Like it or not, oil is vital to our civilization. It's found pretty much everywhere you look. Beyond the obvious daily use by Americans of millions of barrels of oil per day just to fuel their cars, oil and its byproducts are found in everything from plastics to dentures and even soft contact lenses. The oil industry itself may be going through some trying times at present, due to the more than 50% drop in the price of crude oil some 18 months ago, but it is still extremely important to scores of constituents: consumers, nation-states, and investors, to name a few.
With this in mind, some of the Motley Fool's best and brightest put their minds together and came up with three facts you probably didn't know about the oil industry.
Last month, Saudi Arabia confirmed that it plans to sell a less than 5% stake in its national oil company, Saudi Aramco, in an initial public offering.
Deputy Crown Prince Mohammed bin Salman, who is spearheading a grand plan to wean Saudi Arabia off its dependency on oil, is hopeful the sale will put a value on the entire company in excess of... wait for it... $2 trillion.
That's a staggering number, and if the kingdom were to achieve it – which is entirely plausible -- it would immediately vault Aramco to the top of the world's most valuable companies. To give you some idea, $2 trillion exceeds the combined market value of Apple, Google's parent Alphabet, Microsoft, and the world's current most valuable publicly traded oil company, ExxonMobil (NYSE:XOM).
In fact, the only company ever to exceed $1 trillion in market valuation was another state-controlled oil company, PetroChina, and that was due to a stock market bubble.
And Saudi Aramco is in a different league than PetroChina. Keep in mind, its annual production was equivalent to more than half (53%) of the United States' total consumption of petroleum products in 2014
$2 trillion? Not bad for a company that has its roots in the California Arabian Standard Oil Company, formed in 1933 to manage an oil concession ceded by Saudi Arabia to the Standard Oil Company of California (now Chevron).
According to a NASA report, "97% of climate scientists agree" that "human activities" are heating up our home planet. Which activities in particular? It could be texting or Game of Thrones binge-watching -- but my money's on the likelihood that we're heating up the planet by burning too many hydrocarbons.
But here's something you may not have heard about yet: By burning all that coal, oil, and natural gas, heating up the atmosphere, and melting much of the Arctic ice cap, it's now become possible to extract even more hydrocarbons from beneath the ice!
As recently as 30 years ago, half the Arctic Ocean remained frozen year-round. But NASA satellites today show that less than 30% of the Arctic still stays frozen year-round. As a result, sea beds containing valuable oil and gas deposits have become accessible to the same oil companies that many people blame for causing global warming in the first place. (American oil companies -- and the Russians, too.)
How much oil and gas are we talking about here? According to global security intelligence company Stratfor, "30% of the world's undiscovered natural gas and 13% of its undiscovered oil reserves" reside in the Arctic.
Granted, estimating the proportion of something still "undiscovered" is a bit like seeking the proverbial black cat in the darkened room at midnight. But according to the U.S. Energy Information Agency, global proven natural gas reserves alone totaled 6,973 trillion cubic feet, and at a spot price of $2 per MMBtu (1 cubic foot of gas is about 1,000 BTUs), that works out to nearly $14 trillion worth of gas that we know about.
Even if there's only as much gas left on Earth, undiscovered, as what we've already "proven" to exist -- that's trillions of dollars of untapped gas alone. And unless global warming comes to a screeching halt, you can bet your bottom dollar that someone's going to try to drill it.
While Saudi Aramco is enormous by today's standards, Standard Oil, created in the 1800s by none other than John D. Rockefeller, was the Saudi Aramco of its day. We all learn about John D. Rockefeller and his Standard Oil Trust in the "Robber Barons" part of high school U.S. history classes. What most people fail to appreciate is just how truly colossal Standard Oil was.
No doubt, as part of your history curriculum, you also learned that Standard Oil was broken up in 1911 thanks to the first of many of the federal government's antitrust moves. In Standard Oil's case, the breakup was specifically brought on by muckraking journalist Ida Tarbell's expose piece "The History of the Standard Oil Co." The product of this breakup, which split Standard Oil into 33 separate entities, gave birth to 34 huge companies in their own right. Just take a gander at just a few of the "children" of Standard Oil:
- Standard Oil Co. of New Jersey, which became Exxon, eventually merged with Standard Oil Co. of New York (named Mobil) to form ExxonMobil: current market capitalization of $368.6 billion.
- Standard Oil of California acquired Standard Oil of Kentucky in 1961 and was renamed Chevron Corporation: current market capitalization of $192 billion.
- Standard Oil Co. of Ohio (Sohio), as well as Standard Oil Co. of Indiana (Amoco) were eventually acquired by British Petroleum (NYSE:BP), whose current market capitalization is $102 billion.
The sum market values of these entities alone comes to $662.6 billion, and the entities in question were just mere parts of the puzzle that was Standard Oil.
Rockefeller's Standard Oil controlled, it is said, 90% of the oil industry in the United States at its peak. That alone should say something. (Can you imagine a corporation of that size so common these days?) But the most useful figure, to truly grasp just how large Standard Oil truly was, comes from Malcolm Gladwell's book Outliers. In it, he calculates John D. Rockefeller's net worth in today's dollars to be a staggering $318.3 billion. You don't have to check the latest Forbes list to know that Rockefeller makes Gates, Buffett, Slim, and Musk look like paupers.
Extrapolating from the fact that Rockefeller owned 25% of the original Standard Oil Co., this would make the company worth some $1.27 trillion.
And you thought Apple reaching a market capitalization of $700 billion was a big deal.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Alex Dumortier, CFA, has no position in any stocks mentioned. Rich Smith has no position in any stocks mentioned. Sean O'Reilly has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Apple, and Chevron. The Motley Fool owns shares of ExxonMobil and Microsoft and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.