Wednesday August 27, 2014

A complex answer to a simple question


Oil. It is the world’s most important commodity. Its presence in our day-to-day consciousness is ubiquitous. It is transforming the southern Saskatchewan economy. It is central to the federal government’s economic plan.

A day rarely goes by when that we are not inundated by pipeline controversies, railroad or shipping disasters, oilsands protests, price hikes or other petroleum-related news.

Then there are the all the things we take for granted. There are thousands of everyday items we use that contain some form of petroleum product. If something you’re using isn’t plant, animal or metal, it is a pretty good bet oil played a role in its manufacturing.

With my background in geology, there is little I don’t know about the stuff itself, how it got into the ground in the first place, the types of formations it is found in, how they formed, the different grades and how we get it out of the ground.

For as much as I know about that side of the equation, however, I know very little about its commerce. I would be willing to wager most people, who don’t deal with the production and trade are in the same boat.

It is funny how sometimes the simplest question can lead to a fascinating history lesson. In this case the question came from my son, who, while we were watching the news and the price for a barrel of oil came up, he asked, “how much oil is there in a barrel?”

I did not know. I suspected the answer would be convoluted and mathematically illogical, though. When it comes to weights and measures, the legacy of sometimes practical, but arbitrary historical decisions usually comes into play.

I was not disappointed. The short answer is 42 U.S. gallons. Since U.S. volume measurements based on the gallon had been standardized using a base 16 counting system, one might have expected a 32 or 48 gallon barrel, but that is where practicality takes over.

When the oil industry was invented in Pennsylvania in 1859, producers needed watertight containers to ship their crude in. At the time, the most plentiful containers produced by American coopers, and most commonly used by oilmen, were 40-gallon whiskey barrels. The demand for petroleum products was so great, however, producers would take what they could get. Numerous other sizes of barrels for wine, beer, molasses and any other liquid commodities were also in common use. By 1866, the lack of a standard-sized barrel was causing problems for the oil trade prompting the producers to issue the following circular:

“Whereas, It is conceded by all producers of crude petroleum on Oil Creek that the present system of selling crude oil by the barrel, without regard to the size, is injurious to the oil trade, alike to the buyer and seller, as buyers, with an ordinary sized barrel cannot compete with those with large ones.  We, therefore, mutually agree and bind ourselves that from this date we will sell no crude by the barrel or package, but by the gallon only.  An allowance of two gallons will be made on the gauge of each and every 40 gallons in favor of the buyer.”

By the time the 42-gallon definition of a barrel of oil was adopted by the Petroleum Producers Association most crude was already being transported by other means, primarily pipelines and railroad tanker cars, but the standard stuck.

There remained, and still is, a requirement for smaller shipping containers. In 1905, Nelly Bly, a famous American journalist and owner of the Iron-Clad Manufacturing Company obliged the industry with the invention and production of 55-gallon steel drums (often still referred to as barrels), which remain the standard for shipping small quantities of oil, gasoline and other products.

The standard for production and trading of crude, however, is still based on the 42 U.S. gallon barrel.

I love it when a simple question leads to a complex answer.



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