Economics - The Petroleum Products Situation

In discussing the petroleum products situation the first thing that comes to mind is "what is happening to gasoline." Is the consumption increasing? How is the export market? What about imports? Are stocks on hand too high? Have we produced too much? This paper will attempt to answer these questions. Consumption of gasoline (motor fuel) in the United States in spite of the depression and the chaotic conditions of many industries has increased during 1931 about 2 per cent over 1930. This favorable factor was offset by a severe contraction in exports, which fell off about 30 per cent from 1930. This drop in exports was so large that very little more export business was done than in 1926 or 1927. Taking all demand combined, there was a decrease from the peak year of 1930 of nearly 11,000,000 bbl., amounting to slightly over 2 per cent. The units of the industry, though, should have expected some decrease and governed themselves accordingly. Let us see what they did. They reduced imports over 3,000,000 bbl., which helped. Production was cut 3,000,000 bbl., but this was not enough, so that stocks increased 1,800,000 bbl. whereas during the previous year stocks were reduced 2,500,000 bbl. It is apparent, therefore, that something was done to keep the industry in balance in regard to gasoline, but not enough. If the year had ended on Sept. 30, we could have said that production had been cut 19,000,000 bbl. and stocks had been reduced from the previous year, but the excessive production during the last three months of the year changed everything. It is a strange thing and worthy of note that the price of gasoline fell to its lowest levels when apparently the greatest improvement was being made, and that during the last quarter of the year prices started to improve, when, in spite of an improvement in total demand which approximated 1930, an excessive production caused an uneconomic condition to set in. Stocks on hand on Dec. 31 were unquestionably too high, possibly 10,000,000 bbl. more than was needed for a strong condition to obtain. It seems almost unbelievable that the industry would continue to produce