The Centenary of West Texas Intermediate*
Evan Zabawski | TLT From the Editor March 2012
*Not actually 100 years ago, nor in western Texas.
Crude oil benchmarks were introduced as a point of reference in the 1980s.
ON MARCH 12, 1912, AN OIL WELL WAS COMPLETED ON FRANK M. WHEELER’S FARM, LOCATED ABOUT 12 MILES EAST OF CUSHING, OKLA., and one mile north of present Drumright, Okla. Wheeler had leased his mineral rights, at a rate of one-eighth of all the oil discovered on the lease, to Thomas Baker Slick, who was financed by Charles B. Shaffer out of Chicago.
Wheeler No. 1 Well, as it came to be known, had a depth between 2,319 and 2,347 feet and blew out about 400 barrels per day. Attempting to hide his discovery, Slick capped the well and spread fresh dirt over the oily dirt. He then covered it with a tub which he, in turn, covered with several hundred pounds of weights. The well had such great pressure that it would lift the tub, weights and drill, forcing out two barrels of oil every 17 minutes, earning it the nickname “Old Faithful.”
Slick was so protective of this discovery that he even cut the phone line to the Wheeler house to prevent word from spreading. He then went to Cushing to secure all the horses and liveries in hopes it would prevent other fortune seekers from visiting the well site. This subterfuge would only last about five days around town, and on March 21 the local paper informed the world with the headline “Splendid Oil Find.”
A virtual forest of oil derricks sprang up on all sides of Wheeler No. 1 as Cushing became a boomtown, thereby naming this field of discovery as the Cushing Field. The Shaffer Oil Co. opened an office in Cushing, and later another in Drumright.
Within one month, Wheeler was receiving $125 in royalties every day. A few months later, there were 14 wells, which eventually grew to 45 wells, with only one dry hole drilled. Without a nearby railroad, the Prairie Oil and Gas Co. (later Sinclair Oil Corp.) laid its pipe in the ground to help move the oil to nearby tanks.
Within one year of the original strike, there were 150 wells producing a total of 23,079 barrels per day. By July 1914 there were 890 wells producing 161,078 barrels per day and 182 new wells underway, with only 32 dry holes drilled. Wheeler’s royalties had now doubled and 1,843,338 barrels of oil were stored in tanks fed by the pipeline. In May 1915 there were 3,090 wells producing a total of 310,000 barrels per day, and in June 1915 the produced oil totaled 8,002,500 barrels. At the end of 1919, at its peak, the field had produced 236 million barrels of oil and accounted for 17% of all the oil produced in the U.S. that year.
Through the 1920s and 1930s, production dropped rapidly as wells were abandoned, and by 1955 it was only producing 6,209 barrels per day. Over the next 30 years, production continued to slow down to only one barrel per day from Wheeler No. 1, as more wells ceased production.
Around the same time, crude oil benchmarks were introduced as a point of reference in the selling and buying of crude. The three primary benchmarks are Dubai (from the United Arab Emirates), Brent Blend (from the North Sea) and West Texas Intermediate (from the U.S.).
By the 1990s all the refineries were gone, and Cushing was home only to pipelines and massive tanks farms. With 5%-10% of the total U.S. inventory held here, Cushing is a major hub in the oil supply from the Gulf Coast. In 2006, thanks to production increases in the Canadian Oil Sands, one pipeline reversed direction, bringing oil into the Cushing Hub. Currently, the intention is that it be the southernmost hub of the proposed Keystone Pipeline.
Cushing is now considered the most significant trading hub for crude oil in North America and the WTI uses Cushing crude as a price settlement point. As such, Cushing proclaims itself to be the “Pipeline Crossroads of the World” and is the birthplace of West Texas Intermediate, smack in the middle of Oklahoma, “where the wind comes sweepin’ down the plain.”
Evan Zabawski, CLS, is the senior reliability specialist for Fluid Life in Edmonton, Alberta, Canada. You can reach him at evan@fluidlife.com.