Papers - - Petroleum Economics - Collective Planning in the Petroleum Industry

The petroleum industry has been involved in Lore collective planning than any other American industry, with the exception of the railroads and utilities, and therefore is of interest as a case study in the experimental attempts to regulate the economic consequences of free competition. Planning is of course an integral part of effective management, hence at the outset a distinction must be clearly drawn between competitive planning and collective planning. By competitive planning is meant the aggregate of plans drawn up and prosecuted by the competing units occupying a field of enterprise; by collective planning is meant a collusion of plans, either originating among some or all competitors, or else imposed upon them, whether accepted or resisted, by some superior authority, usually the state. The prevailing popular concept of "planning" as applied to industry appears to be a program of conduct superimposed upon an industry unwilling or incapable of achieving a socially and economically desirable result under free competition. In this brief and tentative analysis of the subject, competitive planning is left to one side and attention is focussed upon the matter of collective planning as defined above. A basic functional difference between the two categories of planning is that in the case of competitive planning the individual plans are small, numerous, and tend to offset one another when in error; whereas in the case of collective planning, the separate plans are larger in scope, fewer in number, and tend to escape the incidence of the principle of compensation. In viewing the evolution of collective planning in the petroleum industry we find that during the past 20 years there have developed four more or less well defined collective plans and that at the present time the industry is deeply involved in a collective planning trend pointing toward further varieties. The four plans, which are to some degree transitional, may be conveniently named from the chief incidents that led to their formulations. The first collective plan was the program of control developed during the World War and hence called the war plan. The second plan was one originating within the industry in the period between the war and the inflation of the late twenties and called the inventory