The Oil Situation

WITHIN the past three weeks the price of crude oil in the Mid-Continent field has been cut 50 .per cent. Similar action has been taken, or probably, shortly will be taken, in most of the other fields of this country. This cut is very drastic. Is it justified? Some of the causes advanced for the cut are: that it is in line with the industrial downward readjustment now taking place throughout the country, and that there is an over-production of oil, which can best be slowed down by lowering the price of crude. In part, these two reasons are logically advanced, but such underlying causes as the great production- in Mexico have not been prominently brought forward nor the fact that it would be advantageous at this time to fill up the empty storage of many of the consuming companies at a low 'price. In order to properly comprehend the situation let us compare for a moment the production- of oil in the United' States and that in Mexico. Oil in the United States occurs in numerous often widely separated pools, varying in individual area, but each usually relatively extensive, compared to the area or gathering ground from which it is ultimately derived: It occurs in mod-erately porous reservoir rocks under such conditions of pressure, mobility and availability as to preclude its withdrawal except over a period of years-varying from 1 to at least 40 (average, say 15 years, depending on-the pool). One well will usually drain a limited area-2 to 10 acres-so that rate of withdrawal of oil under each owner's property is determined by the owner. - The important point to remember is that no matter how intensive the development, the oil reserves of -the United States cannot be materially exhausted' for at least 20 years, and the total available supply, not including shale oil, will probably require 50 to 75 years, or longer, for its withdrawal, the yearly rate of production decreasing slowly from this time on.