On this day in economic and business history ...
The Dow Jones Industrial Average (DJINDICES:^DJI) was first published on May 26, 1896. Charles Dow, working in partnership with Edward Jones and Charles Bergstresser, was a pioneering financial journalist who began creating stock indexes (primarily composed of railroad companies) in 1884 to flesh out his daily news bulletins. These quick briefs would be hand-delivered to traders on the New York exchange floor throughout the day and would later be aggregated into a close-of-business news recap called the "Customer's Afternoon Letter" -- the progenitor of The Wall Street Journal, which was originally only four pages long and cost its stock-loving readers a mere two cents.
Charles Dow's early forays into stock indexing coincided with a massive boom in railroad investments, an echo of the explosion of railroad companies that followed the construction and completion of the Transcontinental Railroad. However, a massive financial panic struck in 1893, crushing many railroads and causing a multiyear recession. Three years later, Dow created his first "Industrial Average," which contained only one railroad company -- and this company was actually a diversified materials enterprise as well. The Dow Jones Industrials became a symbol of American business durability while also showing the ability to adapt when necessary.
Few of the Dow's first 12 components (read more about them by clicking on the link) remained on the index for very long, but one -- General Electric (NYSE:GE) -- proved too important to the American economy to keep out. GE left the Dow in 1898 but would return in 1907, and it has been an important part of the Dow ever since.
Early in the morning on May 26, 1908, an oil well drilling more than 1,000 feet beneath the sands of Persia (now Iran) at Masjid-i-Suleiman struck oil, and a gusher shot up 75 feet into the sky. It was the first successful oil well drilled in the Middle East, and its discovery would change the region and the world.
The well was the first success in a seven-year partnership between financier William D'Arcy and oil explorer George Reynolds, who had searched Persia fruitlessly since the former had obtained a drilling license in 1901. The situation was dire in 1908 -- Masjid-i-Suleiman was quite literally D'Arcy's last chance. Wired tells the tale of the discovery in greater detail:
The site was so remote that it took five days before D'Arcy got word by telegram in England. "If this is true," he replied, "all our troubles are over." It was indeed true, and more wells hit oil elsewhere in Persia, including a huge one in September.
D'Arcy and Burmah reorganized their holdings in 1909 as the Anglo-Persian Oil Co. (which became the Anglo-Iranian Oil Co. in 1935, British Petroleum in 1954, and BP (NYSE:BP) in 2000). Its initial public offering of stock shares sold out in 30 minutes in London. People stood five deep around the tellers' cages to buy shares in Glasgow. The race for oil accelerated throughout the Middle East.
BP retained a major presence in Iran until 1951, by which point the value of Iranian oil reserves was beyond doubt. Other oil discoveries took place in the years that followed the gusher at Masjid-i-Suleiman, after the close of World War I. British drillers struck oil in Iraq, near Mosul, in 1927, and Chevron (NYSE:CVX), then operating as Standard Oil of California, tapped Saudi Arabian oil in 1938, on the eve of World War II. Other discoveries made around the time of the first Saudi gusher established a number of smaller Middle Eastern nations as legitimate major oil producers as well.
Today, the Middle East produces roughly 30% of the world's total oil output, with Iran responsible for roughly 5% of the global total. That's more than 26 million barrels of oil every day, as it's been for years. Billions upon billions of barrels have flowed out of the rock and sand of the Middle East, and it all began on that fateful morning in 1908, when Reynolds and D'Arcy uncovered something so much larger than they could have ever imagined.