Papers - - Production - Domestic - Developments in the California Oil Industry during the year 1935

During the first half of the year 1935, the oil industry in California was on a fairly profitable basis, owing mainly to the operation of the Petroleum Marketing Agency. Coincident with the discontinuance of enforced curtailment, California production surged upward from an average of about 500,000 bbl. per day (over the first five-month period) to approximately 625,000 bbl. per day (over the last seven-month period). On Dec. 9 the state production had reached a peak of over 700,000 bbl., a figure that had not been approximated since the early days of voluntary curtailment (Fig. 1). A price cut was instituted during the last half of August, but had no deterring effect on operators that were determined to take advantage of the breakdown of curtailment and produce to capacity. New reserve figures, compiled from actual potentials, available after cessation of curtailment, revealed the startling fact that California reserves were rapidly declining. This situation, coupled with the desire among operators to obtain a more equitable price for their dwindling reserves, caused a restoration in November of a portion of the August price slash. A further rise in price was effected in early December, and crude quotations at the end of the year closely approximated those in effect during the first right months. At the close of the year, the industry felt confident that the production situation was under control. In all fields where competition is keen because of close spacing, production is gradually declining. In the Los Angeles Basin especially there is no likelihood of a large amount of overproduction, unless a new pool is discovered or deeper drilling reveals a prolific source of crude. As long as the fields that are operated by a few companies, such as Kettleman Hills, North Belridge, Ventura Avenue, West Coyote, Dominguez, and some others, can be controlled, it is believed that the overproduction problem in California will be solved.