Papers - Petroleum Economics - Market Behavior of Oil Shares from 1932 to 1937

The purpose of this paper is to analyze the behavior of oil securities during the six-year period January 1932 through December 1937. This period was selected because of its varied character. It includes the depths of the depression, the broad and spasmodic recovery, and the recession collapse. The first part of the analysis is devoted to the correlation of a number of economic factors with an index of 13 oil stocks. The second part is a comparison of the different,ial behavior of 6 oil stocks. The relationships developed here are only a few of many that might be considered in a complete analysis. The stock market is regarded as a barometer of business confidence and as such exerts an important influence upon corporate policies, particularly upon industrial expansion. The complex and continuously changing nature of its price structure, the ebb and flow of influences and the effects of impacts require dynamic rather than static analysis. When treated in this way, many of the important fluctuations in market prices and changes in the relationships between securities appear quite logical. The market for oil securities has varied widely in recent years. The Standard Statistics index of 13 oil stocks made a bull market peak of 166.7 in September 1929. The collapse of the boom and the ensuing bear market finally carried the index down to a low of 36.4 in June 1932. From this point oil stocks made an irregular recovery; they reached a top at 139.7 in March 1937, and after maintaining this approximate level through August, declined precipitously to 93.3 in December 1937. The prices of these 13 oil stocks have gone up and down under the influence of numberless variables. These variables are of two kinds, those external to the industry, and those that are solely due to its internal condition. The external factors are political, social, and economic, both domestic and foreign. These are the influences that induce the ebb and flow of all prices in general and security prices in particular. Among the internal factors are the regulation of industry, the development of new reserves and processes, and the disequilibrium due to lack of balance between supply and demand. Some of the simpler relationships are examined in this paper.