Petroleum Economics - Future Demand for California Petroleum Products (With Discussion)

When considering the question of future demand for crude petroleum in California, one must first decide whether it is to be approached in the light of the definition of "demand" when used in economics; i.e., "The quantity of any commodity required or sought in the market," or in the light of markets developed to dispose of total supply. Therefore, is the California demand of future years to be predicated on a continuation of supplying markets developed following the surplus production commencing in 1922, or predicated on supplying what would be termed economic markets ? If the latter, what are economic markets ? Obviously, the Pacific Coast States and Canada, Alaska, Hawaii and probably the Pacific side of Central and South America, can be considered as normal markets for California petroleum products. While there have been small quantities of gasoline shipped into the PacSc Coast from East Texas, transportation costs, plus import taxes in the case of foreign oil, are a sufficient barrier to justify considering that these markets will be retained. But how about our participation in Atlantic and Pacific foreign and intercoastal markets? During the five years preceding 1931 California shipped substantial quantities of gasoline to the United Kingdom and to France, Germany and Italy. During recent years our business in European markets has been restricted to occasional shipments of gasoline and Kettleman crude. This loss of business is occasioned by the development of production in the Mid-Continent, principally East Texas, and in Iraq, Rumania, Venezuela and other closer producing areas, which makes it impossible at the prevailing crude-oil prices for California to be competitive in supplying any substantial portion of these markets. It is therefore apparent that under a stabilized price structure that will return the California producer a reasonable price for his oil, future Atlantic foreign -business will be restricted to occasional spot cargo sales. As to Pacific foreign shipments which, in addition to Central and South America, consist principally of shipments to Japan, China, Australia and New Zealand: A considerable portion of the business we had with Australia and New Zealand until four or five years ago is now being