Introduction
Oil is the most used fossil fuel in the world, 25% of it is used in the United States primarily for transportation fuel, and is also used in industrial production. It has been used for about 100 years, and many of the products in a common house contain a petrol-based product. Ironically even though oil is the most used fossil fuel it only provides 3.6% of the United States electricity (2007 est.).
Formation
Oil is formed over a process that takes millions of years and will continue as long as there is life on Earth. Millions perhaps billions of years ago existed prehistoric life such as dinosaurs, exotic plants, and oceanic trilobites. Then there were extinctions that ended certain periods of the Earth's history. The process starts with dead plant and animal matter that is buried under sediment. The matter decomposes and what is left are the fossil remains of the animal and the carbon and hydrogen that once formed its body. Remains are cooked into complex hydrocarbons by heat generated from the Earth's pressure. Technically oil is a bio-fuel, because it comes from plants and animals.
Drilling & Refining
Petroleum is only useful to mankind if it can be extracted from the crust and converted into useful products. Some of the basic products we produce with oil are; kerosene, gasoline, diesel, heating oil, fuel oil, plastic, lubricants, pesticides, and fertilizers.
To drill for oil a person needs a way of extracting it and to do this we use pump jacks, oil wells, and water pumps. A water pump will usually pump water to the area where the oil reserve is located. Since oil is hydrophobic (does not mix with water) it will try to move away from the water. The oil will then move up a pipe drilled in the ground that leads to a pump jack, from here the oil will be transferred through a pipe to a storage area.
Now that we have the oil out of the ground it must be refined so that it can be burned cleanly and efficiently. When oil arrives at an oil refinery and is being prepared to be burned it is piped through a furnace where it is heated, then it is piped to a fractionating column. A fractionating column separates the oil into "fractions", which are the products (gasoline, diesel, plastic) that are produced from oil. The fractions of the oil at the top of the column have lower boiling points than the ones at the bottom. This is a basic overview of the oil refining process, oil goes through many more processes before leaving the refinery.
Oil Crisis of 1973
The oil crisis in 1973 started when OPEC decided that if the United States sided with Israel in the Yom Kippur war that it will not export oil to the United States. This caused a sudden spike in oil prices, so in response to this Richard Nixon who was the president of the United States at that time imposed price & wage controls on the price of oil. He put a 90 day freeze on oil prices in America. This caused a shortage because if oil cannot be traded at the free market value no oil company will produce or sell it. If an oil company did it would be taking big losses. The collapse of Communism in Eastern Europe and Asia which occurred from 1989-1991 partly resulted because of price & wage controls.
Oil Crisis of 2008
Long before 2008 in 1981 Congress passed a bill that banned offshore oil drilling. The results of doing so were reflected in the oil prices seen in July of 2008. Now more towards the future in late 2007 Congress passed an energy bill that would mandate usage of alternative energy and not allow the free market to allow choice of the most efficient energy. Alternative energy is expensive to build and maintain, it also increases the price of oil. It does this because if Congress mandates usage of a less efficient product in this case that product is alternative energy; oil will begin to cost more because it is more valuable eventhough alternative energy costs more to build.
The Oil Crisis of 2008 approached a peak in July, where oil hit a high of $145 a barrel. President Bush and his Administration fought the ban on offshore oil drilling that had been put in place by Congress 27 years ago. About a month after the Bush Administration started fighting the ban on drilling oil was around $120-$130 a barrel. Lowering demand for oil due to the economic crisis also contributed to oil's fall in value. On September 26, 2008 Congress officially lifted the ban on offshore oil drilling. By the first of October oil had fallen to $90-$100 a barrel, and on November 12, 2008 oil had finally dropped back down to normal levels closing that day at about $56 a barrel. An ethanol company named Verasun went bankrupt because ethanol is an expensive and inefficient fuel. Gasoline is more efficient and less expensive. Other ethanol companies including Archer Daniels Midland (ADM) stock dropped over 50%.