The oil market that sets today's gas prices was invented in western Pennsylvania

In the fall of 2026, energy is at the forefront as geopolitical events influence everyday American lives. Pennsylvania experiences higher diesel prices, with farmers paying more than $6 per gallon. Alaska witnesses unleaded gas prices exceeding $9 per gallon. As a historian at Penn State Altoona, I draw attention to the origins of the oil market, which began in northwestern Pennsylvania nearly 170 years ago.

In 1859, Edwin Drake discovered oil along Oil Creek near Titusville. His well was funded by Massachusetts investors seeking an alternative to costly whale oil. The initial oil deals were conducted on the streets of Oil City, where traders grappled with questions about the value and pricing of crude oil. To establish a formal system, oil traders developed a rolling oil exchange on Oil Creek Railway, with a daily 13-stop railway car.

Trading occurred on an honor system, without written certificates. As the industry expanded, a dedicated office was established in Oil City's Arlington Hotel. By 1874, Pennsylvania's Oil Valley produced around 30,000 barrels of crude daily, selling for an average of $1.15 per barrel. To facilitate transactions, traders issued certificates representing oil in their pipelines, leading to a massive volume of oil changing hands daily.

In 1878, oilmen formed the Oil City Oil Exchange, a symbol of the growing speculative aspect of the oil trade. The building reflected the industry's growth. Standard Oil, led by John D. Rockefeller, significantly influenced early crude oil pricing by owning offices in the exchange and setting prices itself. The exchange's dominance lasted until Standard Oil's monopoly was broken in 1911.

Oil price prediction became crucial after the 1970s oil crises, leading to today's reliance on exchanges like the New York Mercantile Exchange and the Intercontinental Exchange. The latest disruption came with Iran's attack on commercial ships in the Strait of Hormuz, causing a global oil price surge. Despite efforts to circumvent the blockade, oil prices remain elevated.

The historical Oil City Oil Exchange, though demolished in 1926, continues to shape the market that determines gas prices at the pump.