Discovery of Oil at Spindletop

The discovery of oil at the Spindletop field began the Texas oil boom and led to the growth of a number of important oil corporations.

Summary of Event

On January 10, 1901, at 10:30 a.m., the first major “gusher” came in at the Spindletop oil field near the town of Beaumont in southeastern Texas. (Spindletop was named for the salt dome just south of Beaumont, which was also known as the “Big Hill.”) This first major oil well at Spindletop initially produced 75,000 to 100,000 barrels per day, approximately 800,000 barrels before it was brought under control nine days after oil was struck. This dramatic discovery made the Spindletop area the first major oil “boomtown” of Texas and shifted the focus of petroleum entrepreneurs to Texas. For much of the twentieth century, Texas was the leading petroleum-producing state in the United States and was one of the fastest-growing areas in terms of population. The Spindletop discovery also led to the formation and development of a number of important oil corporations. Oil industry
Oil discoveries;Spindletop
Spindletop;oil discovery
Texas;oil discovery
[kw]Discovery of Oil at Spindletop (Jan. 10, 1901)
[kw]Oil at Spindletop, Discovery of (Jan. 10, 1901)
[kw]Spindletop, Discovery of Oil at (Jan. 10, 1901)
Oil industry
Oil discoveries;Spindletop
Spindletop;oil discovery
Texas;oil discovery
[g]United States;Jan. 10, 1901: Discovery of Oil at Spindletop[00140]
[c]Science and technology;Jan. 10, 1901: Discovery of Oil at Spindletop[00140]
[c]Geology;Jan. 10, 1901: Discovery of Oil at Spindletop[00140]
[c]Trade and commerce;Jan. 10, 1901: Discovery of Oil at Spindletop[00140]
[c]Energy;Jan. 10, 1901: Discovery of Oil at Spindletop[00140]
[c]Natural resources;Jan. 10, 1901: Discovery of Oil at Spindletop[00140]
Higgins, Patillo
Lucas, Anthony F.
Guffey, James M.
Galey, John H.
Mellon, William L.
Cullinan, Joseph S.

Prior to the discovery of oil in Texas, the primary and best-known oil fields in the United States were in Pennsylvania. Officials of the Standard Oil Company Standard Oil believed that few, if any, productive oil fields existed west of the Mississippi River. By 1890, however, evidence of petroleum had been found in Texas, primarily in Corsicana, just south of Dallas. The opportunity to develop the Corsicana oil fields brought two Pennsylvania wildcatters, James M. Guffey and John H. Galey, to Texas. The need to provide pipeline transportation facilities in the area also brought Joseph S. Cullinan, head of one of Standard Oil’s pipeline subsidiaries, from Pennsylvania to Corsicana. With the Spindletop discovery, which would dwarf the production at Corsicana, these three men and many others arrived at the oil fields of southeastern Texas. Guffey, Galey, and Cullinan would form the oil-producing and -refining companies that would eventually become Gulf Oil Company and the Texas Company (Texaco).

Patillo Higgins, a Beaumont resident and self-taught geologist, was the first to find evidence of petroleum reserves at the Spindletop salt dome. Despite the ridicule he received for believing that commercial quantities of petroleum were to be found in the Spindletop hill, Higgins formed the Gladys City Oil, Gas, and Manufacturing Company in 1892 to exploit the oil and gas reserves. He ran out of funds before he had drilled deep enough to reach the oil, however, and in 1899 he placed an advertisement in a trade journal to lease the field. Anthony F. Lucas, an Austrian mining engineer and consultant, answered the advertisement. In his work as a consultant, Lucas had traveled through the Texas and Louisiana Gulf coast plains. He had often found seepages of petroleum in and around the salt dome formations that occurred throughout the region, and he believed that the salt domes were associated with vast reservoirs of petroleum.

Lucas drilled a well on Spindletop in 1899. Although he reached some crude oil, he too ran out of funds for the project. He had difficulty obtaining additional financial backing, because there was no proof in any of the other oil fields of the world to back up his belief in a connection between salt domes and petroleum reservoirs. Through associates in the University of Texas geology department, Lucas came into contact with Galey, who by that time was a partner in the J. M. Guffey Petroleum Company of Pittsburgh. With $400,000 borrowed from the Mellon Bank of Pittsburgh, Guffey, Galey, and Lucas renewed efforts to find oil at Spindletop.

On January 10, 1901, these efforts reached fruition. After weeks of continual drilling problems, the drilling crew reached a depth of 1,160 feet (about 340 meters). At 10:30 a.m., an oil gusher erupted that could be seen three miles away. In contrast to the first major oil discovery in Pennsylvania in 1859, which flowed at a rate of 20 barrels per day with the aid of a pump, the first Spindletop gusher spewed 75,000 to 100,000 barrels per day. In 1902, the Spindletop field produced more than 18 million barrels of crude oil, which amounted to 20 percent of all oil production in the United States. This was 93 percent of the year’s national increase in production. By the end of 1902, almost four hundred wells were bunched together at Spindletop. By 1904, that number had reached nearly twelve hundred.

The first six oil wells drilled at Spindletop accounted for more oil than all the other oil wells in the world at that time. The rapid and massive exploitation of Spindletop’s petroleum resources, accompanied often by extravagant waste, meant that the petroleum reservoirs in the Spindletop field were rapidly depleted between 1902 and 1904. The exhaustion of petroleum resources, at Spindletop and later elsewhere in Texas and throughout the nation, eventually led to concerns about conservation. In the very early twentieth century, however, at a time of economic opportunity and prosperity, such concerns were rare.

William L. Mellon, whose family bank had substantially funded the Guffey operations at Spindletop, soon realized that a greater level of financial and personal involvement was necessary to maintain profitability and expansion. The Mellons bought out Guffey’s interests and in 1907 removed Guffey as president of the J. M. Guffey Petroleum Company. William L. Mellon was subsequently named president of the company, which was renamed the Gulf Oil Company.

Cullinan also realized that the opportunities at Spindletop were much greater than those at Corsicana. In January, 1902, Cullinan formed the Texas Fuel Company Texas Fuel Company to refine and market the vast amounts of crude oil being produced in the area. Cullinan also formed the Producers Oil Company to ensure that the Texas Fuel Company would have a continual source of supply. The Texas Fuel Company proved too small to meet the increasingly immense task of refining all the crude produced, however, and in March, 1902, its assets were transferred to a new corporation, the Texas Company, capitalized at three million dollars. Cullinan’s renown from his days with Standard Oil led to the continual growth and success of the Texas Company at a time when approximately two hundred competitors and other entrepreneurs at Spindletop were failing.

Other major petroleum corporations were born or grew stronger at Spindletop. Shell Oil Company Shell Oil Company had its origins at Spindletop. The Shell Transport and Trading Company of London had signed a twenty-year contract for Guffey’s operations to produce oil for the British navy. Shell’s petroleum transportation investments later led it to engage in the other major functions of the oil industry. The Sun Oil Company, another Pennsylvania organization, grew much stronger at Spindletop. The Magnolia Oil Company, a Standard Oil affiliate, had its origins at Spindletop. It later became part of the Mobil Oil Company. The group of Texas oilmen who ultimately formed the Humble Oil and Refining Company got their starts individually at Spindletop. After the Humble Oil and Refining Company merged with Standard Oil of New Jersey, the Humble organization later became the Texas branch of Exxon, a Standard Oil subsidiary.

Significance

The discovery of oil at Spindletop had a number of important long-run consequences. It proved that there were vast reservoirs of petroleum west of the Mississippi River and that petroleum was not limited to the eastern half of the United States. It also spurred other research and discoveries in the Texas and Louisiana salt dome fields, establishing the area as an oil region of permanent importance. This new research in turn propelled further oil-seeking activities and development of oil fields in northern and western Texas, making Texas the leading petroleum state in the nation for much of the twentieth century. By 1929, Texas was the leading U.S. producer of petroleum, producing 35 to 45 percent of the national total, and it became one of the leading oil-producing areas in the world. Texas held the position of the top oil-producing U.S. state until the 1970’s, when Alaska and Texas each produced approximately 30 percent of the national total.

The progress of the oil industry in Texas led to the rapid growth of highly lucrative associated industries. In their very first oil strike at Spindletop, Lucas and his team used new techniques—such as rotary drilling, drilling mud, and airlift of oil—that afterward became standard operating procedures for oil producers. All these methods created demand for an industry to produce drill bits and other tools and supplies. The most prominent of the companies supplying this equipment was the Hughes Tool Company, Hughes Tool Company the success of which was the source of the initial fortune of Howard Hughes. The growth of petroleum transportation pipelines created demand for firms to service and supply the pipelines.

These organizations, which grew in a symbiotic relationship with the large oil corporations and many other smaller independent oil-producing organizations, were all crucial to the rapid growth of Texas beginning especially in the 1920’s and continuing into the 1950’s and 1960’s. Urban areas such as Houston and the Spindletop-Beaumont-Port Arthur-Orange complex, with ports giving access to the Gulf of Mexico, became the sites of many large refining and petrochemical plants. Because of its location on the Trinity River and its proximity to the highly productive oil fields of northern Texas, the Dallas-Fort Worth area grew dramatically beginning in the middle of the twentieth century.

The Spindletop discovery opened up economic opportunity in an industry that previously had been monopolized by John D. Rockefeller’s Standard Oil Company. The Texas Company, Gulf Oil Company, and Shell Oil Company were born at Spindletop, and the Sun Oil Company grew stronger there. All of these would later provide competition to Standard Oil. Although these growing oil companies remained independent of Standard Oil, practically all had ties to that company, whether selling crude oil to be refined or refined oil to be marketed and sold to the general public. The growth of these corporations, however, transformed the oil industry from one characterized by monopoly (Standard Oil) to one that was more oligopolistic in nature.

The dramatic discovery at Spindletop, by proving that major untapped petroleum reserves existed in the United States, opened the door for other opportunistic, risk-taking entrepreneurs and organizations. This led to the formation of the aforementioned major corporations as well as many smaller independents that helped boost the economy of Texas and the Gulf coast region. Oil industry
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