Papers - - Petroleum Economics - Normal and Basic Prices of Crude Petroleum

The mathematical analysis, which is an essential part of this paper, has revealed the interesting fact that contrary to the opinions of many, determinate and measurable economic factors are largely responsible for the price of crude oil. It should, however, be well understood that the results of this analysis are applicable, without qualification, only to the particular period and market studied. There are certain peculiarities of the petroleum industry which make the consideration of its economics very difficult, and at times practically impossible. Noneconomic factors often become highly important and have serious economic effects, which make unqualified predictions based on economic data extremely hazardous and ill advised. However, in spite of the attendant difficulties there are many problems, especially in price analysis, to which approximate solutions must be made for the proper guidance of public and private policy, but their limitations should be kept clearly in mind. An understanding of the nature of prices is of fundamental importance for a number of purposes. Measurement of the motivating factors giving rise to trends and other price movements is essential to forecasting for the intelligent engineering and financial administration of the industry. The fixing of prices, maintenance of an intelligent industrial dictatorship, or the making of other industrial adjustments, demand, for success, an accurate understanding of their probable consequences. The establishment of a system of equitable relations within an industry, or between industries, by methods other than the natural competitive ones, requires a thorough knowledge of the price structures and the nature and trends of the normal and basic prices of their products. This research has shown that in this case, even though the statistical records are only fair, quantitative economics offers a direct and satisfactory approach to the problems of economic consequences dependent on the reactions of mass intelligence. A consideration of commodity prices naturally leads to costs. The true cost of petroleum is so complex and elusive that its accurate deter-