on February 1, 2009
Oil 101 is a fascinating book. It explains everything I wanted to know about oil.
Over the past few years with rapidly rising and falling oil prices, politicians, TV pundits and market commentators blamed speculators, OPEC, refineries and a host of other seemingly random events. I felt that everyone understood only tiny portions of the oil business. There was no single source which pulled together disparate areas describing oil. Internet searches for oil definitions yielded individual descriptions without an overall context.
Downey's Oil 101 brings all parts of the oil business together in a logical easily understood manner. The sequence of chapters is perfect and the author makes no assumption of prior knowledge. The index is so thorough that I use the book daily as a desk reference.
The chapter on the history of oil is refreshing and is very much worth the price of the book in itself. The book rose my interest to visit the world's first oil well in Oil Creek near Titusville, Pennsylvania where the modern oil industry started in 1859. It was certainly an interesting trip.
The book explains clearly how oil markets operate and oil prices change. The amount of useful information contained in this book is phenomenal. A more important point that I like this book is that the book is very interesting and easy to read. This is exceptional for a highly specialized technical book. I highly recommend Downey's Oil 101. Below is the table of contents:
Part One: Oil fundamentals
Chapter 1: A brief history of oil
Chapter 2: A crude oil assay
Chapter 3: Components of oil liquids
Chapter 4: Chemistry of oil
Chapter 5: Industry overview
Chapter 6: Exploration and production
Chapter 7: Refining
Chapter 8: Standards
Chapter 9: Finished products
Chapter 10: Petrochemicals
Chapter 11: Transporting oil
Chapter 12: Storage
Chapter 13: Seasonality
Chapter 14: Reserves
Chapter 15: Environmental regulations
Chapter 16: New engine technologies
Part Two: Oil markets
Chapter 17: Oil prices
Chapter 18: Forward oil markets - futures and swaps
Chapter 19: Forward oil markets - options
Chapter 20: Managing oil price risk
Many of the reviewers beforehand indicated that they were industry professionals with several intro. texts and comprehensive introductions to the petroleum industry already in their bookshelves. I am not one of them. I approached OIL 101 as a complete rookie who was almost completely ignorant of the details and scope of the petroleum industry, but who had lots of questions.
Some of the questions I had (and were gloriously answered) in this wonderfully helpful book include:
. How did there get to be only about half a dozen major privately owned integrated oil companies in the world? (Mergermania, plus the fact that most OPEC nations and a large number of non-OPEC nations have nationalized their oil companies.)
. Does this "Big Oil" run the show as far as global exploration and production of crude is concerned? (Hardly: a number of OPEC countries have several times the reserves of Exxon-Mobil and the other big shareholder-owned corporations, no matter how those "proven" reserves are measured). Even non-OPEC "Pemex" (Petroleos Mexicanos) has reserves that outstrip those of the biggest Major, Exxon-Mobil.
. Why is it that the U.S. Northeast Coast is reliably served by oil pipelines carrying both "dirty" (crude) and "clean" (refined) petroleum up from the Gulf of Mexico, yet New England still depends on overseas tankers (complicated!).
. Is it true that the world has begun to run out of oil? (Apparently, yes, says author Morgan Downey, who holds to the "Hubbert Thesis" that about 30 - 40 years after a country has peaked in established reserves of crude oil, its output will start to slide -- irrevocably.) Reserves in the USA peaked in the 1930s, output peaked in 1970, and total U.S. production (even including Alaska) has been sloping downward ever since. This is especially scary since the evidence indicates that some of the biggest "bigs" -- the nationalized ones -- deliberately bumped up and overinflated their reserve estimates in the 1980s so that they could pump and sell more crude under OPEC quotas. But many countries are acting as though the easy-to-drill oil is getting scarce. Saudi Arabia, no. 1 in reserves, has started drilling for oil offshore. No country with access to huge amounts of crude on dry land is going to go offshore -- it's too expensive.
. Is it true that most of the plain old American 87 octane gasoline for cars is a generic commodity and goes through the pipelines as such? (Yes.) Is it true that any distinguishing features such as cleansing or performance-improvement additives, and color, are added to the gasoline right before distribution at the local level? (Again, Yes.) In fact, large shipments of 87 octane from multiple suppliers routinely go through the Texas - New Jersey Colonial Pipeline without being batched -- the quantity is measured coming out and since there is very little commingling, it all shakes out regardless.
. Does this mean it's largely irrelevant to the market if you decide to punish one Major Oil Co. in particular by refusing to buy their product at retail? (It makes very little difference -- again, what's put in and what come out may well have different suppliers and recipients.) Is it true that retail sellers of gasoline are usually independent entrepreneurs whose markup on the actual gasoline is only a few pennies a gallon? (Sadly, yes.)
Unsurprisingly given all this, Downey believes that in the near future we are going to witness:
. continued flaky and unreliable crude reserves estimates coming from the OPEC countries;
. increasing difficulty in drilling and procuring crude oil, especially offshore;
. ever more expensive and elaborate methods to suck up, blow out, flood out, or otherwise squeeze as much oil as possible from dying wells, both on- and offshore;
. and a likely lessening in the number of "branded" filling stations by the five of six majors who sell gasoline at retail here in the USA (Exxon-Mobil, BP, Shell, Chevron and Conoco-Phillips), because retail is the most commodified and least profitable segment of vertically integrated oil, as opposed to upstream exploration and drilling. (That aspect being the most risky, I need hardly say.)
There is so much more that Downey covers, including enough geology that we can understand where oil is worth prospecting for, and where not; a chemical assay of crude oil and its trip through (chiefly U.S.) refining with its emphasis on "catalytic cracking"; and in fact what happens to those hydrocarbon molecules that they can wind up in products as disparate as aviation gasoline, retail automotive gasoline, jet fuel, bitumen (from which asphalt is made), and olefins, and plastics, and so on and on. He further covers US environmental laws, the many, many ways there are to drill for oil (and the increasingly complex construction of deepwater rigs), the many ways that speculators and Big Oil can hedge risk (it just starts with options and gets madely derivative at times), and whether a national reliance on ethanol was a sound choice (Well....).
I do wish Downey had spent a little more time on natural gas (or as he chemically and correctly calls it, "methane") past the point of getting it ready for the natural-gas pipeline, but I understand as an author he had to draw the line somewhere. All in all OIL 101 is an amazingly fact-filled and interesting 433 pages of Things Petroleum; it even has a very useful and comprehensive Index. Now, if you are looking for politics and drama in your oil, there are many books that tackle the issue that way (I would recommend in particular THE PRIZE by Daniel Yergin). But if you want the facts, up straight, comprehensively, logically explained and understandable to the layman but not dumbed down, you should buy OIL 101. With similar intro books and texts selling for two to three times as much, it's quite a bargain, too!
on December 10, 2009
As a commodity markets professional with over 12 years experience in the industry, I did not expect to gain a significant amount of incremental knowledge from reading this book. Boy, was I wrong!
From the first chapter which gives an overview of the oil industry to the last on the the oil derivatives markets, I learnt new information from seemingly every page. As I read through the book, nomenclature and practices that I had taken for granted in the business took on more significant meaning as I understood why they existed (e.g. why do US domestic flight routes use JetA and international routes use JetA-1? Because JetA-1 has a lower freezing point suitable for polar routes and because JetA production is more profitable to refineries as it can be produced in slightly higher volumes).
And given that oil is a commodity with global impact, it affects the industry practices for other commodities as well. Thus, an investment in this book has benefit outside the oil industry. I have subsequently bought copies of this book for colleagues who are also commodity professionals; it is that good.
on September 11, 2009
This is an excellent starting point for anyone - whether they are a student or a hobbyist, to learn in a clear, concise and systematic manner, about liquid oil exploration, production and use. This is not a high-level technical manual, but it does cover all the essential details; geology, engineering and chemistry of liquid oil and oil products. It is a well laid out text, it is easy to read and it would be a first choice undergraduate text for a one semester course for engineers, scientists and economists.
on December 5, 2011
I'm amazed by this book. It contains one of the most comprehensive and thorough yet concise descriptions of the oil and gas industry I've ever seen. The title is entirely appropriate, "Oil 101" contains all of the information you need to understand everything from the basics of petroleum geology, exploration, production, and refining, to transportation and petroleum marketing and retailing. It's great value too because an introductory course containing the same content would likely run you in the hundreds of dollars.
I picked this book up because I wanted an integrated review of the industry. I'm not a neophyte and Oil 101 taught me things I did not know. If you're new to the industry and are looking for a comprehensive overview, I can strongly recommend this title.
Very easily 5 stars.
on January 4, 2010
I have read over 10 oil & gas and energy overview-related books, including all of the PennWell Non-technical guides and other energy economic and energy political economy texts.
This book's is the best one for people specifically interested in oil and gas.
The title of this book is too modest considering the prevailing standard for "101" books. It is more, and better, than a 101-level text.Mr. Downey does not waste time and gets to the facts, something important to the impatient reader like myself.
Most authors like to listen to themselves talk, but not Mr. Downey. He spares us the annoying rambling that exists in most introductory texts across every subject area and instead gets to why we bought the book in the first place: to selfishly learn what interests us.
Mr. Downey intricately explains all the important components to all sectors of the Oil & Gas industry, from semi-submersible technology to double bonds and the first spindle top.
Anyone who works in, or is learning about the Oil & Gas industry, should read this book. If you are a student, engineer, or business leader, you should read this book. This book lacks bias and simply delivers facts coupled with analytical interpretations.
What is more, if you are an economist and you don't want your assumptions about the fundamentals of oil and gas and the industry to tear down those fantastic model results, you'd better read this book.
This book will not only get you through a oil & gas business interview, it will educate you with technical details that can enhance your skill, knowledge, and competitiveness.
on January 20, 2013
As a 35 year veteran of the oil business, I have absorbed a lot of information, data and knowledge during my career. Technology, communications, geopolitics and macroeconomics have radically changed the energy landscape. The structure of the industry has undergone massive upheavals with mergers, acquisitions and spinoffs. So much of what is written - Yergin's The Prize and Anthony Sampson's The Seven Sisters come to mind - has become outdated and of merely historical interest. While it is important to keep abreast of innovation and change in the oil patch, there is a bedrock of fundamental knowledge about the petroleum business that one must grasp. More than any other primer on the business, Oil 101 gives you the critical mass, the starting point for understanding how things work. It steers clear of intrinsic jargon and extremely technical concepts, conveying information in a language that the layman can readily comprehend.
I read the book last year and not only refreshed my knowledge of the industry but tapped into fields that I was less familiar with (e.g. petrochemicals, natural gas). Downey does an excellent job explaining pricing, particularly dissecting the Brent market. I have sat through confusing lectures by traders trying to explain Dated Brent, CFDs, DFLs and BFOE and how paper and physical markets intersect. Downey's approach is basic and intelligible. It is an excellent reference.
I recommend this as required reading for anyone at any stage of their career, the new hire, the mid-level manager, the seasoned executive.
Disclaimer: I have never met Morgan Downey but am an ardent user and supporter of Bloomberg products (news and terminals). Mr. Downey runs the Commodities Desk for Bloomberg.
- John Driscoll, Singapore
on July 16, 2009
This has to be the most thorough & well written book on oil out there. Also, don't let the title fool you, it may say Oil 101 but this is a good read for even veterans in the business. If you want the ONE book that will teach you almost everything you'll ever really need to know about oil... this is THE Book. A++
on October 11, 2009
As a keen amateur investor, I've found after reading this book (twice), I get a lot more out of reading a report or article about what an oil company is up to. It's seriously full of well-explained facts about the oil and gas industry. It is quite an achievement that the one book can cover such diverse topics as hydrocarbon chemistry, world oil reserves, futures trading and so on, with such clarity.
I also think its unbiased nature helped me get a better understanding of oil depletion issues ("Peak Oil" theory). Almost everything else I've read seems like pure polemic (plenty of self-interest on both sides of the argument I guess).
EDIT: A couple of days after writing my review, I noticed Morgan Downey had just written an article about the US 'cash for clunkers' scheme on TheOilDrum website ( [...]). Struck me as a good example of his style of writing in Oil 101. He makes some thoughtful observations in the article, backed by facts. His measured responses to some, at best misdirected, comments following his piece make interesting reading too (...and in the unlikely event I ever make it to NY I'll be taking the author's book with me, and taking up his offer of a few Brooklyn Beers!)
on November 11, 2009
I had no prior knowledge of the oil industry up until recently and needed to pick up some basics fairly quickly, so I bought Oil 101 off Amazon and found it well worth the effort. It's got enough detail to provide a solid foundation, but it's written in a readable format. I thought the first couple of chapters on OPEC and the oil industry in general were laid out well and would be beneficial to anyone interested in the global economy as a whole.
Glad I own it, highly recommended.