Friday, September 18, 2009

Taipan Daily: Texas Oil and the Legend of Spindletop

Taipan Daily - a Service of Taipan Publishing Group
Print Edition Whitelist us About Us Archives Investment Marketplace
Friday, September 18, 2009
Taipan Daily: Texas Oil and the Legend of Spindletop
by Justice Litle, Editorial Director, Taipan Publishing Group

Two did it the old fashioned way, drilling holes deep in the earth. One did it with his mind. The fourth did it with a fountain pen. If Texas Oil had a Mount Rushmore, their faces would adorn it. A good ol’ boy. A scold. A genius. A bigamist. Known in their heyday as the Big Four, they became the founders of the greatest Texas family fortunes, headstrong adventurers who rose from nowhere to take turns being acclaimed America’s
wealthiest men.

– Bryan Burrough, The Big Rich: The Rise and Fall of the Greatest Texas Oil Fortunes

Whether by determination and grit or sheer accident of fate, some men lead more colorful lives than others. Such is the case with the old-time Texas oilmen profiled in The Big Rich by Bryan Burrough, a fascinating book chronicling “The Rise and Fall of the Greatest Texas Oil Fortunes.”

But before we can talk about the fortunes, we have to look at the gusher that made it all possible...

The legend of Texas oil was arguably born on Jan. 10, 1901, four miles outside the town of Beaumont in southeast Texas.

On that spot, not far inland from the Gulf of Mexico, stood a 15-foot hump of earth known to locals as “The Big Hill.” (Many things are classified as big in Texas.)

"Piggyback" their $53 billion deal for $100,000 of your own

Four notorious speculators are positioned to rake in billions by intentionally crashing the world's largest currency before October 7th

And this 5-letter code could hand you an easy 100 grand as they do it.

The spot was sniffed out by a one-armed rambler and jack-of-all-trades named Patillo “Bud” Higgins. After making his way to the glistening oil fields of western Pennsylvania – the place where Colonel Edwin Drake first discovered oil in 1859 – Higgins came back to his Beaumont stomping grounds convinced there was oil under The Big Hill.

Higgins was not only right, but right on a scale far bigger than he could have imagined. Yet fate can be cruel, and sometimes the early pioneer gets an arrow in the back for his troubles. Higgins was determined, but the one-armed visionary ran out of money before his dream could be realized. It was an odd duck named Anthony Lucas, a onetime captain from the Austro-Hungarian navy, who carried the torch.

Lucas and Higgins, two fringe characters with weak finances and strong convictions, spent most every nickel they could scrape together drilling dry or collapsed holes in the quest for black gold. But Captain Lucas kept on after Higgins threw in the towel, and sometimes that last mile makes all the difference.

Having run out of money but still possessing acreage, Lucas scrambled to find outside help at any cost. He got it in the form of two well-known Pennsylvania wildcatters, James Guffey and John Galey. In 1901, the workers hired by Guffey and Galey hit a massive gusher at “Lucas No. 1” (the name of the first successful well).

View The Lucas Gusher Image

The beautiful jet-black geyser that nearly “blew off the Christmas tree” in 1901 was the beginning of Texas oil. “The Big Hill,” little more than a pretentious lump of dirt four miles outside of Beaumont, entered the history books as part of a massive salt-dome oil field called “Spindletop.”

As Bryan Burrough writes in The Big Rich,

Lucas had never seen anything like [the first big gusher at Spindletop]. No human had. The Lucas No. 1 well changed the world forever. That first well produced at a greater rate than all other American oil wells in existence – combined. In a matter of days, in fact, the pastures around Spindletop would be producing more than the rest of the world’s oil wells – combined. Of those first six Texas oil wells, three produced at a higher rate than the entire country of Russia, then the world’s top producer.

Burrough goes on to note that “Spindletop not only created the modern American oil industry, it changed the way the world used oil.” The oil around Beaumont was too low quality for kerosene, but it made for “fine fuel oil,” and there was so much of the stuff that it was dirt cheap. Spindletop dropped the price of oil to 3 cents a barrel in 1901, at a time when a cup of water cost 5 cents.

Oil at less than a nickel a barrel was too tempting to resist for the railroads and steamship companies, who until that time had mainly relied on bulkier, less efficient coal. The Santa Fe Railroad was a case in point. After Spindletop, the Santa Fe went from one lone oil-fired locomotive to 227 in just four years. Other railroads and even navies soon followed suit. As Burrough writes, “Everything that today runs on oil and its byproducts, from automobiles to jet fighters to furnaces, barbecue grills, and lawn mowers – all of it began at Spindletop.”

More than 3,000 "Slush Funds" are brimming with cash… and you have the legal right to "raid" them for windfall payouts

There are six "funds" right now that are ripe for the picking… enough cash that you could easily swipe up to $109,122 in the coming months.

The only catch is: You have to take advantage by October 12, 2009.

The Roaring Twenties and The Big Four

At first, Texas didn’t know how to handle its incredible find. The big East Coast oil companies soon muscled their way in, cutting the legs out from under the scrappy wildcatters and siphoning the lion’s share of profits for themselves. “Purchasing, transporting, refining and retailing” became the province of experienced players like Shell, Sun and Gulf, while the locals stuck to exploration and production.

But as native Texans grew in knowledge and experience – as they figured out by trial and error what the business of oil was all about – they eventually retook the reins. The Texas state legislature passed laws more favorable to local interests, and knowledge and know-how steadily grew.

As Burrough recounts, “What the Spindletop boom provided native Texans and new arrivals was not so much a vault of black treasure as a classroom where the oil business could be learned.”

It actually took a few decades before Texas oil really came into its own. After Spindletop there was a long dry spell, with a focus on more proven places like Oklahoma. The “roaring twenties,” though, led to an explosion in oil demand, with automobiles leading the charge. (The number of cars in the United States went from 8,000 in 1900 – the year prior to Spindletop – to 10.5 million in 1920, and just kept rising from there.)

As consumer and business demand for oil products exploded in the ‘20s, so too did prices and profits. This naturally led to a fresh outbreak of wildcat fever, with countless schemers and shady characters dreaming of a new Spindletop.

Oil and gas have minted scores of Texas millionaires and a fair number of billionaires – a process that continues to this day. (For example, a former Enron trader named John Arnold, who founded a Houston-based hedge fund named Centaurus Energy after Enron’s collapse in 2002, managed to turn an $8 million bonus into a $2.7 billion energy trading fortune in less than seven years.)

As a class of rich, rowdy tycoons with deeply conservative instincts, wealthy Texas oilmen were eventually dubbed “The Big Rich” (giving title to the book). But over the roughly 60-year time period (1920 to 1980) that covered the rise and fall of Texas oil greatness, no other oilmen were quite as over-the-top successful as “The Big Four:” Roy Cullen, Clint Murchison, Sid Richardson and Haroldson Lafayette Hunt, Jr. (known to all as "H.L.").

If you enjoy the sweep of history and well-told tales of colorful characters, The Big Rich is a rip-roaring good read. Next week, we’ll take a closer look at “The Big Four” – Cullen, Murchison, Richardson and Hunt – and see what lessons we can draw from their adventures.

Warm Regards,


Are you familiar with the famous Jekyll Island meeting?

Refer to a friend

Latest Taipan Daily Issues

Market News Articles

Taipan Publishing Group

Taipan Daily - a free e-service of Taipan Publishing Group - is easily the most profitable 5 minutes of your day. To become a Taipan Daily member sign up here.

For more information, about Taipan Daily and Taipan Publishing Group, visit our home page.

TPG Resources

To advertise in our e-letters or on our Web site, contact us.

Republish Taipan Daily on your Web site, blog, or e-mail w/o charge. Learn how.

Have a question for our editorial team? E-mail us.

Interested in our team covering a topic in Taipan Daily? Send us an e-mail.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.