When you’re standing at the gas station filling up your car, watching those digits on the pump flip by can be a sobering experience. Fuel prices, especially the price of gasoline, have always been keenly watched, so it’s hard to imagine a time when gasoline was a low-value waste product. But kerosene, sold mainly for lighting, was once king of the petroleum industry, at least before the automobile came along, to the extent that the gasoline produced while refining kerosene was simply dumped into streams to get rid of it.
The modern mind perhaps shudders at the thought of an environmental crime of that magnitude, and we can’t imagine how anyone would think that was a good solution to the problem. And yet we now face much the same problem, as the increasing electrification of the world’s fleet of motor vehicles pushes down gasoline demand. To understand why this is a problem, we’ll start off by taking a look at how crude oil is formed, and how decreasing demand for gasoline may actually cause problems that we should think about before we get too far down the road.