Production Control In The Petroleum Industry

Production control in the petroleum industry may be discussed under three general heads: engineering, legal, and economic. Though the problems that fall under the respective heads of engineering, law, and economics are separate, they are dependent and interrelated. The present study will deal with the economic phases of production control and only incidentally with the legal phases as they affect the economics of the problem. No one of these forms of control is more important than the others. The engineers have performed their service well, and although there are many problems of engineering control yet to be solved, they are not pressing. Legal control is a problem for the legislatures and the courts to solve. The petroleum industry is such a comparatively young industry and the legal problems are of such recent origin that the courts have not yet been called on to settle all the issues and the legislatures still have before them bills concerned with the regulation of the industry. Economic control of production in the petroleum industry is a highly desirable goal but it has not yet been completely achieved. Since the first commercial well was drilled in 1859, there have been recurring periods of overproduction. (Over- production will be used here to describe a condition wherein so much crude oil is available that a satisfactory and reasonable price is not received for the product.) The production of oil in 1859 approximated only 2000 barrels. In the following year production jumped to 500,000 barrels, thus bringing into