Oil 101

Twigs and branches

Written essentially in the style of a textbook, Morgan Downey’s Oil 101 moves systematically through the major areas of knowledge required for a basic understanding of the global petroleum industry. These include:

  • The history of oil use, including predictions about the future
  • The chemistry of crude oil
  • Exploration for and production of oil
  • Refining
  • Petrochemicals
  • Transporting oil
  • Storing oil
  • Seasonal demand variation, pricing, and oil markets

Downey covers each in a clear and informative manner, though he sometimes delves into a greater level of detail than most amateurs will prefer. For instance, some of the forays into chemistry are at a level of sophistication well above what casuals readers are likely to retain. That said, the book is laid out in a highly structured way, so it is easy to gloss over technical portions without losing track of the overall structure of the text.

One thing the book strongly demonstrates is the enormous amount of expertise and capital that have been developed within the petroleum industry. For instance, the section on how offshore oil platforms are constructed and operated shows what an astonishing number of things can be executed deep underground, from a steel platform above the ocean’s surface: everything from horizontal and vertical drilling to the assembly of steel pipes (cemented in place), the use of explosives, the installation of automatic or remote-controlled valves, the injection of acids and chemicals, etc. The discussion of refining and transport technologies and infrastructure is similarly demonstrative of sustained investment and innovation. While it is regrettable that all of this effort has been put into an industry that is so climatically harmful, it does suggest that humanity has a great many physical and intellectual resources to bring to bear on the problem of finding energy. As more and more of those are directed towards the development of renewable energy options, we have reason to hope that those technologies will improve substantially.

The final portion of the book, about oil prices and forward oil markets, was the least interesting for me, as it deals with complex financial instruments rather than matters of chemistry, geology, etc. Still, for those who are seeking to understand how oil prices are established, as well as what sorts of financial instruments exist that relate to hydrocarbons, these chapters may be useful. Downey does provide some practical advice to those whose organizations (companies, countries, etc) are exposed to changes in oil markets: “The decision not to hedge [Buy financial products that reduce your exposure to a risk of major price changes] should be an active decision. Management should clearly inform investors why they decide to face the full volatility of the oil market when they have an opportunity to manage the risk.” Managing such risks on an individual level has been discussed here before.

All told, this book is well worth reading for all those who are curious about the energy basis for global civilization, why it is established the way it is, and some of the key factors that will determine which way it goes. Downey is a low-key proponent of the peak oil theory. He argues that reserves, especially in OPEC, are inflated and that a peak and bell-shaped drop-off in production are inevitable: probably between 2005 and 2015, provided depletion occurs globally at about the same rate as it did in the United States following their peak in 1970. For those hoping to grasp the implications of that projection, as well as those hoping to plan for a world based on other forms of energy, the information contained in this book is both valuable and well-presented.

Author: Milan

In the spring of 2005, I graduated from the University of British Columbia with a degree in International Relations and a general focus in the area of environmental politics. In the fall of 2005, I began reading for an M.Phil in IR at Wadham College, Oxford. Outside school, I am very interested in photography, writing, and the outdoors. I am writing this blog to keep in touch with friends and family around the world, provide a more personal view of graduate student life in Oxford, and pass on some lessons I've learned here.

6 thoughts on “Oil 101

  1. Monday, April 27, 2009
    Book Review: Oil 101

    Oil 101, by Morgan Downey, is without a doubt the most detailed and comprehensive book I have ever read on the oil industry. In fact, I am not aware that another book like this even exists. This is not an opinion piece, nor is it a peak oil book. It is a collection of factual information covering all aspects of the industry. From oil in the ground to product in the tanks (and everything in between) – this book contains everything you could ever want to know about the industry. I like to think I know quite a bit about different areas of the industry, but I still managed to learn a lot from this book.

    It doesn’t matter if you are a complete novice or already know quite a bit about the industry; there is something for everyone in this book. Downey displays a deep understanding across all sectors of the industry. For instance, if I didn’t know better I would have guessed that the refining chapter was written by someone who had spent an entire career in the refining industry. The only books on refining that I have read that were more comprehensive were those written specifically as technical guides for running a refinery. Other areas are covered in similar detail.

  2. A Review of “Oil 101” by Morgan Downey

    The book follows the pattern of oil starting with what types there are, how it was formed and where it is found. It explains with a couple of simple pictures the concept of the kerogen, oil and gas windows and then goes on to explain, from the rock formations in which it is found, how the oil and gas can be recovered. Given the amount of material that the book covers, the specific detail on any one process is sparse, but with the underlying knowledge that is provided, it then becomes possible for example, to follow a more detailed description of the steps that are taken in trying to improve production from a well driven into a shale gas field, or why we are interested in the relative production rates and lifetimes of horizontal and vertical wells.

    This is useful not just to the neophyte. Just the other day when I was writing a piece on the future price of oil, I wanted to know the current percentage of world production that OPEC produced and bingo, there on Figure 5.4 was the number, 43%. The story went on to look at the demand for petroleum products as it fluctuates over the year, and there again was Figure 13.2, showing the fluctuation in vehicle miles driven, by month. (Being me, I then went back to the source he cited to get the current data, but it barely differed from what Morgan Downey had written).

  3. Technology Quarterly

    Inside story
    Plumbing the depths
    Inside story: A recent wave of advances is enabling oil companies to detect and recover offshore oil in ever more difficult places

    Mar 4th 2010 | From The Economist print edition

    “In 2005 the company installed its Constitution platform 300km south-west of New Orleans. Moored to the ocean floor 1,500 metres below the surface, the $600m structure comprises a 13,600-tonne cylindrical floating “spar” supporting a 9,800-tonne upper section or “topside”. Constitution, which is now owned and operated by Anadarko Petroleum, an independent oil producer that acquired Kerr-McGee in 2006, has plenty of company. In 2007 BP finished work on Atlantis, a 58,700-tonne semisubmersible platform, which is tethered to the seabed over 2,150 metres below. Upon completion, the platform was the deepest-moored oil-and-gas production facility in the world.”

  4. Asphalt: The new darling of the oil industry

    Asphalt is produced from the heaviest parts of heavy crude, and heavy crude production in North America is growing, thanks to the Alberta oil sands. That should mean more asphalt – but instead, the opposite has happened. Eager to capitalize on the heavy crude growth, refiners across the continent have scrambled to build what’s called “coking” capacity.

    Cokers take those heaviest parts of the barrel and, in simple terms, refine them into more marketable products. That leaves less of the heavy product to make asphalt – and cokers are growing rapidly. Between 2008 and 2013 alone, North America will add more than 18 per cent to its total coking capacity, according to research firm GlobalData.

    The new capacity has already had an impact on asphalt, which has historically moved up and down in tandem with oil prices. While that still happens to some extent today, it has become more decoupled from crude – and road builders and asphalt suppliers worry that the future will see higher prices for asphalt.

    “The decrease in supply has increased the prices at times,” said Ward Sparrow, the general manager at Vancouver’s Lafarge/McTar Petroleum, a paving contractor.

    “The fundamentals for asphalt are changing all the time. Less sources are becoming available to us.”

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