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successful wells. As early as the 1860s, geologists identified the formations which "paid out" oil. In
Pennsylvania, the most important formation was the "third sandstone," at 300-800 ft., and if this did not
produce oil (you hit a "tight" spot), the well was abandoned.
Chance of Success
Please note that if you are drilling in "rank wildcat territory" on the basis of detection of oil signs, your
chance of striking oil is probably on the order of one in thirty. Even with knowledge of favorable geology
(you are probing an anticline), your chance of a strike is only about 10%. (Anderson, 95-6).
It can be argued that if you are exploring a region on the basis of twentieth-century knowledge, that the
chance of success is higher. And I would agree, if your twentieth-century sources specify the location of
the "known" oil field with an accuracy of about one mile.
That isn't likely to be the case, so you need to budget with the expectation that some of your wells will
be dry. If you are drilling in a known oil field, the chance of success is closer to 75% (you could still hit a
region where the reservoir rock is impermeable).
Completion and Production Costs
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Completing a productive well (putting in casing, constructing gathering lines and temporary storage,
dismantling the derrick and rig, setting up the pump, etc.) might add 50% to the cost of drilling it.
Once production begins, costs are minimal if you sell the oil "at the wellhead" (i.e., the customer pays for
transportation). If the well has to be pumped, there will be lifting costs; figure five to twenty cents a
barrel.
Your ability to recover your exploration and drilling costs is going to depend, in part, on the productivity
of the well. The average well produces perhaps ten barrels a day. (Ball, 137).
Storage tanks give you the ability to wait out a temporary drop in crude oil prices.
The Price of Oil
The impetus for the drilling of the 1859 Drake Oil Well in Titusville, Pennsylvania was a report by
Professor Benjamin Silliman, Jr., that "rock oil" could be refined, in place of whale oil, into kerosene for
use as a lamp fuel. The Drake petroleum sold for about twenty dollars a barrel. A barrel, by the way,
was later standardized as 42 gallons.
Thousands of miles away, Galician villagers hand-mined oil seepages, and sold their oil on the local
market for a price of $140 a ton (likewise about twenty dollars a barrel) (HBS 3-4). Seepage oil was
sold in Europe at least as early as 1480 (HBS 2), and I suspect that both supply and demand were
constant until oil from drilled wells became readily available.
In America, as both demand and supply increased, the price stabilized to some degree. Overall, from
1880 to 1970, the average crude oil price was usually close to one dollar a barrel. (The "real" crude oil
price, in 1991 dollars, was five to fifteen dollars a barrel during the same period.)
It is difficult to predict what oil prices will be like in the 1632 universe. Unlike America in 1869, the USE
has plenty of uses for petroleum. However, it is also able to exploit nearby natural gas and coal reserves,
and petroleum will have to be priced competitively with these alternative fuel and organic chemical
sources.
The Pipeline Business
The first successfully completed oil pipeline, two inches in diameter, built in 1865, carried 1,900 barrels
a day a distance of six miles, and charged customers one dollar a barrel. I estimate that the cost of the
pipeline was about $15,000-25,000 (based on Giddens, 142 et seq.). A turn of the century Gulf Coast
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six inch pipeline, delivering 7,000 barrels a day to the refinery, cost $5,400 to 6,500 per mile.
(Williamson II, 87-8).
The Refinery Business
If the oil field is far away from the USE, you will probably want to build a refinery nearby. You then
export the refined products rather than the crude oil; this is more cost-effective. The cost of building a
refinery depends very much on its processing capacity and sophistication. At the low end, in 1860, a
simple still, with a five barrel a day capacity, cost $200. This was probably good only for producing
kerosene. If you want multiple fractions, then you are going to be spending more money for the same
refining capacity.
Whether it is desirable to refine the crude yourself depends on the profit margin. In early 1863, for
example, crude oil was selling for two dollars a barrel (less then five cents a gallon), while refined oil
brought in forty cents per gallon. Five gallons of crude oil made three gallons of refined product, and the
refining cost five cents a gallon. On the other hand, in 1869, the price of crude was seven dollars a barrel
(sixteen cents a gallon), the price of refined was 34 cents a gallon, while the refining cost was three cents
a gallon. (Abels 50).
USE Oil and Gas Law
Oil is subject to the rule of capture, that is, it belongs to whoever extracts it from the ground, not to the
owner of the land where it lay originally. If a field had mixed ownership, that encouraged rival oil
companies to drill wells close together and pump the oil out as fast as they could.
In the 1930s and thereafter, legislation in the "old" United States curbed waste in oil (and gas)
production, and, not incidentally, put a floor under oil prices. The conservation methods included
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