The present site was named Somerset when the First Townsite Company was formed on the Artesian Belt Railroad right-of-way on May 25, 1909, by A. M. Pyron, Carl Kurz, and Jonas A. Kerr.

In 1913, while drilling for artesian water, Kurz discovered oil and an economic boom followed.

Two oil refineries in the field and a pipeline into San Antonio handled the high-gravity crude.

The town grew rapidly from fifty residents in 1925 to 700 in 1928; it was served by a state bank, a ten-room hotel, and several machine and blacksmith shops.

A nearby lignite coal mine also added to the booming economy of the area.

According to the United States Census Bureau, Somerset has a total area of 2.0 square miles (5.2 km2), all land.

As of the 2020 United States census, there were 1,756 people, 475 households, and 353 families residing in the city.