A brief history of oil: How fuel became a potent geopolitical tool

Graphics: TBS

Long before oil powered engines or fuelled geopolitics, energy itself determined how humans lived. In the agrarian age, survival depended on burning wood, for warmth, for cooking, for life itself. For centuries, wood remained the world's dominant fuel.

That began to change in the early 18th century, when the steam engine marked a turning point. Coal soon replaced wood, not by chance but by efficiency: a half-tonne of coal produced four times as much energy as the same amount of wood, and it was cheaper and easier to distribute. Coal powered locomotives, ships, and machines, shrinking distances and transforming productivity.

Yet, even before coal's dominance, oil had seeped into human history. As early as 3,000 BC, crude oil bubbling to the surface was used by ancient Middle Eastern civilisations. Babylonians waterproofed boats and built with it; Egyptians used it in mummification. The Chinese discovered oil in 600 BC, transporting it through bamboo pipelines. Still, its true potential remained unrealised.

That changed in the mid-19th century. The modern oil industry was born on 27 August 1859, when the first successful oil well was drilled in Titusville, Pennsylvania. Edwin Drake, working with the Pennsylvania Rock Oil Company, used a pioneering drilling method that would reshape energy history. Within a decade, the industry exploded. By the 1870s, kerosene, refined from crude, had replaced whale oil as the dominant fuel for lighting, effectively ending the whale oil era.

The rise of oil accelerated with innovation. The invention of the electric light bulb and the automobile transformed demand. In 1885, Karl Benz's motor car introduced a new need for gasoline, once a discarded by-product of kerosene production. By 1908, Henry Ford's Model T made cars affordable, and demand surged. By 1919, gasoline sales had overtaken kerosene. Oil was no longer just a lighting solution, it was the engine of modern mobility.

Industrial power soon turned into geopolitical power. The 1901 Spindletop discovery in Texas triggered a boom, with more than 1,500 companies formed within a year. By 1909, the US was producing more oil than the rest of the world combined. Meanwhile, Western companies expanded into the Middle East, securing extraction rights 'for a relative pittance' in regions that would later supply more than 60% of global oil.

Graphics: TBS

War cemented oil's strategic importance. During World War I, oil-powered tanks, aircraft, and naval fleets. Ships converted from coal to oil for speed and endurance. Access to oil became a matter of national security. By World War II, its significance had only deepened. 

In 1944, as global leaders carved up influence, US President Franklin D Roosevelt summarised the stakes: "Persian oil… is yours. We share the oil of Iraq and Kuwait. As for Saudi Arabian oil, it's ours." The people of those regions, notably, were absent from the negotiation.

The post-war period saw a shift in power. In 1960, Venezuela, Saudi Arabia, Kuwait, Iraq and Iran formed the Organization of the Petroleum Exporting Countries (Opec) to control production and pricing. Though initially weak, Opec's influence surged in the 1970s. The 1973 oil embargo, triggered by geopolitical conflict, caused prices to nearly quadruple, plunging economies into crisis. Oil had become not just fuel, but leverage.

Control over oil has continually shifted. In the late 19th century, companies like Standard Oil dominated. By 1879, it controlled 90%  of US refining capacity. Later, the 'Seven Sisters'—including Exxon, Shell, BP, Mobil, Texaco, Gulf and Chevron—formed a cartel that shaped global supply. But by the late 20th century, power had moved again. National Oil Companies (NOCs) began asserting control. In 1972, international oil companies accounted for 93% of production; today, NOCs control around 73%.

Meanwhile, oil's geography expanded. The 1938 discovery in Saudi Arabia revealed vast reserves. Today, Venezuela holds the largest, with 300 billion barrels, 18.2% of global reserves, followed by Saudi Arabia and Canada. Across the world, reserves stretch from the North Sea to Brazil's deep waters.

Technological advancement has once again reshaped the industry. Hydraulic fracturing, developed commercially in 1997, unlocked new reserves by injecting water, chemicals and sand into shale formations. Combined with horizontal drilling, it triggered a North American energy boom. US natural gas prices fell by 85% between 2008 and 2012, dropping from more than $13 to under $2 per mmBtu. The US shifted from importer to exporter, challenging Opec's dominance.

The 1901 Spindletop discovery in Texas triggered a boom, with more than 1,500 companies formed within a year. By 1909, the US was producing more oil than the rest of the world combined. Meanwhile, Western companies expanded into the Middle East, securing extraction rights 'for a relative pittance' in regions that would later supply more than 60% of global oil.

But these advances come with costs. Fracking can require up to five million gallons of water per well, raising environmental concerns. At the same time, low gas prices have encouraged a shift away from coal and reshaped global energy markets.

Oil prices themselves tell a volatile story. The early years resembled a gold rush, with prices rising from near zero to more than $7 a barrel before crashing by 1880. A long period of stability followed under monopolistic control. Since the 1970s, however, volatility has defined the market, with prices peaking at $147 per barrel in 2008 before collapsing during the global financial crisis. In 2015, another glut, driven partly by US production, caused prices to fall sharply again.

In the end, the story of oil is not just about fuel. It is about power — who controls it, who profits from it, and who pays the price for it. For more than a century, oil has powered economies, transformed warfare, enriched nations, and shaped the global order in ways few other resources ever have.

Now, as the world stands at the crossroads of energy transition and climate crisis, oil remains both indispensable and deeply contested. Its grip may weaken in the decades ahead, but its legacy will endure. Because to understand the rise of the modern world, one must understand oil — the resource that did not merely move machines, but moved history itself.