Research paper
"Petroleum Industry of the United States"

This 6 page, double spaced paper is written in MLA citation style.
The academic level of this assignment is “Undergraduate 3rd-4rd years” in the subject area of “Economics”.

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Research Paper: Petroleum Industry of the United States

Energy complex occupies an important place in the United States economy, providing 4- 5% of its total GDP. In turn, inside of the main Energy structure leading role belongs to the petroleum industry. According to the U.S. Energy Information Administration ( EIA ):

At the expense of oil the United States covers approximately
55% of its fuel and energy needs.
( EIA 2014)

History of the development of this industry spans half a century.

The first oil well was drilled in the U.S. in 1859 at Oil Creek, Pennsylvania, which began the development of oil production in the country. However, even after that for a long time a major fuel supplier to the U.S. market remained the coal industry. The turning point came in the 20- 30s of the XX century due to the rapid rise in the use of internal combustion engines. The World War ll proved advantage of the petroleum over all other fuels. Since then, petroleum has become the mainstay of the fuel and energy sector of the United States. The oil share in the total consumption of primary energy sources in 1970 increased to 45%. Firstly associated with the development of an auto transport and providing strategic needs of the country, petroleum industry have started to largely influence not only the economy, but also the political life of the United States. No coincidence that it has become the largest area of monopolies activity, such as

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"Exxon Mobil" (until 1973 the famous "Standard Oil of New Jersey", founded by J. Rockefeller), "Texaco", "Chevron", "Gulf Oil" and etc.

The greatest interest causing familiarities with the development of the petroleum industry in the second half of XX-XXI centuries . In the era of cheap oil, i.e. until the world energy crisis of the mid-1970s., oil production in the U.S. climbed all the time, but its import was relatively small and was staying within 13% of total consumption. With the onset of the crisis and entry of the world energetic in an era of expensive oil, the situation has changed dramatically.

In 1974, by special decision of the president of the United States a group of American energy experts developed a project called "Independence", which main task was to reduce to a minimum the U.S. dependence on an oil imports and increase domestic production capacity. However, this project could not be fully implemented. In the 1980s production level never rose to the "mark" of the 1970s, not to mention 1972, when it reached its peak - 530 million tons.

Moreover, import not only not diminished, but instead increased sharply. In the 1990s level of oil production in the U.S. has remained fairly stable, while imports grew all the time, by the end of the decade already exceeded ½. In 2002, production dropped to 290 million tons (Office of Fossil Energy ).

Naturally, such a profound change must have some explanation. The USA as the main reasons for the reduction in oil production mainly reported not political, but natural factors – primarily the depletion of oil reserves.

If look in depth at the petroleum reserves of the United States, we will see the following; Oil reserves in the United States are about 2.7 billion tons. The U.S. goes ahead of all other countries In the West, but in the World’s top ten is not included. Moreover, according to the

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estimates of petroleum experts, in the last two-three decades the U.S. natural oil reserves have a tendency to a permanent reduction.

This is largely explained by the conditions of oil-gas accumulation, which are typical for the Unites States. On the one hand, they look very promising. In fact, according to the American Petroleum Institute:

The United States has explored and developed dozens of
large and small oil and gas basins, and the total number of
oil and gas fields reaches approximately about 15 thousand!
The number of operating oil wells in the first half of the
1990s. was 550-600 thousands with the annual drilling of
25-30 thousand new wells!
( API 2013 )

Overall, since 1859 the U.S. has drilled more than 2.5 million oil wells, which is four times more than all other world countries combined. However, on the other hand, such drilling scale itself indicates that in the United States dominate wells with artificial lift of petroleum ( They are approximately 95% of all U.S. oil wells), rather than jetting (5% of total). That's why daily production per well on average is only 1.5-2 tons, which is hundreds of times less than in the fields of, let’s say, the Persian Gulf. In addition, the average depth of oil drilling has already exceeded 1700 meters. Not surprisingly, that cost of petroleum extraction and, accordingly, its net cost are constantly increasing, affecting the work and efficiency of the industry.

It is clear that in such circumstances, the U.S. started to increasingly rely on petroleum imports from developing countries, especially from the Gulf region, the Caribbean basins and

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West Africa. This allows to save own petroleum resources, and create a federal strategic reserve of the most important type of fuel, thereby ensuring the energy security of the country. However, this policy proves to be quite effective in conditions of more or less low oil prices. At the turn of the XX and XXI centuries, when these prices have skyrocketed, this strategy had to be revised again. According to Colorado School of Mines:
That’s how to replace the R .Reagan program, which
rejected government intervention in the country’s energy
sector, and the program of B. Clinton and A. Gore came a
new program of George W. Bush.
( Division of Economic and Business, CSOM 2010 )

This program included not only the continuation of the policy of resource savings and technical modifications of energy industries, but partial reactivation of strategic petroleum and natural gas resources on the territory of the United States, and in particular within USA continental shelf, which already gives 30% of all crude produced oil and 25% of gas. But, it did not help to reduce U.S. dependence on petroleum import. Corresponding shifts have occurred and are occurring in the geography of the U.S. petroleum industry, the main features of which can be viewed in more detail - in the states, and more aggregate - on the main areas.

Petroleum mining is going in about 20 U.S. states, but about half of them usually classified as "other" category because of oil low level. Almost 9/10 of total production coming from only five states: Texas, Alaska, Louisiana, Oklahoma and California. Meanwhile, major oil-producing areas in the United States only three. The first - the largest of them - the area of South-West Center can include oil reservoirs such as Inner West, Permian and Gulf. For a long time mining in this area was carried out only on land. It began in the late XIX century, but the

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real "oil fever" which quickly turned from a rather backward Texas into one of the richest states in the country, was developed already in the 30-ies. XX century. It was associated with the discovery of the East Texas oil field in the eastern part of the state. East Texas oilfield proved to be the largest in the country, and it has retained the leadership until 1960, until was discovered the Prudhoe Bay field in Alaska. Soon were discovered large oil fields in neighboring Louisiana. Land and offshore petroleum field of Southwest Center, together, now provide more than 50% of all U.S. oil production.

Oil and natural gas in the Gulf of Mexico began after the Second World War. In a relatively short time, there were discovered nearly 150 oil and 700 gas fields. According to the petroleum history of the United States:

In the 1970s the shelf area of Texas and Louisiana has
evolved into the world's largest district of offshore oil
and gas production. Here were built many hundreds of
drilling platforms, drilled many thousands of oil and
gas wells and, whereby entire coastal waters acquired
character of a kind of amphibious space.
( Black.B 2013)

In the 1980s petroleum production in the Gulf of Mexico remained at the level of 40 million tons per year, natural gas - 125 billion m3. In 1991 it rose accordingly to 53 million tons and 135 billion m3. However, the prospects of further production growth in the Gulf of Mexico are now associated mainly with the development of fields discovered in its central part, but at depths of up to 1000 meters. In 2006, there was opened a field, which can become the largest in the United States.

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The Southwest Center – main in the U.S. , and the world's largest oil processing area, which concentrates primarily in Houston. Along with this, here originate the longest in the U.S. oil and product pipelines, which linking Texas and Louisiana to New York, Chicago and other cities of the Northeast and Midwest.

As the second major U.S. petroleum region can be picked Southern California. There, oil was discovered right before the World War ll. Its development grew many large monopolies, including "Occidental Petroleum" Armand Hammer. Production conducted on land, including the city of Los Angeles, and on the continental shelf

Third, the youngest of the oil regions of the United States is Alaska.

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