Bottom of the barrel: why the Saudis wish they'd discovered water instead.

• Author: Homans, Charles
• Position: Crude World: The Violent Twilight of Oil - Book review

Crude World: The Violent Twilight of Oil

by Peter Maass

Alfred A. Knopf, 288 pp.

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The world's first oil well was drilled 150 years ago on a farm two miles outside the wooded hamlet of Titusville, Pennsylvania, by a man named Edwin L. Drake. Drake was forty years old, an erstwhile railroad conductor and a gifted huckster; he arrived in Pennsylvania's logging country with a bogus title--Colonel E. L. Drake--to better impress the locals. His financiers had mostly written him off by August 1859 when, more than a year after he started his work, Drake finally struck oil. The farmers who worked along Oil Creek came running to witness the future bubbling up greasily from the pasture.

What happened next--recounted in detail in The Prize, Daniel Yergin's 1991 doorstop of an oil history--was dizzying. Speculators rushed to buy every available scrap of land in what became known as Pennsylvania's Oil Regions, goaded by tales of miraculous good fortune--one well had repaid $15,000 on the dollar over less than two years of production. The state's oil output more than sextupled between 1860 and 1862. Up in New York, there wasn't enough office space on Wall Street to accommodate all the new companies the industry was spawning.

But if some colossal fortunes--most notably John D. Rockefeller's--were made on Pennsylvania oil, far more were ruined by it. The fever of speculation, coupled with the unpredictability of the new industry, caused prices to plummet from $10 a barrel to 10 cents over a span of just one year, then shoot up again. In one Pennsylvania boomtown, a plot of land that was worth almost nothing in 1864 was sold for $2 million a year later, then again for less than $5 thirteen years after that. The upheavals ultimately swallowed up Edwin Drake himself; the man who first drilled the industry into existence had a brief, disastrous run as an oil buyer on Wall Street, and just seven years after he hit oil was reduced to begging money from his friends. James Townsend, the Connecticut banker who funded Drake's work, fared better, but no less bitterly; "the suffering and anxiety I experienced," he later wrote, "I would not repeat for a fortune."

While contemporaneously volatile Gilded Age industries, such as railroads, have long since settled into normalcy, oil remains afflicted by the paradox that Drake stumbled across a century and a half ago: the people who should theoretically reap the greatest benefit from oil are often the ones who suffer the most on account of it. Of the world's top ten oil-exporting countries, only Norway can claim to have an open, democratic society and a transparent government; only Norway and the United Arab Emirates rank in the IMF's top ten for gross domestic product per capita. Seven of the top ten, meanwhile, are rated as "in danger" on the Failed States Index compiled this summer by the Fund for Peace and Foreign Policy magazine. "All in all," Sheik Ahmed Yamani, the oil minister of Saudi Arabia from 1962 to 1986, once grumbled, "I wish we had discovered water."

This is the thing that interests Peter Maass in Crude World: The Violent Twilight of Oil. "I lived in Asia for several years and wondered, if oil was such a blessing to countries possessing it, how South Korea...