Validity Of Competition In A Natural Resource Industry

THIS paper assumes the incontrovertible nature of the statement that the validity of competition in the nonnatural resource industries is established firmly on the rate and extent of the economic development of the United States. It then demonstrates the nonexistence of any condition within the petroleum industry that would invalidate the principle of competition as applied to it. It points to the benefits that competition has effected in the oil industry and the reasons why the practice of the competitive principle should continue to keep the industry virile and progressive in meeting the requirements of future generations for the kind of products natural to it. Finally, it pleads for a clearer view of the affairs of the oil industry by seeing them against a background of the whole economy. INTRODUCTION Even a few years ago there would have been only an academic reason for presenting before this Institute a paper on the validity of competition in the oil industry or any other natural resource industry; today there is no more practical subject for this body to consider. In social importance it transcends attempted solutions of perplexing technical problems; and even the numerous legal and economic problems that grow out of administration of state regulatory measures appear to be of secondary importance because they would cease to exist if competition were abolished. The aspiration of certain elements of the Federal Government to acquire control of the oil industry has long been suspected The vital need for petroleum in the national defense ... confirms my belief in the urgent need of Federal legislation to safeguard our petroleum supply through prevention of waste and by establishment and maintenance of sound economic conditions in the oil industry... . But also it may be dismissed with this mere mention of it because it predicates government control and the abandonment or broad reduction of competition on a war emergency. Clearly, the fight for a nation's life may justify a government's control over men and resources that would be abhorrent and economically enervating under conditions of national security. More pertinent to the present matter, because it appears expressive neither of a personal ambition nor of an emergency condition but rather of the long-range view of a certain school of conservationists, is the pronouncement of no less an authority than the Attorney General of the United States, who has been repeatedly quoted by the press as saying that the American Petroleum Industry constituted a case "where the principle of conservation of an exhaustible and irreplaceable resource should replace the principle of competitive exploitation." The significance of this statement in the light of the commonly accepted meanings of the " principle of conservation" and of the "principle of competitive ex-