My father was visiting last week from Texas, and he (jokingly) claimed responsibility for the rapidly falling gas prices. “I stay another week and you’ll be under two bucks a gallon,” he said.
Texas has as long and deep a history with oil as Minnesota has with iron ore. The modern oil industry can be traced back to the Lucas Gusher which began spewing oil more than 150 feet into the air on January 10, 1901. Captain Anthony F. Lucas, the head of operations at Spindletop, had come to Texas with years of oil drilling experience in Pennsylvania. Lucas’s initial thought that the well might produce five barrels per day proved a gross understatement. By the end of January, Spindletop was producing more than 80,000 thousand barrels per day, more oil than had been produced per day by all the oil wells in the United States of America combined.
Patillo Higgins, a one-armed mechanic (history is full of great characters), was the one man who believed that oil lay beneath the vast salt dome at Spindletop, and he spent more than a decade trying to get to it. Newspapers and other oil men thought he was a fool, but like Lon Merritt, Patillo proved them wrong.
In the more than one hundred years since Spindletop, wildcatters like Higgins have continued to search for oil in the vast open plains of Texas. So much of the land is open and unexplored geologically, many believe there is so much more oil to be found there.
When the price of oil is high, as it has been for the last several years, individuals can make a hefty profit by discovering a small bit of oil. At eighty dollars per barrel, even a modest well that produces a mere five barrels per day can gross a wildcat oilman four-hundred dollars per day, $12,000 in a month. Enough to recoup the expense of drilling a well, and make a small profit.
But when the price of oil drops, as it has done in the last several months, the ability of small outfits to turn a profit from small wells becomes more problematic. At less than fifty bucks a barrel, a wildcatter won’t make enough to recoup the cost of running the well.
So what happens?
It’s the same thing that happened in Minnesota in the early 1900s. When the price of the commodity falls, the ability of an individual or small company to make a profit on the commodity–be it oil or iron ore–drops. That’s when the big companies step in. Right now in Texas the large oil companies are buying up the small wells for a song so that when the cost of oil does rise again, as it surely will, the big players will have a larger stake.
In Minnesota around the turn of the century, the price of iron ore dropped, and with the drop went the ability for small mining companies to turn a profit on the expensive task of mining iron ore. The Lake Superior Consolidated Mining Company, owned by John D. Rockefeller and acquired from the Merritt family, began buying up smaller mines around the region. On February 23, 1901, less than a month after the gusher at Spindletop created the modern oil industry, Rockefeller’s mines, along with the Duluth, Missabe and Northern Railroad, were added to the amalgamation of the Carnegie-Oliver-Morgan steel holdings to create the largest corporation in the world: United States Steel Corporation.
And the days of wildcatting on Minnesota’s Mesabi Range came to an end.
What does it all mean? Are lower oil prices good or bad? That really is a question for the experts. I’m just a writer who likes to find connections in history.
If you want to read more about the early days of iron mining in Minnesota, pick up a copy of Mesabi Pioneers, my entertaining and highly readable account of the early days of iron mining on the Mesabi range. Read more about Spindletop and Patillo Higgins.