BA 476 Energy 2020.pdf

THE ENERGY INDUSTRIES BA / HISTORY 476 AGENDA ➢ Who cares? ➢ Coal ➢ Electricity ➢ Petroleum ➢ Modern Energy ➢ Class Activity (pay attention ) Why energy matters? Why does energy matter? Why energy matters… • Cheap energy shaped American enterprise • Industry and transportation consumes 60%...

THE ENERGY INDUSTRIES BA / HISTORY 476 AGENDA ➢ Who cares? ➢ Coal ➢ Electricity ➢ Petroleum ➢ Modern Energy ➢ Class Activity (pay attention ) Why energy matters? Why does energy matter? Why energy matters… • Cheap energy shaped American enterprise • Industry and transportation consumes 60% of US energy • Over last 200 years… • Energy sources changed rapidly • Numerous societal impacts (i.e. foreign policy, OPEC) Pre-Industrial Era What was the US’ primary power source in mid-1800s? Direct Water Power Wood Direct Water Power Wood • Hydropower • 1st stored energy in US • Water Mills drove early • Used for heating and power manufacturing • Shaped where towns were settled generation • In homes and businesses • Abundant, portable, and ease of storage PART 1: COAL Timeline ➢ Initial growth of industry (1840-1900) ➢ Industry structure and conditions (1900-1945) ➢ Decline and stagnation of market (1945-1970) ➢ Industry resurgence (1970-present) Growth Factors Expansion of Railroad Networks (1840s) • Enabled cheap distribution to major cities, fueling business growth • Coal powered the trains themselves Many coal fields in northeastern Pennsylvania 1834: 0.5M tons 1849: 3.7M tons “Cheap, clean-burning, high-quality coal helped change industry from its almost cottagelike basis to large-scale industrial production” (pg. 152) Other Industries Impacted Many industries began transitioning to coal… • Consumer goods • Textile mills • Coal-powered locomotives • Iron & Steel* Demand Outpaced Supply High Prices Reduced Industrial Use “Coal Hard Facts” Anthracite (Hard) Coal Bituminous (Soft) Coal • Cheap • Cheaper • Clean-burning • Huge pollution! • High quality Production of coal exploded during late 1800s… 1870: 4.4M tons 1900: 270M tons Causes: 1. Railroads 2. Tech Advancements Technological Advancements Bessemer Process • Pioneered by Sir Henry Bessemer (1856) • Price of steel dropped 80% Open-Hearth Process • Even better than Bessemer Process (1860s) Rapid growth of iron and steel industries… Buildings (Skyscrapers) Railroads Automobiles Manufacturing (Molded Steel Parts) Industry Structure & Conditions “Industry best described as wasteful, inefficient, and overly competitive” (pg. 152) What impact did these conditions have? • Excessive competition! • Instability of Prices and Output • Interregional competition grew due to easy transportation of coal between markets… KY, IL, OH PA, WV What impact did these conditions have? • Mechanization • Reduced costs • Discouraged labor unions • Attempts to export excess supply failed • Prices remained unstable (profits unpredictable) Industry Consolidation (early 1900s) Early attempts to form a national association failed Eventually joined merger movements of Progressive Era • Consolidation into major companies • Aimed to stabilize prices, not create monopoly! • Some smaller firms still drove down prices Industry Evolution • Overproduction depressed coal industry until WWI (1914) • Producers disagreed regarding unionization and trade association efforts (1920s) New Dealers worked with United Mine Workers (UMW) to finally implement price floors in 1940s Industry Decline Post-WWII, coal furnaces replaced by natural gas heaters in the home. Why… Reduced fuel costs Less pollution Less dependence on chaotic industry Steep drops in demand • Dieselization of railways and maritime industry • Tech advancements reduced coal input for steel production • Utilities represented last demand Industry Decline Large decline in production throughout 1950s • Small, unprofitable operators closed Extensive mergers throughout ‘60s • Larger operators purchased smaller ones • Invested heavily in huge machinery Ironically, coal more abundant in US than natural gas/oil Industry Resurgence OPEC oil embargo caused petroleum shortages (1973) • Revitalized demand for coal energy! Some petroleum and coal companies merged to reduce dependence through diversification Petroleum reduced coaldependence in 1800s; coal later reduced overdependence on foreign petroleum in 1980s PART 2: ELECTRICITY Early History Common need for lighting Product improvement (not price) drove oligopoly competition “Engineer-entrepreneurs” • Saw commercial potential of scientific discoveries • Innovated products and manufacturing techniques • Among 1st industries based in constantly changing tech Brush Electric Company • Founded by Charles Brush (1880) • Pioneered electric power industry • Invented arc-light system; used for outdoor lighting • Powered by dynamos (generators) located in small central power stations FUN FACT: He’s a Wolverine! Thomson-Houston Electric Company • Founded by Elihu Thomson & E. J. Houston (1883) • Developing more powerful dynamos for larger systems • Became leading electrical manufacturer • Dominated arc-lighting industry through acquisition of competitors, rather than patent control Thomas Edison • Exploited huge (80%) untapped indoor lighting market; homes and businesses still used gas • Successfully created incandescent lamp (1879); received $500K financing to improve practicality for scale • Cheaper than gas through use of central power stations with “jumbo” generators So energized bro! Edison Lamp Co., Edison Electric Light Co., and others merge to form $12B Edison General Electric (1889) General Electric Company • Thomson-Houston merged with Edison GE (1892) • Incandescent street lights were cheaper and higher quality than gas and arc-lights; industry exploded! • GE provided high-price, high-quality lighting Industry was constantly growing… • Small electric motors • Giant power stations (Niagara Falls) • Extensive transmission lines • Electric railway motors (urban transit lines) Westinghouse Electric Company • Founded by George Westinghouse (1886); bitterly competed with GE to form “duopoly” with huge patent pool • Westinghouse Edison Gerard Swope of GE President of GE from 1922-39 and again from 1942-1944 • Dissolved GE’s holdings in power companies • New consumer products manufacturing divisions • Developed progressive labor relation programs • Proposed unemployment insurance for GE employees; advised FDR on Wagner Act and Social Security Act Industry Expansion (1900-1930) • Revenue increased from $85 million to $2 billion! • Output increased +250%, but consumer rates fell due to economies of scale • Until New Deal, most electric companies were privately owned and run Samuel Insull • Became Thomas Edison’s secretary and later President of Chicago Edison Co. • Formed many holding companies; manipulated stock and sold to unwary investors • Empire collapsed and shareholders lost millions (1932) • Caused public to demand public power development during New Deal era GOVERNMENT INTERVENTION Federal Power Commission (1920) • Coordinated hydroelectric projects under federal control • Largely inefficient entity, reorganized in 1928 • Ultimately took a backseat to the REA and TVA Public Utility Holding Act (1935) • Consumer protection law; restricted utilities companies • Regulated “holding” companies of electric/gas utilities • Direct attempt to prevent fraudulent private sector activities (i.e. Samuel Insull) Rural Electrification Administration (1935) 90% of urban dwellers had electricity, but only 10% of rural dwellers did. REA sought to fix this… • Created 417 electric cooperatives serving 288K homes • Now, 25% of rural homes had electricity (up from 10%) • Worked with Tennessee Valley Authority to continue rural electrification projects Tennessee Valley Authority (1933) • Wide range of duties: energy production, irrigation, reforestation, erosion control, etc. • Goal: Combat Dust Bowl and Recession • New farming fertilizers • Improved crop yields • Replanted forests • Systems against forest fires • New electricity source attracted business and created jobs • WWII: US needed aluminum for bombs and airplanes • Aluminum plants require electricity The Hydroelectric Push TVA created ~30 hydroelectric dams along TN river system 28K new jobs! Hoover Dam (1935) • Partial attempt to create jobs during Great Depression • ~21K Americans put to work • Could irrigate 2M acres at once during peak of Dust Bowl • Generates enough power for 1.3M homes annually Atomic Energy Commission (1946) • Responsible for (1) encouraging commercial nuclear power and (2) regulating its safety • Regulatory controversy abolished AEC in 1974; replaced by Nuclear Regulatory Commission in 1975 The TVA and Nuclear Power • TVA started building numerous nuclear reactors to continue providing more electricity (1960s) • Currently operate 3 nuclear reactors with combined capacity of 6,700 MW/day • Entire Solar industry today produces 9,000 MW/day • Building new reactor for 2016 PART 3: PETROLEUM Timeline ➢ Pre-Standard Oil Era (1855-1870) ➢ Standard Oil Dominance (1870-1911) ➢ Domestic Production Era (1913-1947) ➢ Free Market Oil Importing (1947-1974) ➢ OPEC Oil Dominance (1974-1986) Petroleum Benjamin Silliman created refining process to turn crude oil into quality lubricant (1855) Edwin Drake hired by PA Rock Oil to drill; land produced 1,000 gal/day (1859) • Rockefeller established himself in this year John D. Rockefeller • Built refinery to produce naphtha and kerosene (1863) • Founded Standard Oil Company (1870) • Largest oil concern in the world • Vertical integration • Stabilized industry • Bought 80% of refining capacity in Cleveland (1873) • Later, bought independent refineries in NY, Philadelphia, and Baltimore Henry Flagler • Created South Improvement Company (1870) • Standard Oil controlled almost all refineries and had $40M cash reserves, but lacked structure (1880) • Court-order allowed holding companies (1892) • Faced major competition abroad • Symbolized corporate abuse of economic power in US When did Standard Oil disband? • May 15, 1911 • Supreme Court disbanded company due to violation of Sherman Anti Trust Act • Split into 34 companies across US and abroad • Primary remaining companies include: Gasoline • Automobiles marked the end of Standard Oil; created new need from gasoline • Gasoline surpassed kerosene as a marketable item (1915) Magnolia Petroleum & Integrated Industry • Built pipelines from OK to Beaumont and entered oil fields in south OK and west TX (1911) World War II • Government built oil pipelines from TX to NJ and PA after German subs threatened Gulf-to-Atlantic shipping (1942) • Sold pipelines to private companies; further undermined coal sales on East Coast (1945) Post-War • US heavily imported oil (1947) • OPEC created (1974) The Gas Crisis (1973) Arab oil embargo due to US support of Israel during war • Lasted 6 months • Tripled crude oil prices Emergency Petroleum Allocation Act • US domestic policy created price ceiling • Reduced domestic supply while demand more than doubled from 1973-1977 The Gas Crisis (continued) • Energy Policy and Conservation Act (1975) • Rolled back domestic crude oil prices, further decreasing supply • Established CAFE fuel efficiency standards • Department of Energy is created (1977) The Gas Crisis (continued) Iranian Revolution (1978-79) • Decreased world supply by 4M barrels/day Iran-Iraq War (1980) • Decreased world supply by 7M barrels/day US finally lifts domestic controls on oil industry in response to oil crisis (1981) Crude Oil Price Collapse (1986) • OPEC lifts supply limits and prices drop by almost 60% MODERN ENERGY Modern Day Energy Industry 3rd largest US industry! Includes: ✓ Renewable Energy ✓ Renewable Fuels ✓ Oil and Natural Gas ✓ Coal ✓ Nuclear Energy $6 trillion global industry! Primary Energy Consumption by Source and Sector, 2012 (Quadrillion Btu) P UIU:' .fl l of &,1.11e.:e:; Transpor'lation '26./ Total= 95.0 72 93 (28%) lndustnal' 20.6 (22%) Source ' Doff not t!Cll.debloruel511\at haW been blended w.tllpetn:feUn--Dloruel6areh:I.UOeGIi 'Renewatte Ene,gy.4 ' Ex Cl.de661.41i:temertalg,l6E(IU5l'Uel6.. -' lncllllle6IE'S& than 0.1 quac1r111M8bJ r1 coaleoltene1tnpon&. • eorwen11ooa1hJIJIoeiec:tuc powet'. ge,othefmal. socar,pnotoYoltale.wina.amDl0ma66.. • lnd l.Kle6t'ICIJWQJ com01ned-fteat-ano-power(QiP)ancllndll6!nal eleetllCA)-ooly r d l i . -- • 1rM:1UGe60Cll'l'l'llerclaifCOl'l'tllnecJ-healhlnet-pOwer(01P}a\CI001r•1.ec&a1eJeCtrlelty-onJ)' Sector B ea lUt y«ll y a n d n c l - p o W e r ( C H p b ' 1 l 5 \ W h o 6 e p rm a r y O U 6 l n e 6 S 1 6 t o I I C l o B t detec:trlClly net tnporUnot6l'lcMnunaes·source-.· Note&: Primaryenef9YIn ttielt:lrmthat1 16ll5ta::coomedror ri a W!l&UcalentrrJf balance.. 10&eCOn<lary rx tertiaryronTl6or ene,gy(Tocex:ami(e.coal• U6e<Ito Od0re any gmeraie electrld.'ty). • sun cAcompooEfll5maynol equal total 10 n:lepenaenttOJnclng. SOt.Wce6::U.S. Enef9Y lntl:mlaton MTlll'llm ton. ltlOrt1'lff Enetgy Rewew (January 201•). Tatlfe6 1.J, 2. t-2.6. 6elletem ctty. « elec:t1cttyanorieatb the ptllllC. IOcfUCles0.2 Renewable Energy Wind Solar Geothermal Hydropower Biomass Biofuels Expected to be 27% of US power generation by 2030 Renewable Energy (continued) Today, US produces: • More geothermal energy than any other country (3,187MW) • More biomass power (16,2500MW) • 2nd largest wind industry (60,078 MW) • 3rd largest hydropower industry (100,000 MW) • 5th largest solar industry (9,370 MW) Where does most wind energy come from? Renewable Fuels • Includes (Wood) Pellets and Ethanol • Ethanol used as additive to gasoline • Pellets used for heating purposes • Abundant • Sustainable • Carbon beneficial compared to fossil fuels • US exports: • 6% of Ethanol produced (~858M gal.) • 12% of pellets produced (mostly to EU) Oil & Natural Gas • Shale oil extraction (“fracking”) has greatly increased domestic oil and natural gas • When was the technology created? → 1940s! • Originally used to increase petroleum/natural gas output • Today, used to reach previously unobtainable reserves Coal • US holds worlds largest recoverable coal reserves • Net exporter of Coal • Coal generates 42% of US electricity • New research to capture 90% of CO2 emissions from coal Nuclear Energy • US operates the most nuclear reactors • Generate most nuclear power in the world • ~20% of US energy production • $100B export potential over next decade Key Takeaways Coal • Rose through railroads. Longstanding industry instability before mergers. Resurgence due to OPEC. Most abundant in US. Electricity • $2B industry in 1930s. Led to creation of many privately owned companies before gov. ensured consumer protection. Petroleum • Creation of Standard Oil. Major players in industry. Post-WWII and Gas Crisis. Modern Energy • 3rd largest industry includes: renewable energy, fuels, oil and natural gas, coal, nuclear energy GUESS WHO (or What)??? Brush Electric Company • Founded in 1880, one of the early companies to become a major player in the electricity industry • Invented arc-light system for outdoor lighting • Powered by dynamos located in small central power stations Renewable Energy • Wind, solar, geothermal, hydropower, biomass, biofuels are all part of…. Bessemer Process • Pioneered in 1856 • Revolutionized how steel was produced • Price of steel dropped 80% Thomson-Houston Electric Company • Founded in 1883, built upon the accomplishments of the Brush Electric Company • Developed more powerful dynamos for larger systems • Dominated arc-lighting industry though acquisition of competitors • Later merged with Edison General Electric to for GE Thomas Edison • Didn’t necessarily invent the incandescent bulb, but improved upon it and was able to bring it to mass markets • Famous inventor John D. Rockefeller • Entered petroleum business when he discovered that one gallon of refined kerosene exceeded in value a barrel of crude oil • Helped form Standard Oil Co. in 1870 based on the refineries Bonus Clue: Favorite ice skating rink is in lower Manhattan Rural Electrification Administration • Created in 1935 by President Roosevelt • Brought electricity to countless rural homes throughout the 1930s The Wilson Dam • Supplied electricity for the immediate area and for a nitrate-fertilizer plant • The dams would end the devastating floods on the Tennessee and make the river navigable Public Utility Holding Act • Enacted in 1935 as a federal consumer protection law • Regulated holding companies of electric and natural gas utilities • Created to prevent activities similar to Insull’s General Electric Company • Two major companies merged (what were they?) • Cheaper and higher quality street lighting • Industry exploded soon after this company formed • Company is still around today! Edwin Drake • Hired by PA Rock Oil to drill and eventually produced 1,000 gal/day Magnolia Petroleum & Integrated Industry • Pipelines from Oklahoma to Beaumont, entered oil fields in South Oklahoma and West Texas Benjamin Silliman • Who created a process to turn oil into a lubricant? THANK YOU! Reference List • Bryant, Keith L., and Henry C. Dethloff. A History of American Business. Englewood • • • • • • • Cliffs, NJ: Prentice-Hall, 1983. Print. "Crude Oil Production." Crude Oil Production. N.p., n.d. Web. 14 Oct. 2015. "Fireplace | Inman |." Inman. N.p., n.d. Web. 14 Oct. 2015. "PETROLEUM CHRONOLOGY OF EVENTS 1970 - 2006." PETROLEUM CHRONOLOGY OF EVENTS 1970 - 2006. N.p., n.d. Web. 14 Oct. 2015. "Primary Energy Supply by Source, 2011." (2013): n. pag. Web. "Renewable Energy - IER." IER. N.p., n.d. Web. 14 Oct. 2015. "Shooters - A "Fracking" History -." American Oil & Gas Historical Society. N.p., 19 Apr. 2015. Web. 14 Oct. 2015. "U.S. Energy Information Administration - EIA - Independent Statistics and Analysis." History of Energy Consumption in the United States, 1775–2009. N.p., n.d. Web. 14 Oct. 2015.