Papers - Petroleum Economies - Influence of Control in the Oil Industry Upon Investment Position of Oil Securities (With Discussion)

In the year 1875, the Pennsylvania Supreme Court, acting on incorrect information concerning the production of oil and gas, established what has become the law of the land for the governing of oil production. While the decision was ideal for the refining monopoly which was completed in that year, there is no evidence that the court was in any way influenced by that refining monopoly. The evidence indicates that the court accepted the view of the royalty owner and independent oil producer. Throughout the life of the refining monopoly it accepted this law, which was so evidently to its advantage in securing cheap raw material. The same policy continued until the development of the exhaustion theory and the entry of the various units of the former monopoly into the production of crude oil. It is curious that no one doubted the new theory of shortage sufficiently to feel the need of changing the law. When the theory entered the economic field sufficiently to raise crude oil prices beyond justification it shortly disproved itself, but by this time the question of split ownership in producing fields made a change from legal error to justice too complicated to be undertaken by the large companies. Not even the ardent advocate of unit operation dared to carry the question to the United States Supreme Court, which has never been asked to pass on the complete question. The impossible position of the producing industry, hemmed in on one side by court law compelling wasteful production and on the other by the national law against cooperation, lasted until the demoralization of 1927 led to cooperation within a state and under state guidance. Since that time control of production has grown with the bringing in of each new field and at this time has the active support of the Department of the Interior in such ways as are definitely legal. As in 1875, the royalty owner and independent producer are opposing by all possible means the rational conduct of the business of producing crude oil. Fluctuation in Investments The investor in oil securities has not been as badly fooled as has the oil man himself. Fig. 1 is designed to show the composite regard of all