Economics - Economic Aspects of the Oil Situation

Economic law was accorded considerably more recognition by the oil industry last year than perhaps ever before. While proration was undoubtedly given added impetus in 1931, and the list of proponents of unit operation was noticeably lengthened, predominant evidence plainly shows that the functioning of economic laws dominated collective efforts to reduce the excessive above-ground supply of petroleum. Crude oil production was reduced more than 48,000,000 bbl. last year; imports from other parts of the world were substantially lower; stocks of crude were drawn upon to the extent of nearly 48,000,000 bbl.; domestic gasoline demand increased 2 per cent—and yet, prices of petroleum and its products were at the lowest levels in many years. To say that the ills of the oil industry during 1931 were due to the general depression that was felt in all other lines is tantamount to attaching an air of uncertainty to a group of commodities that have been proved to be an ever increasing necessity, even in times of depression. TO say that the potential productivity of proven oil-producing areas has been responsible for the unsatisfactory state of affairs last year, and now, is to admit failure to carry out the principles designed to control production in accordance with the limits prescribed by demand. In fact, there is no reason why a large proven potential supply of oil should not be considered a valuable asset to the industry; an assurance against future needs; a stabilizing influence in building up confidence in the ability of the industry to supply this and future generations with fuel and lubricant requirements at reasonable prices. At any rate, an assured future supply of oil should be interpreted to the public to mean that the oil industry is a legitimate, progressive industry, and not a group of prospectors madly searching for "liquid gold." There has been a great deal of romance connected with the history of the oil business—so much that the public has come to associate the word "oil" with untold riches. However, the financial statements of 1931 will furnish conclusive proof to the contrary. Too much oil, too many refineries, too many filling stations, too much capital invested; these and other "too muches" and "too manys" have perhaps been given more publicity than necessary. We seldom hear these