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Beginning in the late 19th century, California became a leading producer of extracted oil in the United States and around the world. In the past century, California’s oil industry grew to become the state’s number one GDP export and one of the most profitable industries in the region. The history of oil in the state of California, however, dates back much earlier than the 19th century. For thousands of years prior to European settlement in America, Native Americans in the California territory excavated oil seeps. By the mid-19th century, American geologists discovered the vast oil reserves in California and began mass drilling in the Western Territory. While California’s production of excavated oil increased significantly during the early 20th century, the accelerated drilling resulted in an overproduction of the commodity, and the federal government unsuccessfully made several attempts to regulate the oil market.

Oil in prehistoric California
Native Americans were keenly aware of oil reserves in California, and they relied on its utility for thousands of years, albeit not for energy sources. The most abundant oil seep in the ancient California territory was located in the La Brea territory—located in present-day Los Angeles. Native Americans used oil from La Brea and other seeps primarily as a lubricant, but they also used it as a sealant to waterproof canoes. When Spanish explorers arrived in California in the 1500s, they also used oil to seal cracks in their ships and the roofs of their homes.

Nineteenth Century
In 1865, seven years after Edwin Drake developed the first oil drilling system in North America—located in Pennsylvania—Union Matolle Company moved into California’s Central Valley, east of San Francisco. Union Matolle Company hoped to replicate the success of the Pennsylvania drillings and find large amounts of oil in Northern California. During this period, California’s population increased by approximately 375% in the years following the 1849 gold rush, and California’s demand for oil was increasing dramatically. However, Union Matolle failed to find sufficient oil supplies. The company could not produce the oil to keep up with consumer demand. As a result, Californians found themselves in desperate need of oil.

Meanwhile, in 1892, Edward L. Doheny, a gold prospector, and his partner, Charles A. Canfield, discovered an abundance of oil in Southern California. When word spread about Doheny and Canfields discoveries, drilling companies flocked to Southern California. By 1894, 80 wells were producing oil in the Los Angeles area; by 1897, the number of wells had bourgeoned to over 500. The discovery of oil in California had a significant impact on the price of oil—both in the state of California and across America. In 1860, 0.5 million barrels of oil were produced throughout the country. By 1895, the state of California, alone, produced 1.2 million barrels of oil. With the new oil supplies from California—along with increased oil production in Texas and Pennsylvania—the price decreased from $9.60 per barrel in 1860 to $0.25 per barrel in 1895.

American oil companies including Union Oil Company became concerned with this development because oil prices had fallen too low for oil companies to maintain high profit margins. Union Oil Company and other oil companies lobbied local and federal governments to regulate the overproduction in the oil market. Their attempts, however, were futile and no regulation was passed. Oil prices remained around $1 through the end of the 19th century.

Twentieth Century
At the turn of the century, oil production in California continued to rise at a booming rate. In 1900, the state of California produced 4 million barrels. In 1920, production had expanded to 77 million barrels. Between 1920 and 1930, new oil fields across Southern California were being discovered with regularity including Huntington Beach in 1920, Long Beach and Sante Fe Springs in 1921, and Dominguez in 1923. Southern California had become the hotbed for oil production in the United States. In a 1926 Times magazine article, it was said, “[The Standard Oil Company of California] is the largest individual producer of crude oil in the U.S. and dominates the marketing of petroleum products along the west coast of both Americas.” During this same period, California’s agriculture and manufacturing markets were also expanding rapidly, and the increased oil production helped to power the development of these industries.

However, the development of increased oil production in California had consequences. The additional California oil fields—along with booming oil supplies in Texas from Sindletop—resulted in another surplus of oil reaching the market, again impacting the price of the commodity. With the accelerated oil drillings, the price of oil in the 1920s fell from $28 per barrel to below $10 per barrel. The issue became an increasingly debated topic in the American economy and political arena. In 1924, President Calvin Coolidge created the Federal Oil Conservation Board in an effort to control oil production and stabilize the oil market. However, The American Petroleum Institute (API), representing over 500 oil companies, opposed the program because it feared many of its affiliated oil corporations would go out of business. Ultimately, through API’s resistance, Coolidge’s program never gained sufficient power.

In 1929, however, the sense of crisis in the oil market grew as vast amounts of oil supplies were going unused in Southern California and throughout the US. The API reversed its stance and urged its members to limit its oil production. Additionally, like his predecessor, President Herbert Hoover attempted to control oil overproduction on the federal level. Hoover met with California Governor C.C. Young to create a commission to regulate the oil industry. Hoover’s proposal was defeated because many of the largest oil companies opposed federal regulation. By 1930, there was no solution in place for the depressed oil prices in California and across the United States.