SPEAKER_02: Amazing, fascinating stories of inventions, ideas and innovations. Yes, this is the podcast about the things that have helped to shape our lives. Podcasts from the BBC World Service are supported by advertising.
SPEAKER_01: 50 things that made the modern economy with Tim Harford.
SPEAKER_00: The message had been sent. Edwin Drake's last financial backer had finally lost patience. Pay off your debts. Give up and come home.
SPEAKER_00: Drake had been hoping to find rock oil, a brownish crude that sometimes bubbled near the surface of western Pennsylvania. He planned to refine it into kerosene for lamps, a substitute for the increasingly expensive whale oil. There would also be less useful byproducts, such as gasoline, but if he couldn't find a buyer for that, he could always pour it away. The message had been sent that Drake had not yet received it when his drill bit punctured an underground reservoir full of crude oil under pressure. From 69 feet beneath the surface, the oil began to rise. It was the 27th of August, 1859. The whales had been saved. And the world was about to change. Just a few miles south and a few years later came a hint of what lay in store. In 1864, when oil was struck at Pit Hole, Pennsylvania, there were not 50 inhabitants within half a dozen miles, according to the New York Times. A year later, Pit Hole had at least 10,000 inhabitants, 50 hotels, one of the country's busiest post offices, two telegraph stations, and dozens of brothels. A few men made fortunes, but a real economy is complex and self-sustaining. Pit Hole was neither. Within another year, it was gone. Pit Hole's oil boom didn't last, but our thirst for the fuel grew and grew. The modern economy is drenched in oil. It's the source of more than a third of the world's energy. That's more than coal. It's also more than twice as much as nuclear, hydroelectric, and renewable energy sources combined. Oil and gas together provide a quarter of our electricity and the raw material for most plastics. Then there's transport. Edwin Drake may have questioned who would buy gasoline, but the internal combustion engine was about to give him an answer. From cars to trucks, cargo ships to jet planes, oil-derived fuel still moves us and stuff around. No wonder the price of oil is arguably the most important single price in the world. In 1973, when some Arab states declared an embargo on sales to several rich nations, prices surged from $3 to $12 a barrel in just six months. A global recession followed, and US recessions followed price spikes in 1978, 1990, and 2001. Some economists even believe that record-high oil prices played an important role in the global recession of 2008, which is conventionally blamed on the banking crisis alone. As oil goes, so goes the economy. So why did we become so excruciatingly dependent? Daniel Jurgen's magisterial history of oil, The Prize, begins with a dilemma for Winston Churchill. Made head of the Royal Navy in 1911, Churchill had to decide whether the British Empire would meet the challenge of an expansionist Germany with new battleships powered by safe, secure Welsh coal, or by oil from faraway Persia, modern-day Iran. Why would anyone rely on such an insecure source? Because oil-fired battleships would accelerate faster, sustain a higher speed, required fewer men to deal with the fuel, and would have more capacity for guns and ammunition. Oil was simply a better fuel than coal. Churchill's fateful plunge in April 1912 reflected the same logic that has governed our dependence on oil and shaped global politics ever since. After Churchill's decision, the British Treasury bought a majority stake in the Anglo-Persian Oil Company, the ancestor of BP. In 1951, the government of Iran nationalised it. Our company, protested the British. Our oil, responded the Iranians. The argument would be repeated around the world over the subsequent decades. Some countries did well. Saudi Arabia is one of the richest on the planet. Its state-owned oil company, Aramco, is worth more than Apple or Google or Amazon. Still, nobody would mistake Saudi Arabia for a complex, sophisticated economy such as that of Japan or Germany. It's more like Pit Hole on a grander scale. Elsewhere from Iraq to Iran, Venezuela to Nigeria, few oil-rich countries have prospered from the discovery. Economists call it the curse of oil. Juan Pablo Perez Alfonso, Venezuela's oil minister in the early 1960s, had a very vivid description. It is the devil's excrement, he declared in 1975. We are drowning in the devil's excrement. Why is it a problem to have lots of oil? When you export it, that pushes up the value of your currency, which makes everything other than oil prohibitively expensive to produce at home. That means it's hard to develop manufacturing, and it's hard to build a complex service industry. Meanwhile, politicians often focus on monopolising the oil for themselves and their allies. Dictatorships are not uncommon. There's money, for some, but such economies are thin and brittle. That's one reason we might hope for something to replace oil. Climate change, obviously, is another. But oil has so far stubbornly resisted giving way to batteries. This is because machines that move around need to carry their own source of power with them. The lighter, the better. A kilogram of petrol stores as much energy as 60 kilograms of batteries, and has the convenient property of disappearing after use. Empty batteries, alas, are just as heavy as full ones. Electric cars are finally starting to break through. Electric jumbo jets are a tougher challenge. There was a time when it seemed as though oil might simply start to run out. Peak oil was the phrase, pushing prices ever higher and giving us the impetus to move to a clean, renewable economy. Now, it looks as though we'll have to be more determined if that's really what we want. Oil is being discovered far more quickly than it's being consumed, partly thanks to the rapid growth of hydraulic fracturing, or fracking, in which water, sand and chemicals are pumped underground under high pressure to release oil and gas. Fracking is more like manufacturing than traditional exploration and production. It's standardised, enjoying rapid productivity gains, and the process starts and stops depending on whether the price is right. The Permian Basin, which is home of the US fracking industry, already produces more oil than any OPEC country bar Saudi Arabia and Iraq. We're still drowning in the devil's excrement, it seems, and it's only going to get deeper. Daniel Jurgens' The Prize is the definitive history of oil's
SPEAKER_01: first 120 years. For a full list of our sources, please see BBCWorldService.com slash 50things.
