James Hamilton posts on “Peak oil in Pennsylvania” at Econbrowser, drawing from a few historical surveys and presenting this chart from Michael Caplinger, “A contextual overview of crudeoil production in Pennsylvania.”
Caplinger’s report provides a fascinating concise historical survey of oil development in Pennsylvania, with details about discoveries, production technologies, production rates and prices. Having just taught about common pool resources, the tragedy of the commons, and unitization in my Energy Economics class, I was hoping to find some discussion of the property rights structures surrounding resource developments.
Unfortunately, no such discussion.
Most of the early development clearly proceeded under a “rule of capture,” with title to the resource available to whomever acquires it at the surface. The resulting race to produce led to obvious waste – waste which must have been obvious to observers even at the time when little was known about petroleum geology (e.g., cases in which there was so much production that the excess simply spilled down the streets). Since rule of capture prevailed into the 1900s*, the race to produce would have in part responsible for the 1892 peak of production in Pennsylvania. The too-rapid development of a reservoir leaves a lot of the petroleum below ground, which set the stage for Pennsylvania’s great success in secondary recovery in the 1930s and 1940s.
Given the current controversy over fracking in Pennsylvania, it was interesting to note that the technology was first developed in the state. Only, originally wells were “torpedoed” with nitroglycerin to break up underground rock formations and stimulate production. Caplinger tells us, “This technique was patented by E. L. Roberts in 1862, and the first attempt at torpedoing a well occurred in 1866 on the ‘Ladies’ well, near Titusville. It and subsequent successes in the Pennsylvania fields made this a common practice in the industry…” (Note 70, p. 30).
*Don’t quote me on this, I don’t have my reference book in front of me at the moment.