PORTLAND
MARKET
REPORT
January update
The end of 2018 marked 100 years since
the guns of the First World War fell silent.
Understandably most of the collective
memory of the war has focussed on the
human suffering experienced during the 1914-
18 hostilities. But the First World War also
marked a major energy transition, as power
from coal began to diminish in the face of
increasing oil usage. At the beginning of the
20th century, coal completely dominated the
energy world, making up 96% of global fossil
fuel consumption. But by 1920 that figure had
fallen below 85% and it was oil consumption
in the war years that was largely responsible for
this decline.
The British Navy – at the time unsurpassed
in scale and technical specification – had been
the first to see the benefits of oil rather than
coal-fired steamships. Both Winston Churchill
as First Lord of the Admiralty and Jackie Fisher
as First Sea Lord, had long championed liquid
fuel as the Navy’s preferred power source.
Coal was a cumbersome fuel to transport and
slow and difficult to load onto vessels. This
meant that ships lay prone in a harbour for
days on end, whereas refuelling by oil could
be done at sea, thus maintaining the ship’s
battle readiness plus its manoeuvrability.
Furthermore, oil had a greater thermal content
than coal meaning boilers could be smaller
and lighter and thus ships could go further
and faster. Finally, oil offered a key tactical
advantage in that it created less smoke than
coal and thus ships would be less likely to
reveal themselves to the enemy. The result of
this sea-change in thinking (see what we did
there?!) was the launch in 1913 of the world’s
first oil only battleship (HMS Queen Elizabeth –
a so-called super dreadnought) and by the end
of the war, all new naval vessels were built with
oil burning capacity.
The transition to oil in the Navy was a
relatively smooth one, but the equivalent
transition in the army was a virtual energy
revolution. In 1914, the Allied Armies of the
“RAPID PETROLISATION DURING
WW1 SAW OIL PRODUCTION
INCREASE BY 25% IN FOUR
YEARS”
First World War – along with their Central Power
counter-parts – were almost entirely reliant
on horsepower. Some estimates have over
6m horses serving in WW1 (one horse in the
field for every 3 men) and this equine reliance
was reflected in the fact that the British Army
only possessed 827 cars and 15 motorbikes in
1914. Four years later the British had 56,000
trucks in operation, along with 23,000 cars and
34,000 motorcycles! In the Royal Air Force,
the transformation was no less spectacular.
Fewer than 1,000 planes (on all sides) were in
operation at the beginning of the war. But by
1918, over 200,000 planes had been involved
in the conflict and Britain alone was producing
over 2,700 planes per week.
“IN 1914, BRITAIN DIDN’T
EVEN HAVE A REFINERY,
WHEREAS AMERICA HAD
OVER 20”
All of these new machines of
transportation were powered by petroleum and
there was one country that had the reserves
and technology to supply them. By 1914,
the USA was already responsible for 65% of
the world’s oil production, which at the time
stood at 56m tonnes per annum (that’s 1.2m
barrels per day – a far cry from today’s figure
of 95m bpd!). But the rapid “petrolisation”
that the First World War set in motion, saw
oil production increase by 25% in four years.
What’s more, America’s share of that increase
also went up, so that by 1918 over 75% of the
world’s oil was supplied by the USA.
And it wasn’t just in crude production
that America dominated the oil sector. In
1914, Britain didn’t even have a refinery,
whereas America had over 20 – all of which
were processing oil using techniques and to
standards that today would still be viewed
as modern. And because the First World War
demanded different grades of fuel, so US
refining technology had to innovate to keep up.
Prior to the war, kerosene was pretty much the
only product that came from crude (for heating
and lighting), so refineries were simply huge
kettles which boiled crude oil, skimmed off the
kerosene layer and then (shockingly) either
just burned the remaining volume or dumped
it. But cars, tanks, planes and ships now all
needed different types of fuel. Therefore,
the war years saw the rapid development of
techniques such as thermal cracking, whereby
heavier crude molecules were “cracked” into
lighter ends and this resulted in the doubling of
gasoline, naphtha and diesel production.
America’s total dominance of the oil
sector by the end of the war continued for
most of the 20th century and the power and
wealth that this generated, played a key part
in cementing America’s global hegemony.
If any comparisons are to be made between
the present day and 100 years ago, consider
perhaps China’s current total dominance of
the electrical battery market. In 1918, the
increasing use of oil ensured the terminal
decline of coal and the supply of that oil was
effectively controlled by the USA. Of course,
the jury is still out on whether electric mobility
will have the same impact on the 21st century
as oil had on the 20th. But if that was to be
the case, then the fact that China currently
buys more than 70% of the world’s precious
metals and manufactures over 90% of the
transportation batteries which are made from
those precious metals, would surely be an
indicator of which country will be the dominant
super-power of the 21st century.
For more pricing
information, see
page 22
Portland Fuel Price Protection
ection
www.portland-fuel-price-protection.com
Fuel Oil News | January 2019 11