Papers - Economics - Petroleum Economic Review for 1929 - Summary

ProbDly there has never been a year during which the petroleum industry expended so much effort as in 1929 in an attempt to rectify its ills. Eventually good will undoubtedly result, but as yet there have been no marked changes from the unhappy conditions familiar to all. Throughout the year remedies were sought that would cure the long-existing troubles of overproduction and waste. Proration of production and voluntary curtailment of output, for a short time considered the means for stability, not only failed but contributed to further waste and created a false sense of security. It encouraged a high rate of field development, weakened the economic structure by excessive development of newly discovered reserves and absorbed large sums of capital yielding meager or negative return. The manufacturing of gasoline by refiners without regard for market requirements furthered the unsatisfactory condition by falsely stimulating the demand for crude and placed on the market an oversupply of finished products, particularly gasoline. The marketing section of the industry has made progress by its adoption of the Code of Ethics as promulgated by the Federal Trade Commission and by the formation of an Export Association. The year 1929 opened not only with a current supply of oil exceeding demand but with an additional daily shut-in and potential supply variously estimated at from 3,000,000 to 5,000,000 bbl. This situation stimulated the industry, through the American Petroleum Institute, to attempt to work out an economically sound solution which would further conservation by bringing supply and demand into closer balance. Production Control After a thorough study of producing conditions, the committee of the American Petroleum Institute had for its recommendation that the production of crude oil in 1929 be held in check to an amount equal to that produced during the year 1928. The Federal Oil Conservation Board heard the appeal of the American Petroleum Institute and referred the matter to the Department of Justice. It was ruled that neither the Federal Oil Conservation Board nor the Department of Justice had the * Land and Oil Production Dept., Henry L. Doherty & Co.