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By Joseph E. Pogue

Price is a complicated concept, for price is both a cause and an effect. This reciprocal aspect is commonly overlooked and the oversight is the source of many economic maladjustments. Price is the resultant of the ratio between supply and demand, but it differs from a mathematical concept of a proportion, by itself constituting an economic force which continuously alters the elements that determine the relationship. Price, therefore, is not merely the outcome of other forces but is in its own right one of the most powerful of economic agents. Price accordingly does not play a passive role; nor can it be sterilized or rendered inactive. In consequence, price cannot be fixed or at least kept fixed, except by the elimination of all freedom of choice on the part of producers and consumers. A primary objective of all economic activity is equilibrium. The same is true of a unit of economic activity, the single industry. The plane upon which equilibrium centers may shift in the course of time, but equilibrium itself is the point of departure and the point of return. If an industry is in equilibrium, that industry is operating effectively. The motivating forces of an industry—profits or the common good—are not to be confused with the prerequisite of equilibrium, but this mistake is often made. The producer is dominated by the profit motive; the consumer, or his collective representative, by the general welfare motive. No one is the advocate for equilibrium; that status is supposed to be arrived at automatically. If the forces of competition are perfectly free, such is the tendency. Equilibrium For the purposes of this analysis, equilibrium needs to be broadly defined and is conceived to involve: (1) balance between supply and demand; (2) internal equipoise amongst the elements within an industry; and (3) symmetry in respect to the whole economy. This definition implies flexibility and case of adjustment; a ready accommodation to change. Equilibrium does not postulate profits or nonprofits, social objectives or the lack of them. A decadent industry may be in equilib-

Jan 1, 1937

By C. V. Millikan, Herbert F. Beardmore

Declining Productivity Index, as considered herein, is a productivity index that has a substantially and consistently decreasing value when measured over a period of a few hours. If not recognized, it may be interpreted as representing an unsettled or unstable condition in a producing well. It forms the basis of a number of predictions as to future performance compared with the performance of wells in which the productivity index does not decline. The nost important of these are that: (I) the rate of oil production will decline more rapidly, (2) the gas-oil ratio will usually increase abnormally, (3) the amount of water ultimately produced will be negligible, if any, (4) stop-cocking will increase current production and decrease gas-oil ratio. When such relative well performance is indicated, it follows that certain reservoir performance and operating practices may be anticipated: (I) disappointing recovery, (2) longer natural flow, (3) no active water drive, (4) better evaluation of acidizing, shooting and reworking, (5) intermittent operation of wells, (6) smaller pumping equipment required. It is significant that the basis of these important predictions is bottom-hole pressure tests that can be made immediately after completion of the wells. Introduction "'Productivity index" is the number of barrels of oil produced per day per pound per square inch of differential pressure between the reservoir and the bottom of the well. "Declining Productivity Index," as considered herein, is a productivity index that has a substantially and consistently decreasing value when measured over a period of a few hours. Productivity index can be determined only when the rate of production can be stabilized. In most wells the rate of production and bottom-hole pressure are easily stabilized to give a constant productivity index for a period of many hours. A few produce so erratically as to preclude probability of an acceptable test in the usual sense. A satisfactory productivity index can be determined in some wells only by gauging the production accurately by hours, measuring the bottom-hole pressure continuously, and from these data calculating the productivity index for successive hours. Such figures frequently will have a decreasing value—that is, a declining productivity index—and when plotted on double. logarithmic cross-section paper with productivity index as ordinate and time as abscissa will be a straight-line curve. The angle between the curve and the abscissa is referred to as the rate of decline. Declining productivity index may appear to be the result of change in permeability to oil due to decreasing saturation of oil and increasing saturation of gas in the reservoir. It is possible that such is in fact the cause, but if so, more is involved than merely relative saturation of oil and gas. This seems evident because the rate of decline in productivity index is substantially the same regardless of the pro-

Jan 1, 1945

By I. J. Logan, Warren L. Baker

By 1950 or soon thereafter facilities will be available in foreign countries for the production, transportation, and refining of about 4,305,000 bbl per day of crude oil—a volume not far short of current United States output. This is indicated by announced plans for foreign expansion, - some of the work being already under way. The projected potential production is about 1,500,000 bbl per day or 50 pct above the record-setting foreign production of 2,810,000 bbl daily in 1946. The scheduled new foreign facilities are equivalent to almost one third of the present facilities of the United States. Fears that so much additional foreign oil may flood world markets and disrupt the domestic industry of the United States are not justified. The projected foreign expansion apparently has been planned on a sound business basis, with careful consideration of the world's actual need for all the projected additional production. Materially increased world demand for petroleum promises to absorb the increased supplies without ill effect upon the domestic industry. Even by applying conservative estimates of both foreign and domestic demand, it is indicated that world requirements can absorb the projected larger foreign output and still permit continued increase in United States production. World demand would have to increase only 5.7 pct per year in the 1947 to 1950 period to absorb the prospective supply. Such an increase may be conservatively projected, in view of past and current trends. Introduction Recent announcements of plans for expanding petroleum facilities in the Middle East and Venezuela foreshadow an unusually sharp increase in foreign production in the immediate future. Therefore, the next few years will bring far-reaching changes in world petroleum affairs, with foreign petroleum production and other activities assuming much greater importance than formerly. Tabulation of figures on development already under way or planned indicates that in the next several years facilities will be available for producing, transporting and refining twice the prewar production of foreign fields and about 50 pct or nearly 1,500,000 bbl a day above their record-level output of 1946. To say that foreign fields may be producing such an enlarged quantity by 1950 is, of course, a statement of great significance to everyone connected .with the oil industry and especially to those of the American petroleum industry. A production of 1,500,000 bbl daily is equal to the combined yield of the states of Oklahoma, Kansas, Illinois, Louisiana, Arkansas, Mississippi and New Mexico. This means that within the next several years foreign petroleum facilities will undergo a new expansion equivalent to one third of the present facilities of the United States. To think of such an expansion in foreign production is to raise at this meeting the question of what this prospective foreign development means for the United States, the American petroleum industry in general, and the American engineer and technologist in particular. It is only logical to question whether or

Jan 1, 1948

By Warren L. Baker, I. J. Logan

By 1950 or soon thereafter facilities will be available in foreign countries for the production, transportation, and refining of about 4,305,000 bbl per day of crude oil—a volume not far short of current United States output. This is indicated by announced plans for foreign expansion, - some of the work being already under way. The projected potential production is about 1,500,000 bbl per day or 50 pct above the record-setting foreign production of 2,810,000 bbl daily in 1946. The scheduled new foreign facilities are equivalent to almost one third of the present facilities of the United States. Fears that so much additional foreign oil may flood world markets and disrupt the domestic industry of the United States are not justified. The projected foreign expansion apparently has been planned on a sound business basis, with careful consideration of the world's actual need for all the projected additional production. Materially increased world demand for petroleum promises to absorb the increased supplies without ill effect upon the domestic industry. Even by applying conservative estimates of both foreign and domestic demand, it is indicated that world requirements can absorb the projected larger foreign output and still permit continued increase in United States production. World demand would have to increase only 5.7 pct per year in the 1947 to 1950 period to absorb the prospective supply. Such an increase may be conservatively projected, in view of past and current trends. Introduction Recent announcements of plans for expanding petroleum facilities in the Middle East and Venezuela foreshadow an unusually sharp increase in foreign production in the immediate future. Therefore, the next few years will bring far-reaching changes in world petroleum affairs, with foreign petroleum production and other activities assuming much greater importance than formerly. Tabulation of figures on development already under way or planned indicates that in the next several years facilities will be available for producing, transporting and refining twice the prewar production of foreign fields and about 50 pct or nearly 1,500,000 bbl a day above their record-level output of 1946. To say that foreign fields may be producing such an enlarged quantity by 1950 is, of course, a statement of great significance to everyone connected .with the oil industry and especially to those of the American petroleum industry. A production of 1,500,000 bbl daily is equal to the combined yield of the states of Oklahoma, Kansas, Illinois, Louisiana, Arkansas, Mississippi and New Mexico. This means that within the next several years foreign petroleum facilities will undergo a new expansion equivalent to one third of the present facilities of the United States. To think of such an expansion in foreign production is to raise at this meeting the question of what this prospective foreign development means for the United States, the American petroleum industry in general, and the American engineer and technologist in particular. It is only logical to question whether or

Jan 1, 1948

By Emby Kaye

It is the purpose of this paper to outline briefly some of the considerations that enter into the economics of so-called recycling, the generic designation of the relatively recently developed process by which a condensate† is separated from gas-distillate gas at high pressure and the residual gas returned to the reservoir. This subject necessarily embraces not only a discussion of factors that should be considered in projecting a recycling operation, such as estimating reserves, investment and operating costs, but also a comparison of condensate with other types of petroleum. The place of condensate in its relation to the total supply of crude oil is pointed out as well as certain logical methods of product disposal. The cost of drilling wells and lease maintenance is not pertinent to this discussion because income and revenue are in this paper confined to that retained by the plant or plant operator for supplying processing facilities for the gas. Before the development of recycling a great many gas-distillate gas fields in Louisiana and Texas provided no income to their owners. When gas was sold from these reservoirs it was accompanied by irretrievable losses of condensate in the formation. The understanding of the func- tion of retrograde condensation resulted in the introduction of a new commercial petroleum recovery process for these hitherto unexploited fields and now permits the conditioning of this type of wet gas field for the sale of dry gas therefrom without waste. Some Economic Factors The study of a gas-distillate field for possible exploitation necessarily involves the critical appraisal of a number of elements, chief of which will be discussed here: (I) estimate of distillate in place, (2) estimate of distillate that can be brought to the surface, (3) available market, (4) costs. The considerations affecting the estimating of distillate reserves in place are in the main subject to the same errors as are involved in determining dry gas reserves. Determinable data including acreage, sand thickness, reservoir pressure, reservoir temperature, porosity and connate water provide the basis for calculating the volume of gas in place. Ample allowance must be made for connate water, which may occupy from 20 to 35 per cent of the pore space of the sand. The factor of supercom-pressibility is to a considerable extent nullified by the reservoir temperature. It has been considered well advised to allow this factor to serve as a cushion. With the gas reserves calculated, it remains only to assay the distillate content of the gas. Those familiar with the handling of "wet" gas at high pressure readily appreci-ate the variables in sampling gas from

Jan 1, 1942

By Emby Kaye

It is the purpose of this paper to outline briefly some of the considerations that enter into the economics of so-called recycling, the generic designation of the relatively recently developed process by which a condensate† is separated from gas-distillate gas at high pressure and the residual gas returned to the reservoir. This subject necessarily embraces not only a discussion of factors that should be considered in projecting a recycling operation, such as estimating reserves, investment and operating costs, but also a comparison of condensate with other types of petroleum. The place of condensate in its relation to the total supply of crude oil is pointed out as well as certain logical methods of product disposal. The cost of drilling wells and lease maintenance is not pertinent to this discussion because income and revenue are in this paper confined to that retained by the plant or plant operator for supplying processing facilities for the gas. Before the development of recycling a great many gas-distillate gas fields in Louisiana and Texas provided no income to their owners. When gas was sold from these reservoirs it was accompanied by irretrievable losses of condensate in the formation. The understanding of the func- tion of retrograde condensation resulted in the introduction of a new commercial petroleum recovery process for these hitherto unexploited fields and now permits the conditioning of this type of wet gas field for the sale of dry gas therefrom without waste. Some Economic Factors The study of a gas-distillate field for possible exploitation necessarily involves the critical appraisal of a number of elements, chief of which will be discussed here: (I) estimate of distillate in place, (2) estimate of distillate that can be brought to the surface, (3) available market, (4) costs. The considerations affecting the estimating of distillate reserves in place are in the main subject to the same errors as are involved in determining dry gas reserves. Determinable data including acreage, sand thickness, reservoir pressure, reservoir temperature, porosity and connate water provide the basis for calculating the volume of gas in place. Ample allowance must be made for connate water, which may occupy from 20 to 35 per cent of the pore space of the sand. The factor of supercom-pressibility is to a considerable extent nullified by the reservoir temperature. It has been considered well advised to allow this factor to serve as a cushion. With the gas reserves calculated, it remains only to assay the distillate content of the gas. Those familiar with the handling of "wet" gas at high pressure readily appreci-ate the variables in sampling gas from

Jan 1, 1942

By Fred Van Covern

Before getting into a discussion of the subject of my paper, I want first to make it clear to everyone that I am speaking as an individual; and that any expressions of opinion that are contained herein, or may be expressed in any oral discussion that may follow its presentation, are entirely my own, and must not be construed to be the official opinion of the American Petroleum Institute. Demand fob Motor Fuel, 1936 During the year just closed the domestic demand for gasoline exceeded 481 million barrels. This compares with 434,810,000 bbl. consumed during 1935 and indicates an increase of 10.46 per cent. Export shipments amounted to 27,831,000 bbl. while in 1935 they totaled 30,613,000 bbl. Total demand, therefore, was 509,422,000 bbl., or 9.16 per cent above the 465,423,000 bbl. of 1935. Following are the figures for several years: Already we are supplying gasoline domestically and as foreign shipments at a rate almost 25 per cent greater than our low level of 1933. Before giving figures for 1937, I should like to spend a moment or two in discussion of gasoline inventories, from the point of view of minimum working stocks and other requirements and of probable actual levels. Inventories of Gasoline The year 1936 closed with about 62,900,000 bbl. of finished and unfinished gasoline in storage—about 6 million barrels more than was on hand

Jan 1, 1937

By Joseph E. Pogue, F. G. Coqueron

Prior to 1934, published information covering expenditures by oil companies for properties, plant, and equipment and the residual investments in the various segments of the petroleum industry was not readily available. This paper presents an analysis of the funds invested by a selected group of oil companies during the years 1934 through 1942, based on an extensive study of the individual records of 30 oil companies. The sources, disposition, and characteristics of the capital employed by this group of companies are traced through a series of combined statements and appropriate charts, covering financial and operating data. The analysis of these statements not only constitutes a record useful for comparative purposes but also serves as a basis for a number of broad conclusions, as follows: 1. The petroleum industry generates the capital needed for its expansion almost entirely from its own operations and is therefore a singularly self-contained economic unit. 2. The long-term debt contained in the financial structure of the industry is small relative to the total capital employed, is less than the net working capital, and has increased but slightly during the period under review. 3. The capital expenditures of the group of 30 oil companies for 9 years amounted to 6.1 billion dollars, 58.3 per cent of which went into crude-oil producing facilities. The trend of this segment of expenditures has been downward since 1937. In 1942, expenditures for refining facilities increased sharply and for marketing facilities declined drastically. 4. The net working capital of the group increased 380 million dollars over the period, and the industry is in a favorable position of liquidity. The ratio of combined current assets to current liabilities was 3.21 at the close of the period. 5. The net income of the group displayed an upward trend for the period but with rather sharp cyclical fluctuations. 6. In 1942, Government funds entered the industry for the first time in substantial amounts and were utilized for the provision of war facilities needed for emergency use. 7. The group has paid out a relatively low percentage of net income in the form of dividends. For the period the average was 55 per cent of net income. 8. The rate of return on invested capital for the group averaged 6.4 per cent for the

Jan 1, 1944

By Joseph E. Pogue, F. G. Coqueron

Prior to 1934, published information covering expenditures by oil companies for properties, plant, and equipment and the residual investments in the various segments of the petroleum industry was not readily available. This paper presents an analysis of the funds invested by a selected group of oil companies during the years 1934 through 1942, based on an extensive study of the individual records of 30 oil companies. The sources, disposition, and characteristics of the capital employed by this group of companies are traced through a series of combined statements and appropriate charts, covering financial and operating data. The analysis of these statements not only constitutes a record useful for comparative purposes but also serves as a basis for a number of broad conclusions, as follows: 1. The petroleum industry generates the capital needed for its expansion almost entirely from its own operations and is therefore a singularly self-contained economic unit. 2. The long-term debt contained in the financial structure of the industry is small relative to the total capital employed, is less than the net working capital, and has increased but slightly during the period under review. 3. The capital expenditures of the group of 30 oil companies for 9 years amounted to 6.1 billion dollars, 58.3 per cent of which went into crude-oil producing facilities. The trend of this segment of expenditures has been downward since 1937. In 1942, expenditures for refining facilities increased sharply and for marketing facilities declined drastically. 4. The net working capital of the group increased 380 million dollars over the period, and the industry is in a favorable position of liquidity. The ratio of combined current assets to current liabilities was 3.21 at the close of the period. 5. The net income of the group displayed an upward trend for the period but with rather sharp cyclical fluctuations. 6. In 1942, Government funds entered the industry for the first time in substantial amounts and were utilized for the provision of war facilities needed for emergency use. 7. The group has paid out a relatively low percentage of net income in the form of dividends. For the period the average was 55 per cent of net income. 8. The rate of return on invested capital for the group averaged 6.4 per cent for the

Jan 1, 1944

By Sidney A. Swensrud

The 24-in. crude-oil line. and- the 20-in. petroleum-products line, built as a war emergency by the United States Government and running from points in Texas to the New York-New Jersey-Philadelphia area, were constructed only because of the inability during the war to continue nor-inal ocean tanker movements from the Gulf Coast to the East Coast. The postwar disposition of these lines may be considered as one of the important problems of the postwar readjustments in the oil industry, if not the most important one. In the first place there appear to be many complications in keeping the lines in crude-oil or petroleum-products service. This conclusion was reached also in a study by T. E. Swigart, President of Shell Pipeline Corporation.' Since the lines are too largc for any one company to utilize, and since it appears likely that a surplus rather than a deficiency of tankers will exist after the war, most companies probably will feel that they can achieve lower costs and more satisfactoiy results from the resumption of tanker movements to the East Coast rather than by endeavoring to take over or utilize the capacity in the large pipe lines under some tariff-rate structure. As for using the lines for making deliveries to the middle west or central eastern areas, it would appear that when the war is over and normal transportation arrangements can be resumed, there will be no need of any extra capacity for such deliveries. Therefore, the War Emergency lines could be utilized for this purpose only if privately owned pipe lines and other transportation facilities were to be displaced. Against this rather unprepossessing prospect for use in petroleum or product service is the fact that at or near the source of the lines lie the greatest developed gas reserves in the world, for much of which there is at present no satisfactory market outlet; and at the other end of the lines lies one of the greatest concentrations of population in the world, which is not now served by natural gas. These who have been fortunate enough to use natural gas can have little doubt of its desirability as a domestic fuel. An analysis of the market potentialities and comparison with other areas where natural gas is being distributed, and where it has displaced manufactured gas, makes it seem clear beyond question that the full capacity of both of the large-diameter lines could be fully utilized in this service, and this without creating any undue drain upon the gas reserves of the nation. On the basis of an estimated capacity of roo to 120 billion cubic feet per year, the gas that might be marketed through these lines would amount to only 3 to 4 per cent of the total con-

Jan 1, 1944

By Sidney A. Swensrud

The 24-in. crude-oil line. and- the 20-in. petroleum-products line, built as a war emergency by the United States Government and running from points in Texas to the New York-New Jersey-Philadelphia area, were constructed only because of the inability during the war to continue nor-inal ocean tanker movements from the Gulf Coast to the East Coast. The postwar disposition of these lines may be considered as one of the important problems of the postwar readjustments in the oil industry, if not the most important one. In the first place there appear to be many complications in keeping the lines in crude-oil or petroleum-products service. This conclusion was reached also in a study by T. E. Swigart, President of Shell Pipeline Corporation.' Since the lines are too largc for any one company to utilize, and since it appears likely that a surplus rather than a deficiency of tankers will exist after the war, most companies probably will feel that they can achieve lower costs and more satisfactoiy results from the resumption of tanker movements to the East Coast rather than by endeavoring to take over or utilize the capacity in the large pipe lines under some tariff-rate structure. As for using the lines for making deliveries to the middle west or central eastern areas, it would appear that when the war is over and normal transportation arrangements can be resumed, there will be no need of any extra capacity for such deliveries. Therefore, the War Emergency lines could be utilized for this purpose only if privately owned pipe lines and other transportation facilities were to be displaced. Against this rather unprepossessing prospect for use in petroleum or product service is the fact that at or near the source of the lines lie the greatest developed gas reserves in the world, for much of which there is at present no satisfactory market outlet; and at the other end of the lines lies one of the greatest concentrations of population in the world, which is not now served by natural gas. These who have been fortunate enough to use natural gas can have little doubt of its desirability as a domestic fuel. An analysis of the market potentialities and comparison with other areas where natural gas is being distributed, and where it has displaced manufactured gas, makes it seem clear beyond question that the full capacity of both of the large-diameter lines could be fully utilized in this service, and this without creating any undue drain upon the gas reserves of the nation. On the basis of an estimated capacity of roo to 120 billion cubic feet per year, the gas that might be marketed through these lines would amount to only 3 to 4 per cent of the total con-

Jan 1, 1944

By Howard S. Bryant

The year 1928 has recently.passed from the picture and it is at this time that the various divisions of the oil industry are giving thought to plans for the present year. The outstanding characteristic of the industry in 1928 was the successful curtailment of oil production to the market's needs. It has been thought advisable to look ahead and endeavor to anticipate the oil demand for the coming year, and thus determine the volume of oil that can be safely produced without causing major additions to surface stocks. The year has been one of smaller additions to stocks than in 1927, a record demand for oil products, and a further developed spirit of cooperation among oil producers, as well as various other achievements. It is well to pause and take stock of ourselves. Present Status of Crude Oil Supply and Demand The total daily new supply of oil is at this time1 about 2,960,000 bbl. per day, made up of 2,585,000 bbl. domestic crude production, 125,000 bbl. casinghead gasoline, and 250,000 bbl. of imports. With the present low consumption, due to the falling off in the winter season demand, it is estimated that about 150,000 bbl. a day are now being run to storage, and that the first three months in 1929 will see large-sized additions to storage. Consumption plus exports of oil have increased at a regular rate from year to year, and although oil production in 1928 passed the 1,000,000,-000 bbl. mark for the second time in the history of the United States, with a production of 25,000,000 bbl. more than in 1927, only 30,000,000 bbl. were added to storage during 1928. This is compared to an addition of 65,500,000 bbl. in 1927.

Jan 1, 1929

By John Nelson

AN OUTLINE survey of the economic outlook for the United States export trade in petroleum products resolves itself broadly into two general divisions; first, a consideration of our present position in this trade, and second, a discussion of the visible factors which promise to affect appreciable changes in the immediate future in that trade. The UNITED STATES PETROLEUM EXPORTS OF MAJOR PETROLEUM PRODUCTS 1925, 1926 and 1927 Gasoline, Naphtha, and Other Light Products 1925 1926 1927* Quantity (gal.) 1,286,787,796 1,784,154,802 1,851,494,190 Value $197,491,588 $263,199,938 $214,721,652 'Illuminating Oil, Kerosene 1925 1926 1927* Quantity (gal.) 885;136,041 924,680,979 827,162,280 Value $84,699,724 $100,352,877 $80,358,082 Gas and Fuel Oil 1925 1926 I 1927 Quantity (gal.) 1,365,358,988 1,449,688,394 1,815,130,464 Value.... ? $49,040,024 $45,354,108. .. $50,343,031 Lubricating. Oil 1925... ....1926 .. 1927 Quantity .(gal.) 402,572,584 388,767,055 403,369,512 Value $90,596,671 $86,414,621 $88,926,815

Jan 1, 1928

By John D. Gill

The purpose of this paper is to invite attention away from the obvious. direct monetary costs of oil-field overdevelopment (as distinguished from "social costs") to a consideration of the role played by the exercise of freedom to create even allegedly excessive1 plant facilities in contributing to the maintenance of equilibrium in the wholc economy and in promoting material progress. The obvious and most commonly discussed effect of overdevelopment of oil fields is illustrated by the allegation that already the excessive development of the East Texas field has cost upward of $162,000,000;2 in other words, the drilling of 12,500 wells more than the number estimated as the requirement for economical recovery of the reserve has unnecessarily raised the total cost of development that amount. Many other illustrations of so-called excessive development of oil pools could be presented. Some of them, like Cushing, Powell and Long Beach, might be drawn from the era antedating widespread discussion in the trade of such matters as optimum well spacing, reservoir energy, the conservation rate of depletion of reserves, etc. Numerous other cases can he found in the records of the current era, which began with the introduction of rationalized restriction of production. Besides East Texas, there may be mentioned Oklahoma City, Centralia and. more recently, the town-lot development of Bloomingdale, Michigan.

Jan 1, 1940

By John D. Gill

The purpose of this paper is to invite attention away from the obvious. direct monetary costs of oil-field overdevelopment (as distinguished from "social costs") to a consideration of the role played by the exercise of freedom to create even allegedly excessive1 plant facilities in contributing to the maintenance of equilibrium in the wholc economy and in promoting material progress. The obvious and most commonly discussed effect of overdevelopment of oil fields is illustrated by the allegation that already the excessive development of the East Texas field has cost upward of $162,000,000;2 in other words, the drilling of 12,500 wells more than the number estimated as the requirement for economical recovery of the reserve has unnecessarily raised the total cost of development that amount. Many other illustrations of so-called excessive development of oil pools could be presented. Some of them, like Cushing, Powell and Long Beach, might be drawn from the era antedating widespread discussion in the trade of such matters as optimum well spacing, reservoir energy, the conservation rate of depletion of reserves, etc. Numerous other cases can he found in the records of the current era, which began with the introduction of rationalized restriction of production. Besides East Texas, there may be mentioned Oklahoma City, Centralia and. more recently, the town-lot development of Bloomingdale, Michigan.

Jan 1, 1940

By J. Ehner Thomas, M. D. Gould

Until four years ago the market price of oil securities moved directly and immediately with the general list. This point, was first developed by the senior author in 1924 while making a statistical study of the relative movement of oil securities and the general market. Plotting the monthly averages of 17 oils against 233 industrials disclosed the sur- prising relationship shown in Fig. 1. The traditional vagaries of the oil business, the wide fluctuations in current supply and resulting abrupt changes in crude prices nevertheless produced no movements in the market price of oil securities as a group, which departed notably from the movements of the general market. Obviously general business conditions did not always change when and as conditions in the oil industry changed; clearly the fluctuations of

Jan 1, 1929

By Joseph Pogue

THE past year in the petroleum industry was one of overproduction, rising inventories, low prices, and meagre to vanishing profits. This outcome was the result of a long period of intensive and uncompensated effort on the part of both financial and industrial interests, to stimulate supply on the theory that the primary problem facing the petroleum industry was the development of an adequate reserve of raw material to protect a large and ever-growing investment. The stimulus was applied in various forms and through diverse channels: capital had, long flowed into the industry in excessive amounts under the attraction of large expected profits; the price level for crude petroleum had persistently been influenced -by speculative considerations, with the result that prices declined slowly in periods of flush production and were quick to advance in anticipation of statistical improvement, thus maintaining a superfluous degree of stimulus on wildcatting and on drilling; speculation in inventories had led to the unsound, or at least unusual, business practice of accumulating huge stocks of oil; and, above all, the industry had directed the potent force of technology to the expansion of supply and achieved radical results in accelerating oil discovery, speeding up the rate of oil extraction, and enlarging the recovery of gasoline and lubricating oils from the raw material. In short, the economic conditions of 1927 were exactly those to which the objectively driven enterprise of the petroleum industry had long been directed; and the undesirable financial consequences arising. therefrom reflected no lack of success in what had been set out to be achieved, but rather the failure to have established concurrently the necessary means of economic control to prevent the immediate conversion of reserves into current supply, and likewise the oversight in neglecting to apply the technological force to the enlargement and diversification of the market for petroleum products. Perhaps, when viewed in its longer perspective, 1927 will stand out as the turning point in the economic policy of the petroleum industry, when the technique of rationalizing production made its, initial claim for recognition.

Jan 1, 1928

By Joseph E. Pogue

The past year in the petroleum industry was one of overproduction, rising inventories, low prices, and meagre to vanishing profits. This outcome was the result of a long period of intensive and uncompensated effort on the part of both financial and industrial interests, to stimulate supply on the theory that the primary problem facing the petroleum industry was the development of an adequate reserve of raw material to protect a large and ever-growing investment. The stimulus was applied in various forms and through diverse channels: capital had long flowed into the industry in excessive amounts under the attraction of large expected profits; the price level for crude petroleum had persistently been influenced by speculative considerations, with the result that prices declined slowly in periods of flush production and were quick to advance in anticipation of statistical improvement, thus maintaining a superfluous degree of stimulus on wildcatting and on drilling; speculation in inventories had led to the unsound, or at least unusual, business practice of accumulating huge stocks of oil; and, above all, the industry had directed the potent force of technology to the expansion of supply and achieved radical results in accelerating oil discovery, speeding up the rate of oil extraction, and enlarging the recovery of gasoline and lubricating oils from the raw material. In short, the economic conditions of 1927 were exactly those to which the objectively driven enterprise of the petroleum industry had long been directed; and the undesirable financial consequences arising therefrom reflected no lack of success in what had been set out to be achieved, but rather the failure to have established concurrently the necessary means of economic control to prevent the immediate conversion of reserves into current supply, and likewise the oversight in neglecting to apply the technological force to the enlargement and diversification of the market for petroleum products. Perhaps, when viewed in its longer perspective, 1927 will stand out as the turning point in the economic policy of the petroleum industry, when the technique of rationalizing production made its initial claim for recognition.

Jan 1, 1928

By George W. Doffing

Numerous contradictory statements have been made in the past regarding the importance of the seasonal influence of demand for motor fuel on prices of oil securities. It has often been said that the time to buy oil securities is in the spring, or just prior to the heavy consuming season for gasoline. The fallacy of this argument is brought out in the following paragraphs. Seasonality of Oil-security Prices The indexes used in this paper as indicators of prices of oil securities and general industrials are those compiled by Standard Statistics Co. The oil producing and refining stock index includes 14 representative petroleum companies, while the all-industrials index is made up of 347 issues. All figures are stated as relatives, with 1926 = 100. The primary basis of the index, and one that gives a good weighting of the relative importance of the company within the industry, is the total market value of the stock issue outstanding; i.e., the market price times the number of shares outstanding. Adjustments are made for the addition or elimination of issues from the group index, for stock dividends, split-ups, stock rights, et cetera. At the present time the oil producing and refining index includes the following companies: Atlantic Refining Co., Consolidated Oil Corporation, Continental Oil Co., Gulf Oil Corporation, Humble Oil & Refining Co., Ohio Oil Co., Royal Dutch Co., Shell Union Oil Corporation, Socony-Vacuum Oil Co., Standard Oil Company of California, Standard Oil Co. (Indiana), Standard Oil Co. (New Jersey), Texas Corporation, Union Oil Company of California. In calculating the seasonal for oil-security prices several periods have been selected as indicat,ive of major changes in the industry, as follows: 1. 1918 through 1936. This gives an over-all picture of the industry during the motor-vehicle, motor-fuel era. 2. 1927 through 1936. This period includes the control stages, both voluntary and coercive. 3. 1927 to September, 1933. This is the pre-code period of control.

Jan 1, 1937

By R. V. Whetsel, V. R. Gargias, J. W. Ristori

WoRld consumption of petroleum and its substitutes in 1941, the amount of which obviously is largely conjectural, is estimated at 2,066,653,000 bbl. This is 48,689,000 bbl. more than the previous year and is an all-time high. Except for the United States, this figure does not include consumption for military purposes. Consumption in the United States also reached an all-time high during 1941, totaling 1,492,000,000 bbl., or 158,230,000 bbl. more than the previous peak year of 1940. On the other hand, it is estimated that civil consumption in countries outside of the United States decreased 109,541,ooo bbl. as compared with the previous year. Demand for military purposes and/or additions to stocks in countries outside of the United States is estimated at 304,507,000 bbl. during 1941, compared with 209,635,000 bbl. in 1940. This increase was due largely to blitzkrieg warfare on several fronts. especially Russia; entailing large expenditures of petroleum by both sides because of the immense area covered by the fighting forces, the long supply lines necessary and the intensity of the fighting. It is interesting to note in this connection that Axis-controlled countries, excluding Japan, had an estimated production of approximately 89,000,000 bbl. of petroleum and its substitutes in 1941. The peacetime consumption of these countries in 1938, for example, was about 183,000,000 bbl. It is believed that the minimum to which civil consumption could possibly be re-duced in wartime is 20 per cent of that of peacetime, which would call for a minimum consumption of 37,000,000 bbl. in these countries in 1941 for civil purposes. This

Jan 1, 1942