Economics - Petroleum Economics in 1930 - Summary

If 1929 witnessed a growing realization on the part of the oil industry that supply must be balanced against demand, 1930 proved conclusively that excessive inventories constitute a price depressant even with balanced conditions. Increased attention was certainly paid to economic considerations last year, and the achievement of holding daily crude production, with a constantly mounting potential, to levels 500,000 bbl. below the output of the summer before, deserves special mention. The ill-advised accumulation, however, of gasoline stocks, at least 10,000,000 bbl. larger than necessary, nullified the restraint exercised by the producers and finally necessitated drastic downward price revisions. An event of special significance was the appointment by the Federal Oil Conservation Board, last March, of a temporary Committee on Petroleum Economics that attempted a forecast of demand, an estimate of supply, and an allocation of the latter between the principal producing states. Thus for the first time was an economic program for an entire basic industry drafted by an independent body under the auspices of the Federal Government. The report was widely discussed and generally approved, but its schedules were not adopted by the refining division nor by oil producers in the State of Texas until too late to contribute to the industry's prosperity during 1930. If the restraint of November had been exercised in May a profitable year might have been the result: The gasoline price war in California during June, however, illustrated the point that even with a fairly sound statistical position insistent pressure to expand normal marketing outlets must result in losses to all concerned. The balanced program so painfully attained by producers must be maintained by refiners and distributors to be completely effective. Again in November the Federal Oil Conservation Board, acting on the request of the directors of the American Petroleum Institute, called its Committee on Petroleum Economics back into existence to prepare a new estimate for the next six months. An economic program adopted in advance of the winter period of accumulating inventories may aid this large and essential industry toward the profits to which it is entitled