Factors Influencing Oil Security Prices

THE normal statistics of supply and demand of petroleum and its products have little more than local influence on the market movements of oil securities. The two major reasons for this condition might be called the technique of production and the technique of refining. The speed of improvement in each and the complete lack of control of their, inter-relation have resulted in overproduction of both crude oil and gasoline in the face of immense in-crease in demand. The trouble with oil securities has been that of the mushroom radio companies, where too frequent changes have killed the possibility of profits. It is a case of too much efficiency. During the past ten years there has been continual talk of wasting reserves of crude oil. This has been based on "present methods of production." Yet the methods of ten years ago in the oil industry are as antiquated today as the kerosene lamp.. The fear of famine has transformed the industry. The refiner, through the cracking process, has doubled the gaso-line output from a barrel of crude oil, thus doubling reserves and changing a current undersupply into oversupply. When the automobile driver desires he can again double reserves and transform want into abundance by demanding an automobile which will deliver twice as many miles per gallon of gasoline. Entirely apart from refining and in complete dis-regard for its needs, the oil producer has forged ahead at a pace too rapid for his own good. The science of geology has developed with experience and' lavish expenditure into a constant danger to profits in the production of oil. Two and one-half per ;cent of the producing wells in the United States are yielding one-half of the oil, while their flush production is used as an excuse to force down the price of crude oil until 200,000 wells must be abandoned or produce at a loss. The fabulous yield of the new high-pres-sure fields enables the fortunate owners to make a profit regardless of the price of oil. Such a condi-tion is unhealthy from the standpoint of oil itself and as a national policy. It is manifestly absurd to suppose that such a condition can endure for a gen-eration. There will come a day when the sequence of discovery will be temporarily broken, and at that time the consumer will be forced to pay heavy interest on the foolhardy policy of today.