the beginning of the oil era. It was in 1859 in the obscure town of Titusville in northwestern Pennsylvania, when 'Colonel' E.L. Drake and 'Uncle Billy' Smith successfully drilled the first oil well and ushered in the titanic booms and busts of the oil era. In one nearby town just six years later, a parcel of land worth $2 million was soon thereafter worth only $4.37:
"Nothing revealed the feverish pitch of [oil] speculation better than the strange story of Pithole, on Pithole Creek, some fifteen miles from Titusville. A first well was struck in the dense forest land there in January 1865; by June there were four flowing wells, producing two thousand barrels a day -- one third of the total output of the Oil Regions -- and people fought their way in on the roads already clogged with the barrel-laden wagons. 'The whole place,' said one visitor, 'smells like a corps of soldiers when they have the diarrhea.' The land speculation seemed to know no bounds. One farm that had been virtually worthless a few months earlier was sold for $1.3 million in July 1865, and then resold for two million dollars in September.
|Stereo card depicting the United States, or Frazier, Well
"In that same month, production around Pithole Creek reached six thousand barrels per day -- two-thirds of all the production in the Oil Regions. And, by that same September, what had once been an unidentifiable spot in the wilderness had become a town of fifteen thousand people. The New York Herald reported that the principal businesses of Pithole were 'liquor and leases'; and The Nation added, 'It is safe to assert that there is more vile liquor drunk in this town than in any of its size in the world.' Yet Pithole was already on the road to respectability, with two banks, two telegraph offices, a newspaper, a waterworks, a fire company scores of boarding houses and businesses, more than fifty hotels -- at least three of which were up to elegant metropolitan standards -- and a post office that handled more than five thousand letters a day.
|Edwin Drake's oil well in Titusville.
"But then, a couple of months later, the oil production abruptly gave out -- just as quickly as it had begun. To the people of Pithole, this was a calamity, like a biblical plague, and by January 1866, only a year from the first discovery, thousands had fled the town for new hopes and opportunities. The town that had sprung up overnight from the wilderness was totally deserted. Fires ravaged the buildings, and the wooden skeletons that were left were torn down to be used for building again elsewhere or burned as kindling by the farmers in the surrounding hills. Pithole returned to silence and to the wilderness. A parcel of land in Pithole that sold for $2 million in 1865 was auctioned for $4.37 in 1878."