Texas oil boom

The Texas oil boom, sometimes called the gusher age, was a period of dramatic change and economic growth in the U.S. state of Texas during the early 20th century that began with the discovery of a large petroleum reserve near Beaumont, Texas. The find was unprecedented in its size (worldwide) and ushered in an age of rapid regional development and industrialization that has few parallels in U.S. history. Texas quickly became one of the leading oil-producing states in the U.S., along with Oklahoma and California; soon the nation overtook the Russian Empire as the top producer of petroleum. By 1940 Texas had come to dominate U.S. production. Some historians even define the beginning of the world's Oil Age as the beginning of this era in Texas.
The major petroleum strikes that began the rapid growth in petroleum exploration and speculation occurred in Southeast Texas, but soon reserves were found across Texas and wells were constructed in North Texas, East Texas, and the Permian Basin in West Texas. Although limited reserves of oil had been struck during the 19th century, the strike at Spindletop near Beaumont in 1901 gained national attention, spurring exploration and development that continued through the 1920s and beyond. Spindletop and the Joiner strike in East Texas, at the outset of the Great Depression, were the key strikes that launched this era of change in the state.
This period had a transformative effect on Texas. At the turn of the century, the state was predominantly rural with no large cities. By the end of World War II, the state was heavily industrialized, and the populations of Texas cities had broken into the top 20 nationally. The city of Houston was among the greatest beneficiaries of the boom, and the Houston area became home to the largest concentration of refineries and petrochemical plants in the world. The city grew from a small commercial center in 1900 to one of the largest cities in the United States during the decades following the era. This period, however, changed all of Texas' commercial centers (and developed the Beaumont/Port Arthur area, where the boom began).
H. Roy Cullen, H. L. Hunt, Sid W. Richardson, and Clint Murchison were the four most influential businessmen during this era. These men became among the wealthiest and most politically powerful in the state and the nation.
Timeframe.
Several events in the 19th century have been regarded as a beginning of oil-related growth in Texas, one of the earliest being the opening of the Corsicana oil field in 1894. Nevertheless, most historians consider the Spindletop strike of 1901, at the time the world's most productive petroleum well ever found, to be the beginning point. This single discovery began a rapid pattern of change in Texas and brought worldwide attention to the state.
By the 1940s, the Texas Railroad Commission, which had been given regulatory control of the Texas oil industry, managed to stabilize American oil production and eliminate most of the wild price swings that were common during the earlier years of the boom. Many small towns, such as Wortham, which had become boomtowns during the 1920s saw their booms end in the late 1920s and early 1930s as their local economies collapsed, resulting from their dependence on relatively limited petroleum reservoirs. As production peaked in some of these smaller fields and the Great Depression lowered demand, investors fled. In the major refining and manufacturing centers such as Beaumont, Houston, and Dallas, the boom continued to varying degrees until the end of World War II. By the end of the war, the economies of the major urban areas of the state had matured. Though Texas continued to prosper and grow, the extreme growth patterns and dramatic socioeconomic changes of the earlier years largely subsided as the cities settled into more sustainable patterns of growth. Localized booms in West Texas and other areas, however, continued to transform some small communities during the post-war period.
Background.
Post-Civil War Texas.
Following the American Civil War, Texas's economy began to develop rapidly centered heavily on cattle ranching and cotton farming, and later lumber. Galveston became the world's top cotton shipping port and Texas' largest commercial center. By 1890, however, Dallas had exceeded Galveston's population, and in the early 1900s the Port of Houston began to challenge Galveston's dominance.
In 1900 a massive hurricane struck Galveston, destroying much of the city. That and another storm in 1915 shifted much of the focus from investors away from Galveston and toward nearby Houston, which was seen as a safer location for commercial operations. Because of these events, the coming oil boom became heavily centered on the city of Houston both as a port and a commercial center.
Though Texas had notable urban areas at the turn of the century, it was still a predominantly rural state. Texas was largely "open range", meaning that livestock could freely roam throughout the state.
Early history of petroleum.
In the 1850s, the process to distill kerosene from petroleum was invented by Abraham Gesner. The demand for the petroleum as a fuel for lighting around the world quickly grew. Petroleum exploration developed in many parts of the world with the Russian Empire, particularly the Branobel company in Azerbaijan, taking the lead in production by the end of the 19th century.
In 1859, Edwin Drake of Pennsylvania invented a drilling process to extract oil from deep within the earth. Drake's invention is credited with giving birth to the oil industry in the U.S. The first oil refiner in the United States opened in 1861 in Western Pennsylvania, during the Pennsylvanian oil rush. Standard Oil, which had been founded by John D. Rockefeller in Ohio, became a multi-state trust and came to dominate the young petroleum industry in the U.S.
Texans knew of the oil that lay beneath the ground in the state for decades, but this was often seen more as a problem than a benefit because it hindered the digging of water wells. Rancher William Thomas Waggoner (1852–1934), who later became an influential oil businessman in Fort Worth, struck oil while drilling for water in 1902. He was quoted as having said, "I wanted water, and they got me oil. I tell you I was mad, mad clean through. We needed water for ourselves and for our cattle to drink."
Despite the earlier negative associations with oil among many ranchers and farmers, demand for kerosene and other petroleum derivatives drove oil prospecting in Texas after the American Civil War at known oil-producing springs and accidental finds while drilling for water. One of the first significant wells in Texas was developed near the town of Oil Springs, near Nacogdoches. The site began production in 1866. The first oilfield in Texas with a substantial economic impact was developed in 1894 near Corsicana. In 1898, the field built the state's first modern refinery. The success of the Corsicana field and increasing demand for oil worldwide led to more exploration around the state.
Mechanization.
In 1879, Karl Benz was granted the first patent on a reliable gasoline-powered engine in Germany. In 1885, he produced the first true gasoline automobile, the Benz Patent Motorwagen. The new invention was quickly refined and gained popularity in Germany and France, and interest grew in the United Kingdom and the United States. In 1902, Ransom Olds created the production line concept for mass-producing lower-cost automobiles. Henry Ford soon refined the concept so that by 1914, middle-class laborers could afford automobiles built by Ford Motor Company.
Automobile production exploded in the U.S. and in other nations during the 1920s. This, and the increasing use of petroleum derivatives to power factories and industrial equipment, substantially increased worldwide demand for oil.
Growth of "Big Oil".
Spindletop.
After years of failed attempts to extract oil from the salt domes near Beaumont, a small enterprise known as the Gladys City Oil, Gas, and Manufacturing Company was joined in 1899 by Croatian/Austrian mechanical engineer Anthony F. Lucas, an expert in salt domes. Lucas joined the company in response to the numerous ads the company's founder Pattillo Higgins placed in industrial magazines and trade journals. Lucas and his colleagues struggled for two years to find oil at a location known as Spindletop Hill before making a strike in 1901. The new well produced approximately 100,000 barrels of oil per day, an unprecedented level of production at the time. The 1902 total annual production at Spindletop exceeded 17 million barrels. The state's total production in 1900 had been only 836,000 barrels. The overabundance of supply led oil prices in the U.S. to drop to a record low of 3 cents per barrel, less than the price of water in some areas.
Beaumont almost instantly became a boomtown with investors from around the state and the nation participating in land speculation. Investment in Texas speculation in 1901 reached approximately $235 million US (approximately $ in present-day terms). The level of oil speculation in Pennsylvania and other areas of the United States was quickly surpassed by the speculation in Texas. The Lucas gusher itself was short-lived; production fell to 10,000 barrels per day by 1904. The strike, however, was only the beginning of a much larger trend.
Discoveries spread.
Exploration of salt domes across the plains of the Texas Gulf Coast took off with major oil fields opening at Sour Lake in 1902, Batson in 1903, Humble in 1905, and Goose Creek (modern Baytown) in 1908. Pipelines and refineries were built throughout much of Southeast Texas, leading to substantial industrialization, particularly around Houston and the Galveston Bay. The first offshore oilfield in the state opened in 1917 at Black Duck Bay on the Goose Creek field, although serious offshore exploration did not begin until the 1930s.
Initially, oil production was conducted by many small producers. The early exploration and production frenzy produced an unstable supply of oil, which often resulted in overproduction. In the early years, a few major finds led to easy availability and major drops in prices, but were followed by limited exploration and a sudden spike in prices as production dwindled. The situation led exploration to spread into the neighboring states of Oklahoma, Louisiana, and Arkansas, who competed with Texas for dominance in oil production. The Glenn Pool strike near Tulsa, Oklahoma in 1905 established Tulsa as the leading U.S. oil production center until the 1930s. Though Texas soon lagged behind Oklahoma and California, it was still a major producer.
During the late 1910s and 1920s, oil exploration and production continued to expand and stabilize. Oil production became established in North Texas, Central Texas, the Panhandle, and the Permian Basin in western Texas. The finds in North Texas, beginning with the 1917 strike in Ranger west of Dallas-Fort Worth, were particularly significant, bringing substantial industrialization to the area. Texas soon became dominant as the nation's leading oil producer. By 1940, Texas production was twice that of California, the next largest U.S. producer.
In 1930, Columbus Marion Joiner, a self-educated prospector, discovered the East Texas Oil Field, the largest oil discovery that had ever been made. Because East Texas had not been significantly explored for oil before then, numerous independent prospectors, known as "wildcatters", were able to purchase tracts of land to exploit the new field. This new oil field helped to revive Dallas's economy during the Great Depression, but sharply decreased interest in West Texas as the new supply led to another major drop in oil prices. The uncontrolled production in the eastern field destabilized the state's oil industry, which had been trying to control production levels to stabilize prices. Overproduction in East Texas was so great that then-governor Ross Sterling attempted to shut down many of the wells. During one of the forced closures, he ordered the Texas National Guard to enforce the shutdown. These efforts at controlling production, intended to protect both the independent operators and the major producers, were largely unsuccessful at first and led to widespread oil smuggling. In the later 1930s, the federal government intervened and brought production to sustainable levels, leading to a stabilization of price fluctuation. The income provided by the stabilization allowed less populated West Texas and the Panhandle to be more fully explored and exploited.
Emergence of an industry.
The first refining operations at Corsicana were built by Joseph S. Cullinan, a former manager for Standard Oil in Pennsylvania. His company, which was later absorbed by Magnolia Petroleum Company and then acquired by Standard Oil of New York, built the first modern refinery west of the Mississippi River. Following the strike at Spindletop, Cullinan partnered with Arnold Schlaet to form the Texas Fuel Company in Beaumont with funding from an investment group run by former Texas governor James S. Hogg and other investors. In 1905, as the new company rapidly expanded its operations, it moved its corporate headquarters to Houston. The company's strength in the oil industry established Houston as the center of the industry in Texas. The company was later absorbed into the Texas Company and then renamed Texaco.
The interests in the Lucas operation at Spindletop were purchased by J. M. Guffey and his associates, creating the Guffey Petroleum Company and Gulf Refining Company of Texas. These companies later became Gulf Oil Corporation, which decades later was bought by California's Chevron. Guffey's company became the largest oil producer in the state during the boom period.
Standard Oil initially chose not to become directly involved in oil production in Texas, and instead formed Security Oil Company as a refining operation utilizing Guffey-Gulf and Texas Company as suppliers. Following state lawsuits related to anti-trust statutes, Security Oil was reorganized into Magnolia Petroleum Company in 1911. That same year, the Humble Oil Company (today Exxon Corporation) was formed by Ross Sterling and Walter William Fondren in Humble, Texas. The headquarters were moved to Houston, and the company eventually sold half of its shares to Standard Oil of New Jersey, establishing a long-term partnership that lasted for decades. The company built the Baytown Refinery, which became Texas' largest refining operation. In the post-World War II period, Humble became the largest crude oil transporter in the United States, and built pipelines connecting Baytown to Dallas-Fort Worth and West Texas to the Gulf of Mexico.
In spite of the few major operations, the first decade of the boom was dominated by numerous small producers. As production expanded and new companies were formed, consolidation occurred. By the late 1920s, ten companies produced more than half of the oil in the state: Gulf Production Company, Humble Oil, Southern Crude Oil Purchasing Company (later absorbed by Amoco which was later absorbed by BP), the Texas Company (Texaco), Shell Petroleum Corporation, Yount-Lee Oil Company, Magnolia Petroleum Company, J. K. Hughes Oil Company, Pure Oil Company, and Mid-Kansas Oil and Gas Company (later Marathon Oil).
During the 1930s, a Dallas company known as the General American Finance System, founded by Algur H. Meadows, Henry W. Peters and Ralph G. Trippett, struggling through the Great Depression, began to finance drilling operations throughout Texas using oil reserves as collateral. This allowed Dallas to establish itself as the financing center for the oil industry. The Great American Finance System eventually reorganized itself as the General American Oil Company of Texas, which became an oil producer in its own right and, decades later, was purchased by Phillips Petroleum.
Effects.
Economy.
At the start of the 20th century, agriculture, timber, and ranching were the leading economic engines of Texas. This was changed by the boom, which led to rapid industrialization. Though refineries were initially concentrated around the Beaumont and Houston areas, refining operations gradually grew throughout the state by the end of the 1920s. By 1940, the value of petroleum and natural gas produced in Texas exceeded the value of all agricultural products in the state. The state's GDP grew from approximately $119 million ($ in today's terms) in 1900 to approximately $29 billion ($ in today's terms), a more than 240-fold increase. The U.S. GDP as a whole grew by less than 24 times during the same period.
The opening of Houston Ship Channel in 1914 led to the Port of Houston overtaking the Port of Galveston as the state's dominant seaport. The situation led Houston to also overtake Galveston as the primary shipping center for cotton. The large quantities of oil and gas moving through Houston, Baytown, Texas City, and surrounding communities made the area around the ship channel attractive for industrial development. Chemical plants, steel factories, cement plants, automobile manufacturing, and many other types of heavy industry that could benefit from a ready supply of cheap fuel rapidly developed in the area. By the 1930s, Houston had emerged as the state's dominant economic center, though it continued to compete with Dallas throughout the 1900s. The effects of the boom helped offset the effects of the Depression so much that Houston was called the "city the Depression forgot." Dallas and other Texas communities were also able to weather the Depression better than many American cities because of oil.
The boom in the oil industry also helped promote other industries in other areas of the state. Lumber production thrived as demand climbed for construction of railroads, refineries, and oil derricks, and, in 1907, Texas was the third largest lumber producer in the United States. Growing cities required many new homes and buildings, thus benefiting the construction industry. Agriculture and ranching grew stronger as the rapidly expanding population created more demand for their produce.
Demographics.
The major commercial centers in the state grew tremendously during this period. The city of Houston grew by 555% between 1900 and 1930, reaching a population of 292,352. Other cities, from Beaumont to El Paso, saw similar growth rates. By contrast, New York City grew by 101% and Detroit, where the automotive boom was occurring, grew by 485%.
The populations of many small Texas towns had even greater population increases when oil discoveries brought prospectors, investors, field laborers, and businessmen. Between 1920 and 1922, the town of Breckenridge in rural North Texas grew from about 1,500 people to nearly 30,000. Between 1925 and 1929, the town of Odessa in the Permian Basin grew from 750 to 5,000. Between 1924 and 1925, the town of Wortham in northern Texas grew from 1,000 to about 30,000. The town of Kilgore in eastern Texas grew from about 500 to 12,000 between 1930 and 1936 following the discovery of the East Texas field.
The growth for many towns was only temporary. Growth in some communities was often driven by exploitation of limited oil resources, so once wells ran dry or demand slowed, their populations rapidly declined. When Wortham's boom ended, the population crashed from its 1927 peak of 30,000 to 2,000 people in 1929. The population of Breckenridge dropped from a similar high to 7,569 in 1930.
One of the most significant demographic changes in the state was the percentage of urban dwellers. Between 1910 and 1930, the percentage of urban dwellers (those living in towns of greater than 2500 people) increased by 32%, resulting in 41% of Texans living in urban areas in 1930. World War II pushed the urban population over 50%.
Urban development.
The urban landscape of the cities changed dramatically during this period. The Praetorian Building in Dallas (1907) and the Amicable Life Insurance Company building in Waco (1911) were among the first skyscrapers in Texas. The Perlstein Building in Beaumont was the first skyscraper built as a direct result of the boom. Beaumont's downtown grew rapidly during the first decade after the 1901 strike. After a second major strike at Spindletop in 1925, Beaumont had the largest skyline of any city between Houston and New Orleans by the end of the decade. The twenty–two-story Edson Hotel, completed in 1929, was the tallest hotel building in Texas for several years.
Despite Beaumont's importance during the early boom period, the nearby and already-established commercial center of Houston became the leading city of the period. Houston's status was boosted by the 1914 completion of the Houston Ship Channel, an artificially dredged conduit through the shallow Galveston Bay, allowing the Port of Houston to service large ships. Refineries and related operations were built along the Houston Ship Channel between Houston and Goose Creek. Heavy industry grew in the area and gradually created one of the world's largest industrial complexes. By the 1930s, Houston emerged as the state's largest city and the hub of the rail and road network. The effects of the petroleum-related growth helped offset the effects of the Great Depression substantially, particularly after the discovery of the East Texas field. Texans who became wealthy from the boom established upscale communities including Houston's River Oaks, which became a model for community planning in the U.S. Oil-related growth led to the creation of many new institutions, including the University of Houston, the Museum of Fine Arts, Hermann Park, the Houston Zoo, and the Houston Symphony Orchestra.
Dallas and Fort Worth experienced one of their greatest oil-related construction booms in 1930 and 1931, when the opening of the East Texas oil field helped establish Dallas as the financial center for the oil industry in Texas and Oklahoma. New business offices and municipal buildings appeared in the city, including the Highland Park Village shopping center, one of the nation's earliest shopping malls. The Depression slowed population growth in the Dallas area somewhat during the later 1930s, but rapid growth patterns returned again during the 1940s. By this time, though, Dallas had already begun to rediversify, becoming a center for aircraft manufacturing and electronics technology in addition to a variety of other industries.