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A charge is made on all overdue books. U. of I. Library 8057-S LYMAN STEWART 1840-1923 Pioneer of the California oil industry; born near Titusville, Pa., July 22, 1840; died September 28, 1923. He preceded Mr. Rockefeller two years in entering oildom, and at the time of his death was chairman of the board of directors of the Union Oil Co., of California, which he founded and with which the author was once connected. Among his. more notable beneficiaries is the extensive Bible. Institute of Los Angeles. a ee — oh | OILDOM ITS TREASURES AND TRAGEDIES ; A PROFUSELY ILLUSTRATED BOOK OF LATE AND BASIC FACTS ABOUT PETROLEUM AND THE DEPENDENT OIL AND AUTOMOTIVE INDUSTRIES POPULARLY PRESENTED FOR THE BENEFIT OF INVESTORS, MOTORISTS AND OPERATORS By Oscark H. REINHOLT, B. S. Engineer and Geologist; Specialist in Mineral Resources; Fuel Explorer in the Philippines for the War Dept., 1903-4; Co-Editor, Revised “Manual for the Oil and Gas Industry,” U. S. Treasury Department, 1921; Chief, Depart- ment of Mines and Metallurgy, Sesquicentennial Exposition, 1926; Professor of Chemistry and Geology, Hartwick College, 1929-30 ) 25 (93 A a) PARWONE Covering International Phases, Natural History, Commercial Geology, Mechanism, and Economic Relations of Crude Oil, Gasoline and the Automotive Industry David McKay Co., Publishers South Washington Square, Philadelphia Part Ones 1519, = Part Two, 1927 a pea Re Tid uly a ; Sr pp OUTLINE OF CONTENTS—PART ONE p-! I. THE PETROLEUM PANORAMA—International Treasures and Tragedies, Turkish Petroleum and the Open Door, Averting Another Tragedy, Advantage of Latin America, Engineers as Diplomats, Restrictions on American Enterprise Abroad, World Reserves and Present Sources, American Dominance, Why Other Nations Seek Own Supplies, Domestic Position of Mineral Oil. Il. The NATURAL RESOURCE—Nature, Origin of Oil, Surface Signs of Deposits, Geologic Occurrence and Distribution, Geologic Treasures and Tragedies. Il. COMMERCIAL GEOLOGY—Description of the Major American Fields: “Mid-Continent, California, Gulf Coast, Appalachian, Rocky Mountains, Illinois and Lima-Indiana, Canadian Occurrence and Development, Summary of Salient Facts. IV. MECHANISM OF THE INDUSTRY — Technologic Foundations and Dearth of Petroleum Engineers, Conservation of Underground Reserves, Three Great. Problems, The Tragedy of Poor Recovery, Conservation of Capital Through Core Drilling, Developing, Producing, Transporting and Refining; Technologic Treasures, V. ECONOMIC ASPECTS—Inmportance and History, Problems and Prelimin- aries, Production ‘of Crude Oil, Peak and Economic Limit, Yield Per Acre and Per Well, Overproduction from Deep Wells, Tragic Consequences. VI. ECONOMIC ASPECTS (continued)—Price Changes and Market Panics, Premiums, Causes and Cures for Overproduction, Storage and Stabilization, Manu- facturing and the Refined Products, Costs and the ‘‘Soup-bone” Tragedy, Rate of Refining, Transportation by Tank Cars, Pipe Lines and Tankers, Distribution and Utilization, Tragic Loss of Lubricants, Coal versus Fuel Oil, Conservation. VII. GASOLINE AND THE AUTOMOTIVE INDUSTRY — Three Sources, Growth in Yield, Use and Stocks; Alcohol, Benzol and Other Substitutes; Conserva- tion of Motor Fuel; Practical Economics for Auto Owners; Treasures and Tragedies. PUBLISHER’S STATEMENT—PART TWo - /9 7 Lovers of truth like a book of this type which is both entertaining and instruc- tive. Part One is aimed at the man with the car; Part Two, at the man with the money; both parts, at the man within the oil industry who wants to advance in the field, in the refinery or from the filling station. How well and widely Part One was received is clearly indicated by the comments abstracted at the end of the 12-page index. Not only is the complete book readable and serviceable as a text but it is particularly useful for reference because of its wide range of subjects and the minute division of its content. It is easier to list its omissions—largely legal and technical—than its inclusions since it is so encyclopedic and takes the place of half-a-dozen separate volumes on petroleum. This annual should have a place on the shelf of every banker, bond dealer and other investment adviser. It should interest all intelligent Americans wanting important facts about one of the world’s international problems. It is also commended to all law-makers who may have to consider petroleum legislation. Philadelphia, Sept. 1, 1927. PROVISIONAL SUPPLEMENT TO PARTS ONE AND TWO * A truce has been declared in the world struggle for oil. But the third oil producer, Russia, is still reluctant as to indemnifying British investors: and Venezuela, now the second nation since Mexico’s decline, has discouraged new development to the point that one American operator (Gulf Oil) has withdrawn therefrom. Persia is now pressing Mexico for fourth place and Colombia is com- ing up, having now about twice the output of Peru, or about the same as the * PART TWO, of 270 pages and 150 illustrations, covered Finance, Geography, Govern- mental Relations, the Human Element, Latin America and the Prevention of Frauds and Failures. Crowded out of it was the humorous chapter entitled “Laughing Gas and Lubri- cations” which will appear in the forthcoming PART THREE. That supplement will more completely present the important facts about mineral oil and the petroleum industry as they pertain to the years 1927, 1928 and 1929. V4L719 Dutch East Indies, or almost as much as Rumania. The billion-barrel yield in the United States boosted world production to 1,450 million barrels in 1929. RECENT GROWTH IN THE PRODUCTION OF PETROLEUM IN THE UNITED STATES Year Million BblIs. Mil. Dols. Ist State Year Million Bbls. Mil. Dols. 1st State 1924 714 1,023 Calif. 1927 901 yb Okla. 1925 764 1,285 Calif. 1928 902 1,100 s Texas 1926 igi 1,448 Calif. 1929 1,000 1,250 Texas Stocks of all kinds reached a new record of about 680 million barrels at the end of the year. Gasoline production approximated 440 million barrels, of which 56 per cent was from straight run or ordinary refining, 33 per cent from cracking, and 11 per cent from vapors of oil wells and natural gas. If the 52 million barrels of such natural gasoline be added to the quantity of crude oil, the total liquid mineral fuel produced in 1929 makes 1,058 mil. bbls., 70 per cent of the world’s. RANK OF 18 STATES IN OUTPUT OF CRUDE OIL IN 1929 AND TO DATE (Millions of barrels of 42 gallons) State 1929 Total State 1929 Total State 1929 Total TEXAS Ate ase 299 2,075 Wyoming ..... 19.2 315 Michigan ..... 4.4 5.0 California -.... 293 3210 Pennsylvania . 11.8 825 New York Be: 75. Oklahoma .... 254 ‘2,770 Kentucky 7.8 105 Montana ..... 3.2 30. FEA TSAS Ove crite oe 43 510 ODIO er ee 6.7 555 Colorado... 2:3 23: ATKANSAS) ii hs 25 340 Illinois vaMeOco 385 New Mexico .. 1.7 8. Lowlsianay, yi. 20 425 Wee VIL eine e. a eos 370 Indian ae wees 1.0 117. Early in 1930, the three leading oil areas were the Los Angeles basin, the West Texas (Permian) basin and the Seminole (Okla) district. The daily rates of these ranged from 300,000 to over 400,000 barrels. Curtailments, notably in the first of these, have reduced the daily yield in the United States from nearly 3,000,000 barrels about Sept. 1, 1929, to less than 2,650,000 barrels on Jan. 1, 1930, or an average rate of almost 8 barrels per well per day. Remarkable are the new records established in deep drilling and in production. Wells are now being bored in the Los Angeles basin to depths beyond 9,500 feet, using electric power and rotary tools. The deepest producer in the Mid-Continent field was drilled with cable tools to 8,532 feeet in Reagan County, West Texas. It came in at Thanksgiving, 1928, flowing 80 bbls. daily. In two months it paid for itself and increased to 2,000 bbls. and to 55 per cent gasoline. California’s 7,000-foot wells at Santa Fe Springs, Long Beach, Ventura (page 151), and especi- ally in the Kettleman Hills (San Joaquin Valley), are likewise yielding light oil. The last named field promises to produce more oil than any other field in the world. As a result of all this deep development, the weighted average depth (page 105) of production has “risen” to about % of a mile. The aggregate depth of our 1-3 million wells approximates the distance to the Moon. The cost of drilling and lifting has increased enormously and now exceeds $1,200,000,000 per annum. Rela- tively shallow wells in West Texas, some with over 130,000 bbls. initial per day, have proven bonanzas to their owners and have broken the records of the Lucas (page 41) and the Lakeview (151) gushers. If allowed to flow to capacity, they could have boosted the daily average in 1928 to more than 20 bbls. per well. Exports of refined products, notably gasoline, are advancing in volume and value. But because of the enormous expansion in world demand for American automobiles, mineral oils no longer rank next to cotton among our exports, meas- ured in money. They average about $500,000,000 worth per annum and make about 10 per cent of total exports. Los Angeles and New York are the two leading oil ports, considering both coastwise and foreign trade. At all the other six or seven. leading sea~ports, petroleum remains preeminent as to tonnage in all trade. Despite continued domestic competition, evidenced by the overbuilding of filling stations and the extension of household heating with oil, the operators are prosperous and are gradually agreeing on unit development of new pools in line with what Henry L. Doherty has advocated for years. The U. S. Oil Conservation Board, appointed by President Coolidge on Dec. 19, 1924, is harmonizing Federal activities in cooperation with state authorities and the leaders in the industry itself. Water-drive in New York and Pennsylvania and air-lift elsewhere are. increasing the recovery of oil per acre and per well. Hartwick College, Oneonta, N. Y., Feb. 10, 1930. PREFACE “Conservation of Capital’ is the key-note of this little contribution to petroleum literature. The conservation of the natural resources in oil and gas has already received proper consideration in various publications. As a result of the co-operation of the United States Geological Survey and the Bureau of Mines with wide-awake operators the former woeful waste of these natural treasures has been remarkably reduced. With the rapid growth of the oil industry during the last decade redoubled efforts have been exerted by other Government agencies to discourage the evil prac- tices of oil promoters and pseudo-geologists. Uncle Sam, however, neither can nor will take away the personal liberty of being humbugged. During the past five years an average of almost 150 million dollars has been annually lost more or less honestly, but not always unavoidably, in unsuccessful drilling for petroleum. No one presumes to know exactly how much additional good money has gone overboard in the storms of stock and lease speculations; but very likely at least twice that sum was thus lost during the boom year of 1919. Three dollars for each man, woman and child in the United States does not seem so appalling as it would be if the loss were distributed at the rate of $300 each among one million “investors.” This estimate in the aggregate was actually under 10 per cent of the 3 3-4 billion dollars total authorized capital of the 1629 oil companies organized throughout our country in 1919; but it actually approximated the entire output of all the world’s gold mines in any recent year. The Treasures and Tragedies of Petroleum are numerous, notable, and varied. The famous asphalt deposits of Rancho La Brea near Los Angeles have proven a veritable treasure vault to science. The embalmed bones of camels, elephants, lions, and saber-tooth tigers found there represent a geologically recent tragedy of rare occurrence in nature. As a treasured commodity of international trade, petroleum would not yet have yielded its comforts and conveniences to man were it not for the treasure seekers, intrepid geologists, and patient technologists, who, in their various ways have pioneered and improved the greatest branch of the American mining industry. Treasures in the form of income to royalty owners, stockholders, and employes are all self-evident. Not to be overlooked, however, are the many public improvements and benefac- tions that have helped to advance civilization and have derived their funds from the oil industry. Suffice it here to mention one—the Rockefeller Institute for Medical Research which has reached even to China with its helping hand. Two great tragedies are “‘portrayed in oil,” respectively in the picture of a motorless America a hundred years hence and in the real- ization that human parasites steal millions each year and drive many in- vestors to suicide. How to avert the one of these tragedies by providing intelligent in- vestors with means for their own protection against misadventure in oil, (5) has been the main motive in preparing this book. The latest and most re- liable information on mineral oil and the dependent industries has been collected, classified, and condensed for the benefit of both the investor and the general reader. Some money-saving advice is given to the many in- vestors and other readers who are also motorists. This, together with late statistics of the automotive industry supplement the chapters on Eco- nomics. The economic and other treasures of the motor car are quite obvious but facts about avertible tragedies must needs be told effectively. The attempt has been made to present the serious facts in a brief and popular form; just a little has been added in a lighter vein for entertain- ment and good measure. Practically all the topics taken up have been treated more deeply in publications to which references have been made. Interested readers are invited to suggest improvements for future editions. They may be mailed to the author, in care of the Chamber of Mines and Oil, Los Angeles, California, or the Technical Research Institute, 601-5 Star Building, Washington. OSCAR HALVORSEN REINHOLT. Washington, D. C., Jan. 16, 1924. ACKNOWLEDGMENTS The principal inspiration truthfully to portray the oil business as it is today has come from contact with scientific workers in Washington and with Natural Resources cases of the Income Tax Unit that imply a ridiculously low percentage of success among the many American oil companies that have been organized. The surcharging of the atmosphere at the Capital, not with factory fumes, but with unburned carbon, carbon-monoxide and gasoline vapor from the exhaust of automobiles in the down- town district, has led the author to devote special space to the subject of gasoline and its waste in an effort to help save hundreds of millions yearly misspent. Individual thanks are herewith extended to those men who have contributed material or otherwise encouraged the writer: Mr. P. EH. Barbour, Assistant Secretary, American Institute of Mining Engineers; Commissioner Burke and Mr. T. B. Boone, an attorney, of the Indian Bureau; Major W. DuB. Brookings, of the U. S. Chamber of Commerce; Secretary J. F. Callbreath, of the American Mining Congress; Mr. A. H. Fay, former associate of the author in the Oil and Gas Section and for two years head of the Natural Resources division in the Bureau of Internal Revenue; Mr. J. C. Fitzsimmons, sales manager of the leading producer on the Pacific coast; Mr. J. O. Jenson, banker and former oil operator, of Clifton, Texas; Mr. G. E. Mitchell, mem- ber of the U. S. Geological Survey and writer for the Scientific American; Messrs. H. C. Morris, chief, and A. T. Coumbe, Jr., assistant chief, Petroleum division of the Department of Commerce; Dr. W. H. Raymenton, naturalist, of Worcester. Mass., and San Diego, Calif.; Mr. W. A. Reid, foreign trade adviser, Pan American Union; Mr. A. H. Redfield, of the Foreign division of the Survey; Mr. G. B. Richardson, chief of the Petroleum division of the survey; Mr. W. W. Orcutt, vice-president of the Union Oil Company, of California; Secretary G. M. Swindell, of the California Chamber of Mines and Oil, Mr. H. T. Walsh, vice-president of the Sullivan Machin- ery Co., Chicago; Mr. David White of the Survey; and also the publishers of the various books and periodicals who have been specially credited for illustrations or quotations reproduced. (6) OIL DOM: ITS TREASURES AND TRAGEDIES By Oscar H. REINHOLT Pre Rela OINsE CHAPTER I. THE PETROLEUM PANORAMA “While our Government has been trying to organize a model state of society, other great states have been looking about for the means to dominate the petroleum production of the world, because of their conviction that in the control of petroleum they might find the power to control the commerce, the trade, amd the industry of the twentieth century world.”—Warren G. Harding, 1920. International Treasures and Tragedies. The very great and growing importance of petroleum throughout the world is being emphasized by cur- rent events. The year 1923 has been full of happenings that prove how essential mineral oil has become to our industrial life and how involved it is with international commerce and politics. Not only have the daily newspapers been deluged with long news items, but certain popular magazines have devoted page upon page to reviews of various oil situa- tions.* Pessimistic writers have even prophesied that the next world war will be fought for the posses- sion of oil deposits as the last one was instigated by Germany’s greed for greater resources in coal and iron ore. The Chester concession,** relat- ing in part to the Mosul region of Kurdestan, is a late affair to re- ceive public attention. Interest therein has been aroused because of the spreading realization that from foreign sources must be taken more and more of the future supply of pe- troleum to meet the varied and To whom the Turkish Government has : : erauied areal, iconcéssionsy in. Asia voracious demands of America for Minor. (See map, page 9.) lubricants and liquid fuels. Other International Petroleum Problems. Among other affairs with an oily flavor may be mentioned the recognition of Russia’s misgovernment REAR ADM. COLBY M. CHESTER, U.S, N: 4 Minee: especially, “World Race for Oil,’”’ The Literary Digest, January, 1923, and “Civilization and Oil,” by Leo Pasvolsky, Atlantic Monthly, February, 1923. **Seventeen years after meeting the Admiral at the 8th International Geographic Congress, the author heard him describe the Kurdestanian fields. In the course of his lecture he credited David White of the Geological Survey with broadcasting the facts which explain why our country must seek foreign supplies. See ‘The Import- ance of Mosul in the Oil World,’’ Current Opinion, June, 1923; and “Berlin to Bag- dad and the Chester Plan,” J'he Nation’s Business, July, 1923. (7) 8 OILDOM: ITS TREASURES AND TRAGEDIES which depends so much upon the restoration of petroleum rights to foreign — interests that have developed Baku and lesser fields. The recent recogni- tion of the Obregon government was deferred by the United States until the dark clouds of confiscation had been dissipated to the satisfaction of American owners of Mexican oil lands. Perhaps it is providential, for the good of civilization, that two fair- minded nations together so largely monopolize the earth’s resources, pro- duction and commerce not only in petroleum but also in gold, iron, coal, copper, cotton, wheat and wool. According to Barron’s* “England has the lines of world communication and dominion in colonial administration and upbuilding. English capital and credit is being allied with American capital and management in a world’s steel development. Foundations are being put under the peace of the world that mean much for world de- velopment. Whatever may be the appearance of local friction, Great Britain, the United States, France and Italy are moving forward in closer co-operation than is locally realized. ‘The Mediterranean is a pivotal point in that co-operation and that future development.’’ Americans and Turkish Petroleum. The long diplomatic contest between France and England for the petroleum of the Mosul area in the upper Tigris region, which has been one of the dominating though underlying factors in various conferences, from Rapallo to Lausanne, be- came further complicated when Turkey by force of arms established her right to be recognized and dealt with politely. Upon this happening, Turkey herself protested against the tapping from her ancient territories of the Mosul petroleum, and this obstinate wish was one of the reasons why the Lausanne conference broke up, although even the American repre- sentative advised her to yield. Now Turkey has cleverly drawn a new element into the situation by ratifying the Chester concession, which gives an American syndicate the right to develop petroleum in this region and cancels an earlier permission secured by France. The move was clearly political on Turkey’s part, for the Chester concession is an ancient one, dating back to Abdul Hamid.+ It is interesting to note that no foreign oil interest has been posi- tively mentioned as being behind the French and British protests. Never- theless, it may well be that it is but another phase of the old struggle be- tween the Dutch-Shell and the Standard interests. In this respect it is interesting also to note, in so far as the British protest is concerned, a state- ment by Admiral Chester: “Counting the world war, Great Britain has sacrificed 100,000 men in her determination to monopolize Turkish oil. We are in Turkey to stay. Great Britain and France would not let us thru the front door so we have effected a rear entrance. The door will stay open for all time. The world may as well become reconciled to giving up part of its oil. In our country we have not enough, yet our automobiles and machines are multiplying so fast that we are facing a fatal shortage. Our commercial life depends upon an adequate supply of oil. “Geography and history will help our people to understand why this fight has been made in such intensity. It must be remembered that the *Issue of April 16, 1923, in article on ‘‘Mediterranean Issues—Airplanes and Mesopotamian Oil’’ by C. W. Barron, President of Dow, Jones & Co., publishers of The Wall Street Journal. ¢Kditorial in Hngineering and Mining Journal, April 28, 1928, J. E. Spurr, Hd. ITS TREASURES AND TRAGEDIES OILDOM: (ez6L ‘02 ‘20d ‘SEW ‘A “N 04} Woody JORIISqy) ‘UOTSSe9DU0D 19}seq4D [BUIS[IO 94} JO JuBvd [[VUMS Sty} Adojfaaep 0} Aplavutid pemdoy useq seq ‘smI09S JI ‘ayvoIpuAS UOpUOT B&B puB ‘petopuBqe seq SBy eSoq} JO vuO A[UQ “JUSTE -dojaaep Jo sesodind a0J ssety}JIOM oq 0} ‘AVAINS Suldo9ursue pus Apnys Joye ‘punoj Jt sjyooford eT oy} Jo Auv uopuevqge 0} WSII 94} Wie Ady, ‘“poyjnuue useq pey BI[oJVuY UT SpuUR, [IO puB [BIZUTM JO JUsTIdO[eAVP VY} AOF UOTSSad.U0d 1ajseyQ 94} By} e[douTURJsUOD Wor Juodel 9Yy} poluep “OD jJusUIdOTIAVd UvBolIouUlV-UBUI0I}O 94} JO S[LVIOMO ‘[BuINoLF epvit, TIO ey} Jo Asozan0jQ— "TOSOW GNNOUV NOIDA TIO GOIOHO AHL JO AWAISNTIONI AYOL -IUUAL NVISACUAM AO LNO LUVd NI dO LAS OL ONIAUL SI YAMOd ANO HOIHM ‘OVUI JO ALVIS SSW ooZ 29! 9 eo a 6) © B3L3W01y 00 002 01 a eo “spodsoig 110 © ip ee (SO yo uoIsssou05D Ane —| a JO SEUOZ 424,9W0]!) Op |= = a oe == ot Vp OXe "@KEM|ICy BUISIXT tear = = - i WANK fe uorssar Log JO 241 Vy TLuvorss arog thf JO HIS y 2) CASIO SI (3 » wnat , ey O vt WLLBUGNVXITY Z Z > oafhe 3 PZ: Oo . VORP = WIHSI NIN rf vinvay & ji ith i i Viuvds i = a UVSSINVUVH WHOIS F NE LivsVHS IrdVH WOw3Zy by ao ma x So NVAIUAO 4 OdOYOHWS ATTY Ze a : : 4 i i : oe . veh \: NS é ? O ° s : SOREN Y 4 OY ais } . ; : i. = 4 4 1? Jn05 10 OILDOM: ITS TREASURES AND TRAGEDIES world war was fought over oil. Britain invaded Turkish territory, in the ~ oil region (according to official reports) two weeks before war was declared between those countries. Averting Another International Tragedy. In recommending the crea- tion of a council of 25 experts, elected at large and independent of Con- gress, to handle our foreign affairs, Mr. Frank A. Vanderlip said, at Washington, May 12, 19238: “We are admonished not to covet our neighbor’s house. But what about his territory, his oil fields, his ports? There wasa coveting of terri- tory in Europe which resulted in 25 million refugees driven from their homes. * * * There was in Europe a coveting of oil wells which has set the whole Mohammedan world afire and brought a fresh threat to civilization.” Passing the question of political dominion over the Mosul region, France and Great Britain must admit that, if either of them should under- take through her nationals to develop that petroleum territory, she would eventually call upon the United States to supply some, if not all, of the capital, equipment and skilled labor essential to economic success. Know- ing that astute Turkey realizes their semi-dependence upon the United States in this respect, France and Great Britain may become content to leave the responsibility of the petroleum development to Americans and amicably to arrange, on equitable basis for the procural of the crude oil which they may require. While more embittered politically against Great Britain, Turkey, at the same time, has not forgotten the French fiasco of the Panama Canal; she must have greeted with glee the announcement that General Goethals, the canal builder, would direct the half-billion dol- lar enterprise if the Chester concession be brought to fruition.* On the subject of international cooperation as opposed to tragic competition, A. C. Bedford** has recently expressed himself as follows: “No one can regard the petroleum situation in the world today in:a com- prehensive manner without being convinced that a clear vision of all the elements in that problem leads to but one conclusion, and that is the supreme importance of co-operation on the part of the peoples of the world both in exploiting and utilizing the oil resources which nature so sump- tuously provided.” Convenient Location of Latin-American Oil Fields. None of the Asiatic fields awaiting development are near enough to the United States to prove very attractive to either the American investor or the American consumer. Beyond any doubt it will cost us much less to bring our future supplies from South America than, for instance, from Mesopotomia, the main difficulty being the dubious attitude of the various Latin-American states toward foreign enterprises essential in the development of their petroleum deposits. As a matter of fact, Columbia, Venezuela, and Trin- idad are all about as close to the Atlantic ports of the United States as are the Tampico oil fields of Mexico. American interests, present or prospec- tive, in Armenia, Mesopotamia and Asia Minor, should therefore not be opposed to a mutually profitable apportionment of foreign mineral oil that * Early in September, 1923, it was reported that Admiral Chester and his asso- ciates had sold out to the Kennedy interests for $300,000 all but 10% of their share of the profits of the Ottoman Development Co. But this report has been proven erroneous. ** Chairman, Board of Directors, Standard Oil Co., of N. J., writing in Foreign Affairs, March, 1923. OILDOM: ITS TREASURES AND TRAGEDIES 11 might some day be produced in Asiatic territory now claimed by Turkey”; nor should American investors at large become disappointed if they be not permitted to share in the Asiatic developments except so far as they are, or may become, stock- holders in the American com- panies mentioned below. Late in 1922, the Standard Oil Co., of N. J., acquired a 25 per cent equity in the Meso- potamian properties of the old Turkish Petroleum Co., by agreement with the Shell-An- glo-Persian companies and the French interests, of which the latter represent the German pre-war share.** It is ques- tioned if the Barnsdall con- cessions in the Caucasus or the Sinclair concessions in Sakhalin will ever prove profitable in view of the various restrictions imposed by the Soviet Govern- ment. Engineers Become Diplomats in International Disputes. Sir John Cadman, a leading engi- neer in British oildom, lately outlined the empire’s policy in these wordst: “A weird picture has been drawn about Meso- potamia. The fact is, that the ownership of oil deposits there- in will be secured to the Arab state as a part of the adminis- trative arrangements under the treaty mandate. Great Britain is denying the chance to all nationals, her own included, to examine these areas for com-. A VENEZUELAN GUSHER Sensational developments in petroleum produc- tion in Venezuela within the next year are ; , expected by experienced oil men. Above mercial purposes until she has view is from BE. 8. Durward, of the Caribbean been charged as a mandate. Petroleum Co., Maracaibo, and shows a well “One is led to believe that they recently got in the La Rosa district, rh HAE Z flowing 12,000 barrels a day.—Mining and the British Government is a Oil Bulletin, Aug., 1923. great oil company, and that it *In March, 1923, the New York Times declared, “The time may yet come when oil will have to be distributed according to the need of each country by international agreement.” : ** London dispatch to the New York World, dated Oct. 26, 1922. American par- ticipation was said to be due to the demand of the State Department for equal rights in Palestine and Mesopotamian oil lands. tIn the February (1922) issue of Mining and Metallurgy, quoted by the Mining Congress Journal of April, 1922. 12 OILDOM: ITS TREASURES AND TRAGEDIES has subsidiaries such as the Royal Dutch Shellf and the Anglo-Persian companies. Rumor asks you whether you can afford to become dependent for even a part of your crude petroleum upon such a British combination. You are asked to believe that soon your own internal source of supply will be exhausted. Emphatically, the British Government is not in the oil business. She does not control the Royal Dutch shell—she does not have a single share in that corporationt—-and with the exception of shar- ing in the Anglo-Persian Oil Company, over which it has no control, the British Government is not interested in oil companies.”’ In framing a foreign petroleum policy for our own Government American engineers and engineer-geologists have been called upon by Congress and the State Department to gather fundamental data. Promi- nent have been Secretary Hoover of the Department of Commerce; his petroleum aid, Mr. H. C. Morris, Dr. David White of the Geological Sur- vey, and Dr. C. K. Leith* as chairman of a committee of the Mining and Metallurgical Society. The question is held to involve more than petroleum. While nature distributed petroleum unequally throughout the world§ it pursued the same course with other minerals. In some of these, such as copper and iron, the world must depend heavily upon the United States. All agree that restrictions on the international movement of essential minerals should be subject to the minimum amount of control. Nevertheless, there is certain to be more or less trading on the strength of mineral advantages as a result of the acuteness of the oil situation. It is the hope of the Leith committee to be able to furnish information which will make possible a more intelligent consideration of this general subject, when placed at the disposal of the Government. || The United States should distinguish between immediate economic needs and remote and perhaps unnecessary diplomatic ambitions. It is most legitimate and desirable that for a time we should supplement our American oil with whatever we can get from abroad at a cost which will represent a national saving. Our ultimate native fuel resources are so vast and their extent so continuously enlarged by scientific research that there would seem little reason why we should ever feel obliged to incur any risks of war in distant parts of the earth on behalf of an imported supply of liquid fuel for our country.** Restrictions on American Development of Foreign Fields. Secretary Hoover of the Department of Commerce said in his annual report, 1922: Early in the administration consideration was given by this Department jointly with the Department of Interior to the serious situation confront- ing our country in its supply of oil. As a result of a survey of our own 7This foreign concern, largely through the Long Beach discovery made by its California subsidiary, controlled over 4% of the oil output of the United States in 1922. ¢ Sixty % Royal Dutch or foreign controlled; only 40% Shell or British. See Federal Trade Commission’s report on Foreign ownership in the (United States) Petroleum Industry, made to the Senate, February 12, 1923. *Adviser to the United States Shipping Board, 1917-18; author of ‘“‘The Strategy of Minerals’’. §See table and map of petroleum reserves. ||Paul Wooton, correspondent of Engineering and Mining Journal Press. **Joseph EH. Pogue, quoted in The Oil and Gas Journal, May 3, 1923. * OILDOM: ITS TREASURES AND TRAGEDIES 13 and the world situation, it was concluded that our domestic sources of oil would at the present rate of exhaustion last only a generation, and that foreign nations were rapidly pre-empting the available foreign oil-bearing territory. Therefore, unless our nationals could reinforce our holdings abroad, we should be dependent upon other nationals for the supply of this vital commodity in a measurable number of years. As a result of these conclusions, conferences were called with the representatives of the oil industry, and voluntary steps were taken by them to extend their holdings AMERICAN ENTERPRISE ABROAD Despite the notorious neglect of our nationals in foreign fields, at least one country—Mexico—owes its modern development of mineral resources to men, money and material from the United States. Here is shown a steel derrick and a diamond core drill made by an American company and used in extend- ing the producing area of an oil field near Tampico. —Courtesy of Sullivan Mchy. Co. abroad. Departmental reports show a rapid expansion of the foreign interests of our different companies, and they have now reached an extent which should measurably assure to us future supplies under American con- trol. It has developed from these investigations that while our oil-bear- ing lands are free to the exploitation by foreign corporations, some of the principal countries whose nationals are thus engaged here at the same time prohibit our nationals from similar free access to their territories. Retaliatory action was taken by Secretary Fall just before vacating his office as Secretary of the Interior early in 1923. In the opinion of the New York World:* Nobody is going to solve the international oil prob- lem by making reprisals in Oklahoma against the British and Dutch com- panies. To shut out capital from the small fraction of the American sup- *Quoted by The Literary Digest of March 31, 1923, page 13. 14 OILDOM: ITS TREASURES AND TRAGEDIES ply that remains untaken will not open the door in the Near East or in the East Indies. The American interest in the oil policy of Europe and Asia is twofold, first to see available at home a cheap and abundant oil supply and next to insure the sharing of American oil companies in the develop- “ment of the Eurasian fields. In these oil-fields we have no strategic inter- est. The oil problem (with us) is a peace problem. It is a question of feeding autos, tractors, gas-engines, locomotives and merchant ships in time of peace rather than of warships in time of war.f TABLE OF THE WORLD’S PETROLEUM PRODUCTION in 1912 and in 1922 Showing the Quantity and Percentage Contributed by Countries and Grand Divisions. Thousands of Barrels World’s Per cent Countries 1912 1922 1912 1922 Unitedwe States==== eee 223,000 551,200 63.4 — 64.8 Meéxi¢o (02225 2s eee eee 16,600 185,050 4.7 21.7 Canada. 22 S24 Se eee ee ee 240 180 soe Spies, Per 3222 eee ee ee ae 150. 5,330 0.5 0.6 Argentingieee* e SA ee 50 2,670 0 0.3 TTI RIA dha 2 ee ee ene es 440 2,450 vas! 0.3 Venezielaac see ae 0 2,340 AO) 0.3 > Colomblas22 222-222-220 — 0 320 AO) ae Hey pti te oe os See eer ens 200 1,190 0 OA: Algeria RD Ne St Se a gD 0 10 ae poh UMA aes ee ee eee 13,000 9,820 3.0 12 ‘Poland eee ee eer eee 8,500 5,100 2.4 0.6 UPA COs ett EO eae ean aie 0 500 0.0 0.0 Germany ee 2 Sees eee 200 1,030 0 mal RUSS Ree Seg, See 68,000 35,100 19.3 4.1 IPOS a, oe ee Sees ae aes 600* 21,200 sik 2.0 Dutch ehast indies === 10,850 16,000 oul 1.9 ATT Gl ie gee en pas ya ama 7,120 7,980 2.0 0.9 British bores. = ss meas 6£ 2,920 nae ‘3 Japan wand Hormosas === 1,670 2,000 9) 3 Summary by Grand Divisions. NOTE AM Cri Ca ee ee 239,840 736,430 68.2 86.5 South “America 22 a2 aes 2,240 13,110 6 15 TNocaleeA MET Caeser ee 242,080 749,540 68.8 88.0 BESS ire ese eke ey ee ee 20,246 50,100 Sali 5.9 PATRI C ates tet See ee he ae ae se 1,200 0.0 ll EERULTSO J) Care es sence eae gee 89,700 51,550 25.5 6.0 AUWISGRATT A Ste ne ose ee O$ O§ 0.0 0.0 352,226 852,390 100.0 100.0 1OMY CATA Cai sence 500,164 = 142 per cent. Revised statistics of the U. S. Geol. Survey gives the yield of the United States in 1922 as 557,531,000 bbls.; but the share in the world’s yield remains practically 65 per cent. yIn reversing his predecessor’s decision, Secretary Work announced May 16, 1923, that corporations controlled by foreign interests are again permitted to obtain oil and gas leases on restricted Indian lands. *Campbell M. Hunter, of London, quoted in (United States) Mining and Metal- . lurgy of February, 1920. tSarawak, from the An. Rep. of the Royal Dutch-Shell Co., quoted by A. H. Red- field in Economic Geology, August, 1922. §As in Seotland the only mineral oil obtained in Australia is shale oil. OILDOM: ITS TREASURES AND TRAGEDIES 15 Present Dominance of the United States in the Oil Industry. Allow- ing for 4% foreign ownership at home, and for 80% control of Mexico’s oil industry, the United States, through its nationals, last year controlled about 78% of the world’s output of petroleum. Including the 23 million barrels produced by foreign corporations, the 551.2 million barrels of domestic oil obtained in our country in 1922 constituted a direct con- tribution of 65% to the world’s output. Our gain of 79 million barrels, or 16.7 per cent over 1921 made up more than nine-tenths of the 86.5 million barrels increase for the whole world. Not in copper, cotton, or corn is our present world supremacy so marked as in petroleum although we export relatively much more of our domestic production of the first two. Our per capita yield of petroleum has been steadily increasing. It rose from 4 1/3 barrels in 1921 to 5.0 in 1922, promising to become nearly 7 barrels in 1923. No nation except Mexico surpasses us in this respect. Mexico’s maximum per capita yield of 13 barrels was attained in 1921, but dropped to 12 barrels in 1922. However, along this line of com- parison Mexico, in turn, is excelled by six of our individual states, namely Oklahoma, California, Wyoming, Texas, Kansas and Arkansas. In consumption, our leadership is more pronounced and is not, on a per capita basis, approached even by Mexico which usually retains and uses less than 5% of her production. With only 7.5% of the earth’s land area and with only 6% of its population we are consuming 70% of its crude mineral oil. and fully 80% of one refined product, namely gasoline. The Bureau of Mines* has published statistics of the quantity of petroleum used in 1921 by certain countries. The units have been con- verted from gallons to barrels of 42 gallons each and are given herewith in millions: mined Sates: see ee} BS eee e2D: Cita See Sen Oe en eee Arete Se 4.8 inte dies in od oni =.= Sea. epee tes Abeworzwe, are “lionm cavers pep A he Bh CRNDEKO I 9 a, Ss SiR Sle ee ee ee 9.5 C1] Ge re ea ees ayes ea Be Ps 3.0 [SNR MAVCYS). ox, Davies Aled 5 JIM Oe ee ae 8.9 IVEGSC Opec = Sea On een tere) Petey ie ied ayy Ditch Hast Indies: -2ses 225 5.4 SMG Hi ofa ea SD Sere ia aS Ti RS Sem 2 These figures for 1921 become significant if expressed in consumption per person, as shown below: (GIN GS CER SCS Cl le. a 4.8 Chinato oe ste Pe Ot ee oe 0.011 Remit Cie IM OMe fg 8 ne ko 0.7 JVADOMSAnO RP OTmOsies i =a. ere a 0.053 Mee eet pee eee pee ea: Ub PRA eae Rt ee. eee See ee Cee 0.80 Eg a ey SE RIS el 0.2 MECKICO ere ee ee 0.10 Pt ememaste ln glee: ss 0.11 ANISErS amie oe ee ee 0.22 From the above it appears that we consume 4.4 times as much per capita as Canada. The latter relatively uses 10 times as much as the Dutch East Indies and they in turn, use 10 times as much as China de- spite its huge consumption of kerosene. Thus our consumption of petrol- eum per man, woman and child appears to be, roughly, 400 times that of China. It may be truly said that the per capita consumption of mineral oil is fast becoming an index’ to the ae SOE if not the extrava- gance, of civilized nations. — -*Hstimates by W. C. Hill, published in the Qi] and Gas Journal, November 4, 1922. £2 -! OILDOM: ITS TREASURES AND TRAGEDIES Efforts of Some Countries to Find or Open Domestic Deposits. Four instances are cited of activities in coal producing countries seeking do- mestic supplies of mineral oil. England, during the past eight years, has expended over $2,000,000 in drilling almost 31,000 feet of test wells within her boundaries without discovering oil of any commercial consequence. The value of the petroleum produced has been estimated at less than $100,000.* In South Africa the Northwestern Cape Colony Prospecting syndicate has for 20 years been boring for oil near Carnarvon. Efforts in that immediate locality were lately abandoned after an English expert reported adversely. The Government of Australia has a standing offer of nearly one-quarter million dollars reward for the discovery of mineral oil in paying quantities within that commonwealth. So far only two likely structures have been found and a trial bore is being sunk on one of them.{ After spending about $150,000 the Government has given up its own test at Roma, owing to an excessive inflow of water.§ However, British oil companies, operating outside of the Empire, have met with more success, particularly in Mexico, Persia, the United States, and Rumania. The total amount has been estimated at 52.6 million bar- rels by a London authority but the published list appears to be incomplete. After allowing 40% of the Royal Dutch-Shell Company’s output in the United States (23 million barrels in 1922) and say 60% of the entire Persian output (21.2 million barrels in 1922), the British oil companies controlled, in 1922, at least 75 million barrels of petroleum or approxi- mately 9% of the world’s production.|| Aeronautical France, which has been getting most of her gasoline, illuminating and lubricating oil from America and paying a seemingly high price for the first named, has bestirred herself since recovering from Germany the Pechelbronn oil ‘“‘mines’” in Alsace. Even with new shafts over 1000 feet deep compared with the earlier diggings of 40 to 300 feet, the annual output is not expected to exceed half million barrels, or no - more than the daily rate of Oklahoma alone at the middle of 1923. To supplement this seemingly small amount of domestic production the Freneh people are now normally importing in a year nearly 9 million barrels of petroleum products. Various steps have therefore been taken to reduce the requirements from foreign sources. These include encouragement to further prospecting in France, Algeria and Madagascar and the legal obligation of importers, beginning August 28, 1923, to buy of the Govern- ment 1-10 as much motor alcohol as the volume of gasoline imported. In October, a liquid fuel congress and exposition were held in Paris. Both *Wall Street Journal, December 4, 1922. According to Trade Information Bulletin. No. 80 of the Bur. of For. & Dom. Com. January 29, 1923, the English discovery was made at Hardstoft in Derbyshire. Similar high grade oil was found 300 miles away and 1,800 feet deep near Edinburgh, Scotland, in May, 1921. See also chapter on Commercial Geography. +United States Commerce Reports February 5, 1923. ¢The Oil and Gas Journal, January 25, 1923, Page 136. §The Mining Journal, London, December 30, 1922. |In September, 1923, the Royal Dutch-Shell Co., was getting %4-million barrels of oil daily; 80,000 in California, 40,000 in Mid-Continent, 100,000 in Mexico and 30,000 in other fields—R.Airey of the Asiatic Petroleum Co., quoted in The Oil and Gas Journal, September 6, 1923. OILDOM: ITS TREASURES AND TRAGEDIES li] proved disappointing as to the expected attendance of foreign producers, refiners and marketers who might have valuable trade or technologic sec- rets to reveal. Why Nations Seek Own Sources of Oil Supply. In general, the more civilized foreign nations are ambitious to have their citizens own or con- trol petroleum deposits—colonial, domestig or foreign—sufficient for two purposes: (1) Industrial independence from the United States with special reference to the refining of the crude oil; and (2) military de- mands which, for countries like Germany with negligible domestic deposits, involve reserve storage of large quantities of lubricants and gasoline. Some authorities say that the Central Powers were defeated as much through their shortage in these supplies as through any privations and propaganda that influenced their folks at home. Special reasons impel some nations, notably Great Britain, Nether- lands and Norway, to encourage their nationals in the quest of petroleum deposits. The countries mentioned are to a great degree dependent upon shipping as a source of national income, and it is but a question of time be- fore fuel oil will entirely displace coal for marine motive power, particularly if the Diesel engine should be universally adopted. As a matter of fact, the mer- chant marine of the world consisted of oil-burning vessels to the extent of 26 per cent in 1922 compared with only 3 per cent eight years earlier. Lord Curzon* has stated that whereas Great Britain imported nearly 3°4 million tons, or over CAPT. ROALD AMUNDSEN’S SCHOONER “MAUD” 28 million barrels,} of oil at Seattle, taking on petroleum supplies for its ; ie O- Arctic cruise, June 4, 1922. Note the Norwegian Se 1920, her domestic tes flag and crowd on dock and roof. Gasoline will duction (presumably from again be needed for the next attempt of the South g h. shal Pole’s discoverer to find the North Pole. cotch shales) was only —Courtesy Union Oil Co. of Calif. 166,000 tons, or a little more than 1 million bar- rels. Of the oil imported, 61% then came from the United States, 37% from other countries, and only 2% from the British possessions. Yet 90% of the British navy is now oil-fired, and the use of oil is increasing in the mercantile marine, so that the urgency of a supply of oil is manifest. bine iS Be ts *Quoted in an editorial of the Mining and Scientific Press, July 16, 1922. tIncreased 67% to 34.3 million barrels in 1922. ITS TREASURES AND TRAGEDIES OILDOM 18. ‘6I6L ‘Jequejdeg ‘puvlsuq “~ousnor s,uyjuady Ul ABVspy ABYOR ‘A— : ,“SO9AIOSOI BINJNJ IOJ PvVoIge YOO, 0} pesiy~qo SI puew [IO JTJSeMIOP JorSeI10}S Joy YSnoiy} suluunNI ST BolIomMy * * * “Jonpoid epnid 3Y} JO vIVYS I9y IOJ SotzJUNOD I9yIO YIM 919009 01 JABY TIIM JOYS PTIOM OY} JO JoYAVU [IO VY} SUI[NA JO PvI4SUL UOYM SuIyqovoidde eull? B puBw dn Aap 0} Supuutseq ATddns d1]seuIOp Jo VvdINOS Jory Joy SpUy SoIVIG P2eqTUQ 94}—SUIY SBA [9091S JVY} OS SIBvOA AJB} SBM FT SB ,SUIS[ SI [10, 384} Surdvs B oni}? 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OILDOM: ITS TREASURES AND TRAGEDIES 19
WORLD’S KNOWN RESERVES, PRESENT PRODUCTION RATE AND
REMAINING YEARS OF LIFE, JAN. 1, 1924.
Life Left
Remaining* Yield At 1923
Country and Reserves 1923. Rate
Grand Division Millions of Barrels
RRS LC eS ote ee kL eae 12,000 735 16
Pere t MexiCg. uo tS 4,000 142 28
Rea TUOMAS <0 ot et et ee fr 7 -2,.000 ye a
Northwestern a Sa oc ile maa aman mia 6
Sotth Wiest Zl CLS um ee ee a ee Ce
oe PPT ates ter ee She A 9,000 3 500
ee (OAS TA), ae A ee DORE 2 :
ap hapnios Pemarron ing tee er 6,000 5 850
South Bolivi t 2
rr erinn RIM eeEO LT ee eee a
Pemanig- © Polatdertee 2a io fe ee 2,000 17 120
Snr pen eerie eee ko A ce 7,000 35 200
AE Wate EEE SEE ee ne 4,000 0 --
Rerdin-std Mesopotamia... 7,500 25 300
SO OMIEMIII MR OrniNaH ou 2 8 2 ee 2,200 2.2 --
nee Ce ree We re or ee 1,500 ma --
Rt ee Ee oe Pe ger eS 2,800 8.2 350
WERE eee ee ee ee a 3,000 20 150
mer nementertin sw ctes id we en 1,000 1.2 800
SUMMARY
INGrIN AA INeE i eS ee ey a Pee ane LS O00 878 20.5
South America________ 4D: 28 eRe Sie” eae 15,000 25 600
BOURODG cea ot 3 Pees ey bee oe ee OD OOO 52 160
AOS lee a Sedaiee eee e S o Sea a ene oe 21,000 55.5 380
MimtierumArricn ste ao ee 1,000 1.2 800
Total quantities, average life________________ 64,000 1,011.7 63
Position and Importance of Petroleum in the United States. Nowhere
in the world does petroleum and its dependent industries present so many
important phases and effect, as in this country. In only one other nation
is it more significant in any respect, namely in Mexico where of late it
has, through taxation, furnished nearly all the funds needed to support
the Federal government. While making but one per cent of the entire
revenue received by Uncle Sam in the form of income tax for 1919, the
total of 38.6 million dollars derived from the oil and gas industry proved no
mean amount that year. It then made up 51 per cent of the income tax
levied on the American mining industry, compared with 23.6 per cent to
the credit of coal mining.
The most vital relation of petroleum is not, after all, toward trans-
portation—aerial, terrestial and submarine—but towards the basic food-
producing branch of industry, ancient and honorable agriculture and stock-
*These estimates represent the author’s modifications for January 1, 1923, of the
White-Stebinger approximations appearing in Oildom, October, 1922. David White, in
The Mid-Pacific Magazine, June, 1923, wrote that wild estimates are better than none
and that the obligation of the geologist is to make them as good as possible; but that
they will be often revised during the next half-century with advances in geologic
explorations, drilling tests, commercial production, and technical discovery. S. K.
Hornbeck, of the U. S. Department of State, in addressing the “Raw Material’ con-
ference at Williamstown, Mass., August 11, 1923, mentioned 70,000 million barrels
as the latest measure of the world’s petroleum resources.
20 OILDOM: ITS TREASURES AND TRAGEDIES
raising. ‘The general employment of the tractor and oil-driven equip-
ment in this field suggests great possibilities to follow in saving labor on
the farm and increasing production not only of food but also of fiber.
Julius H. Barnes, president of the Chamber of Commerce of the United
States and an international authority on grain, recently said that while
the agricultural industry was not generally considered to be highly
mechanized, the wheat crop of today, if the same crop were produced by
the methods in vogue before the invention of the reaper and other mechan-
ical devices, would require 130,000,000 working days’ labor. The American
worker produces yearly an average of 12 tons of cereal per worker, com-
pared with an average of only 1% tons per farm worker of the world at
large. The tractor and oil-driven equipment will more than make up for
the 1,700,000 fewer workers on the farm in 1920, compared with 1910.
They will help solve the problem of labor and production costs which now
engross the minds of our farmers.’’*
In some states as in Oklahoma, the economic sitiaGon of the oil
industry must be considered in weighing the condition of the farmers.
Many hundreds are getting an annual revenue from leases of land not yet
developed and large numbers are drawing royalties. But oil is not yield-
ing direct revenue for the great majority of farmers.
i = Onb an Gas Journal.
GRAIN FIELDS AND ORANGE GROVES GIVE WAY TO GOLDEN OIL.
Discovery well at Compton, latest new field in Southern California, 1923
One does not think of New York as an oil town, yet nearly a quarter
of its total trade as a port is in petroleum and petroleum products. Most
astonishing is the fact that in 1922, in point of tonnage, mineral oil made
first place in the total traffic of each of the six leading sea-ports of the
United States, namely New York (19,000,000 tons total traffic), New
Orleans (6,700,000), Baltimore (5,200,000), Philadelphia (5,150,000),
Port Arthur, Texas (4,800,000), and Galveston.+ During the fiscal year
of 1921, petroleum and its products were exported to a value exceeding
500 million dollars. In 1922, with a value of almost 350 million dollars
and a rank next to cotton and wheat including their manufactures, mineral
oil made up nearly 10 per cent of the total value of all domestic mer-
chandise exported. Oil traffic through the Panama canal was paying 50
per cent of the Government tolls during 1923, and at one time during the
latter part of this year it was moving east at a rate of almost 150 million
*Hditorial from The Oil and Gas Journal, May 17, 1928.
{The Literary Digest, June 17, 19238, page 70.
21
1923,
the 2%
S15;
ic and Gulf
troleum alone for this
ing
to Sept
it from the port
’s greatest export
This tremendous
has resulted in a
000 dur
1
In Atlant
ico.
Q
1c
’
200
h ran from July
da year ago.
most of
’
in Mex
ia pe
ific to the Atlant
forn
ion barrels,
ico
of Los Angeles, which in 1923 has become the world
1
Tamp
ill
ic
°
tons per annum.
being nearly $5
ing
.
ts,
TREASURES AND TRAGEDIES
ipts of Cal
1p
10
ITS
OILDOM
barrels or more than 20 million
year will probably total 70 to 75 m
center for crude oil, even surpass
traffic in petroleum from the Pac
doubling in the toll rece
months of the fiscal year 1924 wh
Coast ports the actual rece
compared with the same per
‘eg osed uo ulseq
salesuy SOT 94} JO dem 99g ‘“p[IOM 9} Ul 9}]VI SUIPBOT 4Se4SVJ 9G} 9q 0 PTes ‘INOY Ue ‘s—Tqq OONON'OS 1B SIAOyxUBI PROT 0}
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CHAPTER II. THE NATURAL RESOURCE.
Nature and Origin of Oil. Crude petroleum is a liquid bitumen—
a complex mixture of many compounds, principally those of carbon and
hydrogen. It is extremely variable in weight, color, and thickness or Vis-
cosity. In general it ranges in specific gravity from 0.75 to 0.99*—that is,
it is lighter than water. Some of it has a light color and may be very
mobile; some, an almost black color and may be very viscid. Petroleums
are commonly divided into two groups, one of oils having a paraffin base.
and the other of those having an asphaltic base. Usually the oils that have
a paraffin base are lighter and contain more gasoline and more lubricating
oil and are therefore worth more than the others.
Natural hydrocarbons are present in all sedimentary rocks of marine
origin that are not too much altered or metamorphosed. While they are
also stored in sediments of fresh-water origin, no valuable deposits in such
have so far been found. The
ereatest amount occurs in dissemi-
nated condition in the shales, es-
pecially in the fossiliferous black
shales where oil forms as much as
21 per cent of the rock mass. As
little as three per cent can be ex-
tracted by heating the shales and
driving off the crude oil. Impure
limestones, notably dark ones, are
full of oil, evidenced by the odor
on breaking the rock. Even if a
series of 1,500 feet thick had but
1 part petroleum in 100,000 parts
emCTION Oman eee ' (of bed rock), this amount would
By way of cracks or joints the oil mi- yield 750,000 barrels to the square
grates from the mother shale up into mile, about equal to the greatest
porous ‘‘sands.”’ e :
actual production per square mile
of any part of the leading Appalachian fields. But if the material is to be
commercially valuable, it must be concentrated by natural agencies into
limited underground areas. Furthermore, to be of use to man, these in-
visible reservoirs must be discovered by drilling. The natural hydrocarbons
occur in the sedimentaries in all conditions from natural gas through
light oil and heavy oil into asphalt. ‘
Three theories ascribe an inorganic origin to oil, namely the car-
bide, the volcanic, and the sedimentary theories. Of six organic theories
two claim animal origin. The explanation usually accepted is that oil is
formed from the same material as coal, that is, mainly from vegetal
matter. Plants, except for the water in them, consist principally of the
same elements that go to make up petroleum and natural gas.+
DEL AE Ser sees :
*On the Baume light scale the range is from 56 degrees for the lightest to 11
degrees for the heaviest crude, 10 degrees B. corresponding to the specific gravity
1.00, of water.
{‘‘World Atlas of Commercial Geology,” U. S. Geological Survey, 1921.
w (ez)
OILDOM: ITS TREASURES AND TRAGEDIES 23
ra
The material from which petroleum originated was first laid down
on the floor of the sea; the greater part of it was seaweed, with some
animal tissues which become deposited in connection with fragments of
coral and broken sea shells forming beds of limestone. In some rocks
of this kind the odor may still be noted in freshly-broken pieces; so marked
is the smell that they are known as stink stone. Masses of clay washed
down opposite river mouths are heavily charged with fibers and tissues
which high pressure reduces into oil and gas. Such carries vast amounts
of plant remains. When this is deeply buried under the pressure of other
deposits Nature distils it slowly into oil which, separating by gravity from
the gas and the salt water, accumulates with these in porous beds; with the
WATER IS ESSENTIAL
TO FLOAT THE OIL TO
THE HIGH PART OF
CERTAIN STRUC-
TURKS.
Here is shown a heavy
flow of salt water near a
large untested Texas struc-
ture once leased by the
author. This well was
drilled 7 or 8 miles from
the apparent center or
geologic high point and
thus missed the oil itself.
gas above and the water below. Overlying impervious strata prevent the
upward escape of the oil; and the subsequent movements of the earth’s
crust, such as bending or breaking, create structures for the natural trap-
ping or storage of the oil until the impervious beds have been punctured
by the drill. If the pressure of either the water or the gas is great enough
gushers or flowing wells will result when the petroliferous stratum has been
penetrated.*
Briefly, the purely animal theory is now definitely on its defensive,
the rival vegetal theory having decidedly gained ground especially among
the younger generation of practical geologists and those who are intimately
associated with the winning of the precious fluid.+
Occurrence in Geological Structures. The world’s petroleum comes
from sedimentary beds, almost entirely from sands, sandstones, conglom-
erates, and porous limestones. The deposits are universally held in by
coverings of shale, clay, or marl. The bodies of strata most common in oil
fields are those in which thick shales, clays, or marls alternate with rel-
atively thin sands.#
* “Surface Marks of Oil Deposits,’’ P. H. Pearson.
+ “Oil-Finding,” E. H. Cunningham-Craig, 1920.
+ “Geology of Petroleum,’’?’ W. H. Emmons, McGraw-Hill Book Co.
24 OILDOM: ITS TREASURES AND TRAGEDIES
Any arrangement of the beds to form a trap for the gathering of oil
in commercial quantity, is called a “structure.’”’ Some structures completely
trap or enclose the oil within a part of the porous bed, i. e., they are more
or less closed. They include domes, anticlines (or elongated domes), and
lenticular sands. The domes may be formed by the ordinary “‘blistering” of
the earth’s crust, by the underground growth of thick salt lenses, or by
the upthrust about a volcanic plug. Local structural highs and sealed
s > > VF > > 3 VS 3 x
a3 Ee ere eer coi ini. 2
A cS S SS 8 8 8 ss OS §
-—— i; 2 A Surface Ri iM A RA
lee A = bi Nh lS
2 ee = ee
oe ee eee Oe ee ee
Ee ESS = = S!S=—, ——— on
——— is os ee Sands containing
= Fresh water cee ————. Bae fresh water
‘ee SS Bee az
SS Enns Ga eee = _———S———————
a Pa
=
———
—S<— Shale
= .—Limestone
= -—_ 5)
=
———— SS ==
SS S— Salt water e
GENERALIZED, CROSS SECTION THROUGH AN OIL AND GAS FIELD
—Bureau of Mines, Natural Gas Manual.
faults may hold the oil along the anticlines. Of less importance are the
retardation structures on monoclines of moderate dip, i. e., strata gently in-
clined in one direction only. The retardation may be due to local horizon-
tality or terracing, to mere change in the rate of dip, or to the development
of anticlinal noses.
Experience has shown that each oil field has a characteristic and dis-
tinctive geological structure. The following classification of American
fields is based on structure:
1. Fields with folded structure (anticlines and synclines)—the Ap-
palachian f., Illinois, the Mid-Continent f. (Oklahoma—Kansas N. Texas),
N. Louisiana, California, Wyoming, Colorado.
II. Fields with monoclinal dip (homoclines)—Ohio-Indiana; of minor
importance in California and Wyoming. :
Ilf. Fields on domes—Wyoming, Ohio, Louisiana-Texas Gulf Coast,
Mexico. ;
IV. Fields on faults—California and Wyoming (of minor import-
ance).
V. Fields on unconformities—California, Oklahoma, New York, On-
tario, Quebec; of minor importance in Wyoming. *
Petroleum occurs in synclines or ‘‘down-folds” only in the absence
of (salt) water from the containing stratum.
* Ziegler’s “Popular Oil Geology,’ 1920. At Mexia, Powell and Luling, Texas,
faulting is admittedly the major factor in trapping the oil. The great pools of Mexico
are located in areas with fault systems.
OILDOM: ITS TREASURES AND TRAGEDIES 25
TWO EXTREMES IN
SURFACE SIGNS.
1. Natural gas discov-
ered: in a_ shallow well
drilled for water—near and
north of the Virgelle struc-
ture, 15 miles SW of Big
Sandy, Mont.
—Photo by the author.
2. Asphaltic residue or
“Drea” that remains after
the oil exudes from the
sandstone and partly evap-
orates. Under the Cali-
fornia sun the “‘brea’”’ flows
in ropy forms and cascades
over the edge of a Tertiary
bed.
—Photo by R. HE. Vandruff.
—U. S. Geol. Survey.
OIL SEEPAGE NEAR HEAD OF KATALLA SLOUGH, ALASKA.
Note the gas bubbles breaking in the surface of the residual gil.
26 OILDOM: ITS TREASURES AND TRAGEDIES
The Carbon Ratios of Coals in Relation to Oil Fields. As regards the
alteration or metamorphisis of rock originally oil-bearing a discovery of
great practical value was made less than a decade ago by David White,
of the Geological Survey. Petroleum in reservoirs associated with the
coals show differences corresponding to the degree of alterations of the
coals. In the few regions where the geographic association of oil with
coal exists closely, almost always with the oil beds (stratigraphically)
lower, it has been found that the percentage of fixed carbon in the coal
amounting to 65 or more precludes the possibility of commercial deposits
of either oil or gas. Where the coals range from 60 to 65 per cent gas
may be found but no oil of consequence. Where the fixed carbon ratio
runs from 55 to 60, both are found in abundance. These rules apparently
apply to Arkansas, Oklahoma, Pennsylvania, Texas, Wyoming and several
other states that produce both coal and petroleum.*
Surface Signs of Oil Deposits. The presence of petroleum in any region
may be indicated by oil springs or seepages or by surface deposits of
asphalt or paraffin wax, and its location underground may be inferred
from visible stratigraphic and structural features favorable to its ac-
cumulation.
Seepage is the surest evidence of the presence of oil. Most of the
Tertiary oil fields of the world are located where seeps occur. Seepage has
given the discoverer the first and often the only clue to the oil value of the
field. This and structure combined form conditions that delight the heart
of the driller, as largely eliminating chances of failure. The fields
of Mexico are located in extensive areas of exudation. The great Bibi-
Eibat fields of Russia were first operated amidst such visible signs. De-
velopment in California mainly followed seepages. In Burma, Galicia,
and Roumania, surface marks showed the way. In the Mid-Continent field,
however, oil springs are rather rare. The reason is that the beds are so
slightly tilted that they remain unbroken and there are no fissures along
which the oil can reach the surface in noticeable quantity. Though seepage
and asphalt show that oil has been lost we have reason to believe there is
more where it came from.t
Geological Distribution. Nearly all the oil produced in Europe, Asia,
Africa, and Oceanica is obtained from Tertiary strata. In Canada oil is
obtained from Silurian and Devonian rocks, and in Mexico, the West
Indies, and South America from Cretaceous and Tertiary rocks. In the
United States, which alone supplies two-thirds of the world’s output, and
in which the scientific quest for it has included the entire stratigraphic
column, petroleum is found in the beds of every geologic system above
the Cambrian, though the most productive rocks are in the Devonian,
Carboniferous, Cretaceous, and Tertiary systems. The Pennsylvanian,
* “Geology of Petroleum,’ W. H. Emmons.
+ Pearson’s ‘Surface Marks of Oil Deposits.” Seepages are most in evidence
and strongest in those regions where the folding is most recent, and where stresses
are still in operation; regions of early buckling furnish little evidence of seepages
such as oil or gas springs or asphalt deposits. Such former deposits may have been
eroded. The readiness with which seepages are healed is apt to be underestimated;
they tend to stop themselves.—David White, Chief Geologist, U. S. Geological Survey.
t World Atlas of Commercial Geology, U.S. G. S., 1921.
OILDOM: ITS TREASURES AND TRAGEDIES
27
PRINCIPAL DIVISIONS OF GEOLOGIC TIME, MODIFIED FROM THE
LSE
Recent.
Quaternary] pjeistocene.
Cenozoic
(recent
life). Pliocene.
Miocene.
Oligocene.
Kocene.
Tertiary.
r “Age of man.”’
S. GEOLOGICAL SURVEY
eS LS LS
Characteristic life.
Animals and plants of
modern types during Great Ice Age.
“Age of mammals.’’ Possible first ap-
pearance of man. Rise and develop-
ment of highest orders of plants.
Cretaceous.
Mesozoic
(interme-
diate life).
Jurassic.
Triassic.
Permian.
Carbonifer-| Pennsylva-
ous. nian.
Mississip-
pian,
“Age of reptiles.”” Rise and culmina-
tion of huge land reptiles (dinosaurs),
of coiled shellfish with complex parti-
tions (ammonites) and of great fly-
ing reptiles. Appearance (in Juras-
sic) of birds and mammals; of cycads,
an order of palmlike plants (in Trias-
sic); and of angiosperms such as
palms and hardwood trees (in creta-
ceous).
“Age of amphibians.’’ Dominance of
club mosses (lycopods) and plants of
horsetail and fern types. Primitive
flowering plants and earliest cone-
bearing trees. Beginnings of back-
boned land animals. Insects. An-
imals with nautilus-like coiled shells
(ammonites) and sharks abundant.
Devonian.
Paleozoic
(old life).
Silurian.
Ordovician.
Shellfish (mollusks)
Rise of amphibians
“Age of fishes.’
also abundant.
and land plants.
Shell-forming sea animals ruling, not-
ably relatives of the nautilus (ceph-
alopods). Rise and culmination of the
animals known as sea lilies (crinoids)
and of giant scorpion-like crustaceans.
Rise of fishes and of reef-building
corals.
Shell-forming sea animals abound, not-
ably cephalopods
Culmination of buglike crustaceans,
the trilobites. First trace of insects.
Cambrian.
Trilobites and brachiopods most charac-
teristic. Seaweeds (alge) abundant.
No trace of land animals found.
and brachiopods.
Duration
variously
estimated.
toe
million
years.
4 to 10
million
years.
hia to. 20
million
years.
Algonkian.
Protero-
zoic, (pri-
mordial
life). Archean. rocks
Virst life that has left distinct record.
Crustaceans, brachiopods, and _ sea-
weeds.
Crystalline | No fossils found.
28 OILDOM: ITS TREASURES AND TRAGEDIES
the upper division of the Carboniferous system, has proven to be the most
prolific series of oil-bearing formations in the Mid-Continent field; while
the Mississippian, the lower division, prevails east of the Mississippi.
The following summary of stratigraphic distribution of oil (and gas
fields) in North America covers the important systems of strata accord-
ing to past production and is brought up-to-date. Where several systems
are represented in one state the name of the state is capitalized to show
the leading occurrences. (Modified from Ziegler’s ‘Popular Oil Geology’’.)
Tertiary: CALIFORNIA, Gulf Coast of TEXAS, Louisiana, and MEX-
ICO.
Cretaceous: California (COLORADO), LOUISIANA (Haynesville,
Homer, Caddo, Bull Bayou), Mexico, MONTANA, TEXAS (Mexia, Cor-
sicana-Powell), WYOMING (Salt Creek).
(Permian): Oklahoma, North Texas (Burkburnett in. part).
Pennsylvania: Illinois (in all parts), Indiana, KANSAS, Kentucky,
Ohio, Oklahoma, Pennsylvania, North and Central TEXAS (Burkbur-
nett, Stephens Co., Ranger, Pioneer, Electra), Wyoming (Lander).
Mississippian: ILLINOIS, INDIANA, KENTUCKY, OHIO, PENNSYL-
VANIA, WEST VIRGINIA.
Devonian: OHIO, (ONTARIO, CAN.), NEW YORK, PENNSYLVANIA,
WEST VIRGINIA.
Silurian: New York, (Ontario, Can.).
Ordovician: OHIO-INDIANA (Lima-Ind. field), Kentucky, New York
(Ontario).
Of relative unimportance are the Cambrian below the Ordovician and
the Quaternary above the Tertiary. The oldest oil-bearing beds occur in
New Brunswick and New Foundland, and the youngest in California and
the Gulf Coast field.
Natural Petroleum Treasures and Tragedies. Mention has already been
made of the extinct animals whose buried bones were discovered about
15 years ago in asphalt beds of the Sherman or Salt Lake oil field located
on the western edge of Los Angeles. One of the illustrations herewith
shows the Imperial elephant, the giant sloth, and skulls of sabre-tooth.
tigers. Visitors to the American Museum of Natural History in New York
City will find there a splendid group of two tigers caught in the natural trap
of sticky oil and asphalt, to which, like the giant wolf spectator, they were
attracted by the bulky bait in the form of ground-sloths. The greatest col-
lection, comprising over 10,000 individual birds and mammals dug out
from Rancho La Brea, are housed in the Museum of Science, History and
Art at Los Angeles; and those that are mounted must always prove of
great interest to all persons connected in any way with the petroleum
industry. A similar find has been recently made in the San Joaquin
Valley, also near oil wells, but its extent has not yet been determined.*
* Tragedies in Nature traceable to petroleum are not confined to the land by any
means. According to the Oil Paint and Drug Reporter of October, 1922, nations are
being called together to prevent the pollution of waters of the earth through the dis-
charge of waste petroleum thereupon. Righteous indignation has been voiced in the
sportsmen’s circles of Great Britain particularly at the alleged destruction of famed
fishing streams by the drainage thereinto of oil from highways. The tragedy that
befalls the larvae of the mischievous mosquito when kerosene or the cheaper crude
oil is used to form a film on the water surface becomes a treasured protection to the
health and comfort of mankind in many malarial regions.
29
‘AVGOL JO SHYNSVEUL OIVIINGIOS GAMVN ODV DNOT JO SHIGADVUL S.ANILVN
‘Ioqyny vy} Aq sojoyg—
‘aSBo
Ioop Ul pd}IVAUL ‘S1OSTy,
Y}00}-01qBQ JO ST[NYsS 930N
‘SUO[ JO0J FL SYSn} pvy pues
oqung UY Ae[[V} Jost Z
pooj|s [BUMUIVU SIV, “ueyd
-o1 [eldodty jo yuory ut
UOpoISBAL :IYSII ZW ‘“soaumo0q
poyove[q YIM oyRIIH pur
JewWeD Ulepou spIssuOTe
—poule}s-18} [[V@—jueydeq
[eliodmy pue ‘ojeyng 1eITy
‘TIOIS JUBIH U01-F ‘PouUIRD
youT;Xs JO PBoY : Jel IV
Vaud WI OHONVY NOU
SIVWINV DIYOLSIH
“Hud AO SMHIA WOASDIN
‘AVAING [BOISOTOIH “GS *Q ASoJINOD—
‘puUNnoJ VIOM S[TRUNIUB JOUTIXS BLOYM SSUISSIP 910B-0Z PUB !deI} JUDTOUR UL sv Sursanqg setqqnq svS YIM ‘[1I0 Ayors ‘KAvay Jo [ood 9]0N
SGIHONV SOT JO ASA NYALSHM NO VOU VWI OHONVY GNV GIAIAI TIO ANVI LWIVS AHL
ITS TREASURES AND TRAGEDIES
OILDOM
30 OILDOM: ITS TREASURES AND TRAGEDIES
In connection with geological investigations made at great depths or
before the development of an oil field, district, or pool, not only is science
enriched but unexpected and valuable discoveries of coal, potash, sulphur,
and other economic minerals are made.
As an example of scientific treasure,
there is given below the geological
record or summarized log of the
world’s deepest wells. This test was
sunk by the Hope Natural Gas Co. on
the Goff farm near Bridgeport, Har-
rison Co., West Virginia, in an effort
to reach the “Clinton” oil and gas
zone of Ohio. It was begun April 19,
1916, and finished March 4, 1918, to
7,386 feet without reaching the de-
sired depth because the cable parted
2,000 feet above the bottom. In the
table, the depth to the base of each
series or system starts from the bot-
tom of the Pittsburgh coal seam
(lower end of the Monongahela
ONCE THE :
WORLD’S DEEPEST OIL TEST. series), an assumed level of 200 feet
Near Bridgeport, W. Va. above the derrick floor.
Name of Bed or Formation Thickness Feet Series Depth
Conemaweh= San dao Gee sion ele sis aeeGrane o cuswepevelsiets ornate 600-
Allegheny Coal-Bearing Formation ............ 290 +} Pennsylvanian 1150
Pottsville Coal-bearing formation .............. 260
Mawel: Chum kes oo ee hie ierale cgarstoto are niente areas 260
Mountain (Greenbriar) limestone .............. 65 +} Mississipian 1740
“Big Injun’” Squaw, and Berea sand group....265
Catskill (Venango) sand gr. to base of Bayard. .770
Chemung Shales (Hlizabeth, Speechly, Bradford
& Kane esand = norizons) yw cccne ceva eis oer ances 2,190 | Upper Devonian Shales 7563
POTtA ee Beds saicawied so aacteole o Carcass Wiemelece eos eae ele 1,207
Genesee: Statens asin viaienie Gatasseietetors sanreoseciaue ere eee 288
Hamilton sand | Marcellusiy copcoccsmt nce ere ies 1,368
Corniferous limestone to bottom .............. Don (Grand Total) 7586
According to State Geologist I. C. White, the temperature readings in
Fahrenheit degrees were as follows:
Depth Temp. Depth Temp. Depth Temp.
100 ft. 55.6 2000 ft. 74.9 5000 ft. 114.2
500 ft. 60.2 2500 ft. 81.0 6000 ft. 132.1
1000 ft. 65.3 3000 ft. 87.6 7000 ft. 153.2
1500 ft. 67.8 4000 ft. 100.0 7310 ft. 156.3
Potash salts form the basis of the most important economic treasures
discovered incidentally to the drilling for oil. They were found in the
Staked Plains region of Texas by scientists of the U. S. Geological Sur-
vey and the Texas Bureau of Geology and Technology operating under
Director Udden of the latter. Potash is one of the few essential mineral
substances in which our country has not been self-sufficient so far. Un-
scrupulous promoters have already seized upon its agricultural and in-
dustrial importance; and warnings have been issued by the United States
Geological Survey to prospective potash investors regarding the exag-
gerated claims set forth as to the thicknesses of these deposits. Rarer
even than potash are the medicinal ichthyol and the non-burning and inert’
helium. The former is found in mineral oils from California and Texas;
the latter as part of the natural gas emanating from petroleum in limited
localities of Kansas and Texas.
CHAPTER III. COMMERCIAL GEOLOGY OF
MAJOR AMERICAN FIELDS*
Petroleum is as widely distributed geographically as geologically.
The largest physiographic province of the United States, namely, the
Interior Plains, was the source of more than 50 per cent of the oil pro-
‘duced during 1922. This province takes in the Appalachian field in the
plateau of the same name, the Lima-Indiana field of Ohio and Indiana,
the Illinois-Indiana field, and practically all of the Mid-Continent field, the
Sabine uplift being (geographically) included with the Gulf Coast field in
the Coastal Plain. The Rocky Mountain element comprises the fields of
Colorado, Wyoming, and Montana. The California valley and Coast
Range embrace the fields of southern California.
. < a mos FIG. 3. DISTRIBUTION OF THE IMPORTANT OIL-POOLS OF THE UNITED STATES
Adapted from a map published by Arthur D. Little, Inc.
1 wiscONstn
foe a aces mre ee
ay Vee"
Ge *
5 mf 1
Td Py
6 \< . *
312 ap Oo C od yy we
86. g —
fe S = SUNBURST FIELD '
°
Kor, 0 \s
% be MONTANA
\ x
st Fi
@ BLACK GIRCLES REPRESENT PRODUCING CENTERS OR POOLS WHICH ARE
INDIVIDUALLY NOTABLE, THOUGH OF VARYING PROMINENCE. THEY MAY BE IDEN- a
IFIED BY THE ASSIGNED NUMBERS, WHICH REFER TO THE LIST AT THE BOTTOM
OF THE MAP,
LB = LONG BEACH FIELD, CALIF. C = POWELL FIELD
\ s EAST CENTRAL TEXAS
2
O UNFILLED CIRCLES REPRESENT PRODUCING AREAS OF SECONDARY IMPORTANCE,
BOUNDARY LINES INDICATE THE KNOWN EXTENT OF THE MAJOR FIELDS. SF = SANTA FE SPRINGS F, CALIF
—Courtesy of Wiley & Son, Ince., publishers of Pogue's “Heonomics of Petroleum.”
THE SEVEN MAJOR OIL FIELDS OF THE UNITED STATES.
There are many new pools not shown by the dots on this map, particularly in Oklahoma.
Within the limits of the outlines of each field lie large dry areas and larger untested areas.
Additional prospective oil territory is shown on a map in The Literary Digest, Nov. 10, 1923.
The Mid-Continent Field. Commercial usage, largely determined by
the quality of the oils, has added the pools of Arkansas and North Louisi-
ana to the Mid-Continent field proper. The main oil areas of this field
are situated in a broad belt extending from Kansas City south through
eastern Kansas and northeastern Oklahoma, thence southwest through
*Based largely upon two Government publications: (1) “World Atlas of Com-
mercial Geology,” part I, by J. B. Umpleby and others, issued in 1921 and for sale
at $2.00 by the Director, U. S. Geological Survey; and (2) “Manual for the Oil and
Gas Industry,” revised in 1921 by A. H. Fay, 0. H. Reinholt, and other valuation
engineers of the Treasury Department and for sale at 25 cents by the Superintendent
of Documents, Washington, D. C. A. C. Bedford recently wrote in Foreign Affairs:
“Petroleum is the most uncertain of natural resources. Broadly speaking, it is
impossible to tell today where oil will be found tomorrow, and having been found,
exactly how long the supply will last.’’ :
(31)
ITS TREASURES AND TRAGEDIES
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OILDOM: ITS TREASURES AND TRAGEDIES 33
south-central Oklahoma into north and central Texas as far as Brown
and Limestone counties. It may be extended as far west as the Texas
“Panhandle” to take in the Amarillo gas pools in Potter County and the
minor oil pools in Carson and Hutchinson counties.
Most of the oil produced in Kansas, Oklahoma, and northern Texas
is obtained from beds of standstone in formations of the Pennsylvanian
series. Limestone beds are of much less importance. The “sands” are
generally between 25 and 75 feet thick, but range up to 300 feet (at
Healdton). In southern Oklahoma some oil comes from the “Red Beds”
of the Permian series. The-oil found in southern Arkansas, northern
Louisiana and central Texas is obtained from structures in sandstones or
other porous rocks of the Cretaceous and Tertiary systems. In the Mid-
Continent field the oil gathered in anticlines, domes, and terraces through-
out an extensive region where the strata have a general westerly dip. The
depth to production varies from 200 to 3,500 feet, the shallow wells being
along the eastern edge of the belt and the deeper wells being confind to
the western part. The wells are preferably drilled with standard tools, the
rotaries being used as a rule only in parts of Texas and in the “‘Red Beds”
of Oklahoma. Drilling and production cost more than in the Eastern
states, although less than in Wyoming and parts of California; hence
pumping cannot proceed to so low an economic limit as in the Eastern
states. Well spacing is from 2 to 10 acres per well. Recovery of oil per
acre is generally less than in California and in the Gulf Coast.
Mid-Continent Oil is almost invariably of paraffin base, and the weighted
average gravity is about 36 degrees Baumé. It grades in appearance and —
gravity from the thick, black oil of Smackover and some Louisiana pools
with a gravity of about 20 degrees, to the almost colorless product of the
so-called “gasoline well’ near Cushing, Okla., with a reported gravity
above 55 degrees. The usual gravity range, however, is from 30 degrees
to 45 degrees Baumé and the prevailing color is light green. The world’s
most productive light oil field is Tonkawa, in Kay and Noble counties,
Oklahoma, where the average gravity is 43 degrees.
The Mid-Continent field is more pre-eminent in production than in re-
serves. During the past few years it has been yielding about half of the
oil produced in the United States; but on January 1, 1924, it holds hardly
ene-third of the total reserves.
The California field may be divided into 3 geographic sub-provinces.
One covers both sides of the San Joaquin valley and is known as the
Valley “fields” or districts; another takes in the many small and separate
districts in the mountainous Santa Barbara and Ventura counties; and the
third comprises the districts of the southern coastal plain in Los Angeles
and Orange counties. Except for the Kern River pool the Valley districts
lie on the west side of the valley and all get the oil mostly from Tertiary
sandstones that have been folded. Sharp anticlines constitute the con-
trolling type of structure, yet much oil has come from monoclines and
synclines. Similar in many respects are the Coastal districts although dis-
playing an even greater variety of structures, but sealed faults are fewer.
An insignificant part of the California petroleum is obtained from Cre-
taceous formations. Compared with the Gulf Coast field of Texas much
less oil has migrated from the Tertiary up into the Quarternary beds. A
1. (Above) A KERN COUNTY FIELD
IN SAN JOAQUIN VALLEY, CALIF.
Note the open “oilduct’” for carrying
the heavy oil down grade more easily
than in pipe line.
2. AN OIG FIELD IN THE COAST
RANGES OF CALIFORNIA, VEN-
TUBA, COUNTY:
The topography and the _ political
division suggest ‘‘nothing venture, noth-
ing have,’ a rule in oil hunting.
3. LLUNTINGTON:~ FEED 9 EN IDE
COASTAL PLAIN.
View of a young field from the ocean.
It is generally regarded as within the
Los Angeles basin.
—Oil and Gas Journal.
—U. 8S. Geol. Survey.
—Calif. Chamber
of Mines and Oil.
OILDOM: ITS TREASURES AND TRAGEDIES 35
marked feature of the California occurrences is the great stratigraphic
range throughout all the four series of the Tertiary system which, in the
Sunset-Midway district becomes 18,000 feet thick. Producing horizons ap-
pear anywhere from 300 to over 5,000 feet below the surface. Oil seeps are
numerous, and asphalt beds cover wide areas. In no other region in North
America is oil found in commercial quantities where the structure is so
complicated and where the surface indications are so abundant. The
California oils vary in color from black to honey-yellow and in gravity
from 9.9 degrees to 54 degrees Baumé, the average having recently risen
from 22 degrees to 28 degrees. Heavy dark oils predominated until the
light oil pools were developed near Los Angeles, 1921-1923.
TT CNTs
i ee wo Sette ee iy My a é or ae
caer aii 7 ¥". Alhdimbragi~# San Gabriel . d :
as Pree Ae tt El Monte a a, N-Cuamanga
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Am. Inst. Min. and Met. Engrs.
LOS ANGELES BASIN SHOWING OIL FIELDS, 1923
Near the middle of this map is seen California’s greatest individual field, Sante Fe
Springs, which reached a record of 350,000 bbls. daily during the summer. In
November, Long Beach or Signal Hill, 10 miles southwest, passed the champion on its
decline but reached a peak of hardly 275,000 bbls. daily, 50,000 less than Powell in
Texas. The newest pool, not outlined here, is Compton—halfway between Santa Fe
Springs and Torrance-Redondo. (Map drawn by Wayne Loel.)
“The most striking features in the three newly discovered fields in
the Los Angeles basin are the enormous thickness of oil sand’’* and the
limited producing area from which are coming 23 per cent of the coun-
try’s petroleum at the present time, May-June, 1923. At Long Beach a
thickness of over 1,500 feet has been penetrated to the depth of a mile. At
Santa Fe Springs the oil sand is said to be even a little thicker, and at
Huntington Beach certainly not any less, the horizon being the same in all
three of these fields, California’s total oil-bearing area is considered to be
*Ralph Arnold and Wayne Loel in Mining and Metallurgy, May, 1923.
36 OILDOM: ITS TREASURES AND TRAGEDIES
about 1,500 square miles,* or nearly 1 per cent of the area of the state.
Out of this, practically one-tenth only has been proven or is at present
productive. About 30 square miles, or 20 per cent of the proven area,
lies in Los Angeles and Orange counties which contain the above named
new fields. These three together cover but 5,300 acres or less than 9
square miles, but they were in June, 1923, contributing at a rate equiva-
lent to one-sixth of the world’s total.
—Oil and Gas Journal.
THE FIRST POOL FOUND IN THE GULF COAST FIELD.
Spindle Top, near Beaumont, Texas, was discovered January 10, 1901, and
became the leading pool of the United States in 1902. It has produced about
50 million barrels and is’ still active. See Chap. IV.
The Gulf Coast field of Texas and Louisiana ranks third in respect to
reserves, possessing 20 per cent as of January 1, 1924. Moreover, its pres-
ent rate of production, 5 per cent of that of the whole country at the middle
of 1923, places it far below California. This field includes that part of the
Gulf Coastal Plain in which petroleum is associated with masses of rock
salt and gypsum in domes. The oil-bearing strata are Cretaceous to Quar-
ternary in age, and the reservoir rock is generally either sandstone or dolo-
mitic limestone. In this coastal belt rise more than 40 low domes above
the general level. They are supposed to be the surface marks of the salt
domes which are beneath and which are known to produce some oil or
gas. Few of the pools are more than 3 miles in diameter. The reservoir
rock is generally either sandstone or dolomitic limestone, and the oil itself
has an asphaltic base. The value of some of the oil is impaired by its high
sulphur content—up to 2.3 per cent. The gravity ranges from 15 degrees
to 32 degrees, averaging 22.5 degrees, Baume. Most.of the oil is dark brown
to black, but some is green and rich in lubricating constituent. Any re-
lation between color, gravity, and content of sulphur is not apparent. The
zones of production vary from a few feet to hundreds in thickness and
from 100 to 4,100 feet in depth. The rotary drill is used almost ex-
clusively and consequently the correlation of the various sands is difficult.
The Rocky Mountain field comprises all areas that produce petroleum
in Colorado, Wyoming, and Montana, as well as some areas of prospective
production in Utah and New Mexico. The oil is derived from beds of
Pennsylvania, Permian, Triassic, and Cretaceous age. Most of the oils
* State Mining Bureau, quoted in The Oil Weekly, June 17, 1922,
**V. B. Ellzey in The Oil Weekly, May 12, 1923.
OILDOM: ITS TREASURES AND TRAGEDIES 37
from pre-Cretaceous beds are dark and heavy, with gravities averaging
23 degrees Baumé, the heaviest being of 11 degrees. The Cretaceous oils,
contrary to expectation, are remarkably light in both color and weight.
Their gravity ranges from 25 degrees to 50 degrees Baumé, while the
average gravity for the Rocky Mountain field is about 37.5 degrees.
Worthy of special mention is the Cat Creek oil from Montana. It has a
paraffin base, contains little sulphur, and is 8 degrees lighter than the
average Appalachian oil or 18 degrees lighter than the average Mid-Con-
tinent oil. Its gasoline content is 1% times that of Appalachian oil and
twice that of Mid-Continent oil. No other pool in the United States of
the same size as the Cat Creek yields such a quality of crude product. The
Rocky Mountain reserves as of January 1, 1922, were estimated to be
—Photo by the Author, Sept., ’23.
THE LARGEST OF THE ROCKY MOUNTAIN FIELDS IN AREA.
The Kevin-Sunburst Pool, found in the spring of 1922 by Gordon Campbell, is
again referred to in Chapter VI.
about 7% per cent of all our American reserves, Wyoming alone being
credited with 6 per cent. The rate of production on July 1, 1922, equaled
5.6 per cent of that for the whole country. Since the discovery and initial
development of the Kevin-Sunburst field, probably the largest single Amer-
ican pool in point of area, the estimate of oil reserves has been raised so
as to make nine per cent of the total.
The Appalachian field still retains underground almost 1 billion barrels
or eight per cent of our total reserves after producing about 11% billion
barrels in the course of the past 64 years. The present rate of yield is
about 4 per cent of that for all the fields. This field embraces every
pool east of central Ohio and north of Alabama in an elliptical area having
a major axis trending northeast and southwest. Besides southeastern Ohio
it includes the petroleum territory of New York, Pennsylvania, West
Virginia, Kentucky and Tennessee. The oil-bearing strata are chiefly
sandstones and conglomerates of Devonian, Mississippian, and Pennsyl-
vanian age. These porous rocks produce from depths of 100 to 4,000 feet,
the shallowest horizons being found in eastern Kentucky and the deepest
in West Virginia and southern Pennsylvania. The typical oils are of
paraffin base, are free from asphalt and objectionable sulphur, and give
up to 79 per cent of kerosene, gasoline and lighter products by ordinary
refining. They range in color from black to light amber, but most of them
are of green shade. In gravity they run from 25 degrees to 53 degrees
Baumé and average 41 degrees.
38 OILDOM: ITS TREASURES AND TRAGEDIES
The Illinois field, confined largely to the southeastern part of the state,
with small scattered pools in the central and western parts, ranks 6th in
the matter of reserves, having hardly 5 per cent of the 9 billion barrels
of oil still obtainable in the United States early in 1922. The present rate
of output, about 10 million barrels yearly, would afford a long life to the
Illinois field, considered as a whole. Most of the oil comes from sandstone
beds in the Pennsylvanian and Mississippian series of the Carboniferous
system. The oils in ‘the northern part of the field are heavy, have an
asphaltic base, and carry sulphur. Those in the southern part are of better
grade. The gravity ranges from 27 degrees to 37 degrees Baumé. The
richest area of this field is in Lawrence County, where 7 sands are encoun-
tered at depths of 450 to 2,000 feet, with the richest at the bottom.
The Lima-Indiana or Trenton field is of least importance from a quan-
titative standpoint. Its reserves make but % of one per cent of our grand
total and its recent rate of production makes but half of one per cent
of the aggregate rate for the United States. It embraces all the pools in
northwestern Ohio and most of those in Indiana. The oil-bearing beds in
this field belong to the Ordovician, Silurian and Carboniferous systems,
but the most productive are lenses of porous dolomitic rock in the “‘Tren-
ton” limestone, a member of the Ordovician system and the oldest known —
oil-bearing rock in the United States. This lies 1000 to 1500 feet deep in
Ohio pools and averages 1000 feet in Indiana. The oil from the Carbonifer-
ous rocks in southwestern Indiana properly belongs to the Illinois field, for
the formations occupy the same structural basin and the two “‘fields” or
districts are continuous. The oil in the pre-Carboniferous strata of the
Trenton field is of lower grade than that in the same strata of some parts
of the Appalachian fields and contains sulphur compounds that must be
removed by special treatment. In color the oils range from green to brown
and in gravity they average nearly 36 degrees Baumé.
Canada. Indications of petroleum have been observed in many parts
of Canada, but no fields have been much exploited except those in Ontario,
where the oil occurs in sandstones and limestones of Silurian and Devonian
age, and where the rate of output is now insignificant. The oil there has
a paraffin base and a large percentage of sulphur. It comes from a depth
of 200 to 500 feet. The Calgary field has furnished a small quantity but a
field farther north in Alberta gives greater promise. In the Mackenzie
field, during 1920, oil flowed from a depth of 100 feet and gushed from
800 feet. Up to August, 1923, the developments have proven rather dis-
appointing, particularly in the western part. However, continued search
may bring results now that new Montana fields have been found close to the
Dominion line. Canada’s petroleum reserves have been estimated at 2000
million barrels, a comparatively high figure, considering past production,
but not inconsistent with the great expanse of favorable formations as yet
scarcely scratched with test borings. Fortunately, the more accurately
measured coal resources are immense, Alberta alone possessing 17 per ’
cent of the world’s known coal or 70 to 80 per cent of Canada’s coal
deposits.
OILDOM: ITS TREASURES AND TRAGEDIES 39
SUMMARY OF SALIENT FACTS ABOUT THE PETROLEUM RESOURCES OF
UNITED STATES
Region or Major Proven Average Yield to Recoverable Reserves
Field and States Area Gravity Jan. 1, 1924 Jan.1,1924 Original
Miles? Degrees B. Millions of Barrels
MID-CONTINENT
Quintet Arka; Kan. Da... cs. 1,500? 35.9 2,550 3,450 6,000
CAE EOEUIN LAO oe 2 ce 6 6s eters a os 175 21.9 1,800 2,700 4,500
GULF COAST ;
PGT Pa TTISIA TAG oo is ages aoc PAT) (i 22.4 470 2,330 2,800
APPALACHIAN
Pao ago: eX O..« W. Vas, KY.,
NST TST eae ner Gre Spe eR a eae ae 2,500 40.8 1,380 920 2,300
ROCKYSMOUNTAINS. ©... ccs cn 6 700? 37.5 175 1,025 1,200
Wy., Mont., Colo.
LEM LNOLS= UN DIANAS icswe es Fe 350 ? 32.5 350 500 850
LS S.2W. 10d.
ASIN) EC ACNPACH ese oc. gt ches ete vets aes 500 35.9 460 | 90 550
N. W. Ohio, N. BH. Ind.
UNITED STATHS
POLI ET OVERS Sie cok aie Satie 87s 5,750 32.0 7,185 11,015 18,200
MTSCHLIAMGCOUS) = AtoeGid cles pie ec aoe 250 ? 2 None 800 800
Cora Mee LO UAE secrete ee alenie 6,000 32.0? 7,185 11,815 19,000
REMARKS. The general areas of production, as shown on generalized maps, are
much greater. The actual areas of proven territory take in both producing and
undeveloped oil land. They are rather well defined in California and in the Appa-
lachian and Lima-Indiana fields. In roughly determining the Mid-Continent area there
were considered the total number of oil wells, their spacing of 6 or 7 acres per well,
and the likely percentage of proven but undeveloped acreage. In the case of the Gulf
Coast, statistics published in The Oil Weekly indicate an area of 5,700 acres for 11 out
of the 21 local fields or salt domes that have produced on a commercial scale; and
with this as a basis a liberal allowance has been made for the acreage of the other
10 and for the undeveloped areas, the total being likely a little less than 25 square
miles—a remarkably limited area for so large a production to 1924. In the Appa-
lachian field there is an additional area of 1,700 square miles of productive gas terri-
pas In other fields their minor areas are included where not separated in the original
ata.
Gravities given are on the Baume scale. They are all weighted averages, consid-
ering the relative yield of different grades within each major field, and were pub-
lished by the U. S. Geological Survey in October, 1922. The only radical correction to
be made is for California, where the average quality of the crude oil was raised to
an extraordinary extent within a year’s time due to the light oil development of the
Long Beach and Santa Fe Springs fields near Los Angeles. The average has risen
from 21.9 to fully 28 degrees if not higher. The heavy Smackover oil of Arkansas,
ee. not Mid-Continental, has been offset largely by the light Tonkawa oil of
klahoma.
TANKER IN WAR-TIME PAINT, LOS ANGELES HARBOR
Tankers were largely instrumental in winning the war for the Allies by carrying fuel
oil and other products across the Atlantic.
—Courtesy of Union Oil Co., of Calif.
CHAPTER IV. MECHANISM OF THE AMERICAN
INDUSTRY. -
Engineering Aspects. Next to the natural resource as a foundation
for the Oil and Gas Industry stands the development of tecnnologic methods
for finding, obtaining, transporting, treating, and utilizing the crude
petroleum and natural gas. Were it not for the wonderful work of both
the geologist and the engineer-technologist, the one in exploring for new
deposits and the other in striving to procure maximum recovery of the
crude oil and maximum efficiency in the refining and use of the product
at a minimum cost and with a minimum waste, the industry would not have
attained to one tenth of its present proportion; and consequently would
neither attract millions of investors nor give employment to many thou-
sands of wage earners. *
Since the beginning of the petroleum industry in 1859, up to five or
six years ago, there has been a dearth of engineers who have had the fun-
damental technical training and also sufficient practical experience so
that they could compete with purely practical men. About 23 years ago,
Captain Anthony F. Lucas, a mining engineer, resorted to the rotary pro-
cess in drilling an 1100-foot well, and brought in one of the greatest
gushers ever found within the United States. The mechanical accom-
plishment was then overshadowed by his discovery of commercial oil in a
Gulf Coast dome which rises but 12 feet above the prairie at Spindle
Top, a little south of Beaumont, Texas. Previous to that time almost all
American wells were sunk with cable tools. With a few similar exceptions,
and “until recently, comparatively little attention had been given by the
engineering profession to the petroleum industry except in storage, refining
transportation and natural gas.’
Conservation of underground reserves has been initiated by engi-
neers, notably in California where it has been carried on through the co-
operative work of the operators with the State Mining Bureau. Along
this line of endeavor “it is now universally recognized that the minimum
protective work necessary narrows down to two requirements: 1. Ex-
cluding water from the production of the well; 2. Preventing the migra-
tion of water, outside the casing, from water bearing formations to oil
or gas bearing formations.” ‘‘The proper setting of casing, cementing off
water, checking productivity of individual wells, correct plugging of dry
and abandoned wells, and various other conservation methods established
elsewhere” were in 1918 being adopted in Oklahoma as a direct movement
*The president of a large Mid-Continent producer has calculated, from extensive
records, that 85 per cent of the wells located on the basis of careful geological sur-
veys: proved productive, whereas only 5 per cent of the wells located at random were
successful. Pogue’s Economics of Petroleum, p. 348.
Writes the editor of the Oil and Gas Journal: In the oil business in the old
days, but slight attention was paid to technical matters. The refiners were obliged,
of course, to know things scientific, but the producing men were guided largely by
every-day experiences. Main strength plus practical knowledge of the routine work
were the essentials then as they still are to a large extent. Nevertheless, there are
now opportunities for genuine “efficiency”? men in oil producing work. Many of the
big concerns are profiting by the skill of technically trained men. In the refining
industry the “highbrow” is more in demand than ever before.
7 E. W. Wagy, Pet. Engr., Bureau of Mines, in the Oil and Gas Journal.
tg (40)
OILDOM: ITS TREASURES AND TRAGEDIES Al
toward the saving of crude oil. The use of cement in oil wells not only
conserves the supply of the raw material but it also conserves capital and
enhances the profits, as in the case instanced below.
“On 141 wells in the Cushing field that had been put back to pro-
ducing after cementing, there occurred an immediate increase in yield of
4,304 barrels daily. At the quoted market price of $2.25 a barrel (in
CAPT: ANTHONY FE. LUCAS.
The pioneer of the Gulf coast
fields; first to use the rotary for
drilling oil wells; and the indirect
founder of the first great independ-
ent operators, the Gulf and the
Texas companies.
At the right is shown the LUCAS
GUSHHER, greatest oil well ever
drilled in the United States. It
came in Jan. 10, 1901, at 75,000 to
100,000 barrels a day. Since then
the Gulf Coast field has produced
about 500 million barrels of oil. —Courtesy A. F. G. Lucas.
May, 1919) this quantity was equivalent to $9,684 a day, and at $3.00,
the price at which most of the oil was actually sold, it was equivalent to
$12,912.”’ At that rate the additional production would mean almost
$4,000,000 in one year compared with the probable cost of less than
$75,000 for cementing the 141 wells. Besides the increased yield there
was likewise effected a large saving in the labor required, amounting to
40% of that involved before cementing; also a lower rate of deterioration
in well equipment due to the absence of salt water.*
Similar results have been accomplished by the U. S. Bureau of Mines
in co-operation with the Rocky Mountain Petroleum Association in Wyom-
ing. A-well which had been standing full of water was repaired and com-
pletely recovered. One month’s production therefrom was worth more
than the cost of the four men’s services for one year. Notwithstanding
*“Recementing Through Tubing Under Pressure,’ by C. C. Thoms, California
Oil Fields, July, 1920; and U. S. Oil Inspector’s report to the Superintendent for the
Five Civilized Tribes of Oklahoma.
42 OILDOM: ITS TREASURES AND TRAGEDIES
the various advances that have been made in the line of enlarging the’
ultimate recovery from sands, there still remains a very large margin for
improvement in view of the serious fact that 80 to 90 per cent of the un-
derground oil is unrecoverable by the prevailing production methods.
‘Profits from the industry will be immensely increased when the relative
recovery equals or exceeds the much higher rate of that otherwise back-
ward branch of mining, the under-engineered and over-capitalized coal
industry.
—U. S. Geol. Survey.
THE GREATEST FIELD FOUND IN THE UNITED STATES BEFORE 1928.
Only part of the Drumright division of the Cushing pool is shown here with
wells along the Cimarron river in Creek Co., about 25 miles west of that other
great pool, the Glenn. Cushing, surpassed nationally by Powell and Santa Fe
Springs fields alone, was found by W. S. and R. HE. Vandruff,. geologists and
former associates of the author, one year before the first well was drilled in 1912.
In the chronological order of their realization, the three most import-
ant and profitable applications of technology in the near and not very dis-
tant future pertain to (a) the use of core drills in wild-catting rather than
in developing, (b) the sinking of shafts for the mining or draining of
pumped and abandoned sands, and (c) the extraction of oil from the ex-
tensive deposits of bituminous shales found in certain Rocky Mountain
states and in Kentucky and other Allegheny plateau states. Shale oil has
no immediate value and will receive little consideration in this edition.
Production engineers, constituting a new class of petroleum tech-
nologists, may soon perfect American methods for mining or draining
residual reservoirs in old fields or pools as advocated by Albert H. Fay
in the Ow and Gas Journal, May 28, 1920. Intrenched in their ignorance,
some apparently intelligent operators scorn this idea, claiming it has never
been done. As a matter of fact, while shaft-sinking failed in the early
boom days at Petroleum Center, Pa., tunnelling for oil was successfully
undertaken in California about the same time. Actual mining of petroleum
sands was carried on by Frenchmen in Alsace from 1735 to 1865 at
depths of 35 to 220 feet. Such operations, on a new principle, were
resumed in 1916, with the result that 2 to 5 times as much oil was thus
extracted as by the ordinary well-boring process. In Estill County,
Ky., during May, 1921, D. W. R. Kinney began sinking a shaft, concrete
lined, and on reaching the sand at 185 feet got 4 to 5 barrels of oil a day.
OILDOM: ITS TREASURES AND TRAGEDIES 43
In the meantime, and until mining methods have been adopted, pro-
duction engineers have resorted to other and temporary expedients to ex-
tend the extraction beyond the present limit of 10 to 20 per cent. The
compressed air process has spread to some pools and properties where ordi-
nary pumping has reached the economic limit, particularly in the Appa-
lachian field. Some old properties there have been rejuvenated so as to
yield, in this way, from one-half to equally as much as the entire past pro-
duction. Flooding partly exhausted sands with water has also proven satis-
factory, as in the Bradford field, Pennsylvania, where this process was
initiated in 1890.*
MINING OIL SANDS AT PECHELBRONN, ALSACH, SINCE 1735.
French and German miners sank shafts and drove galleries for 147 years before
a well was drilled in 1882 to a depth of 465 feet and gushed 500 barrels daily. (See
pages 16 and 72.)— Rig and Reel Magazine, Parkersburg, W. Va. :
Conservation of capital through core drilling. Out of 750 million
dollars lost the last five years through unsuccessful drilling for oil, largely
legitimate wild catting at that, at least 250, possibly 500 millions could
have been conserved through eliminating the old fashioned, cumbersome,
and costly cable and rotary systems and the substituting therefor the
more reliable and scientific systems of drilling for exploratory purposes.
Sixteen years ago, or four years after introducing core drilling into the
Philippines,j the writer advocated the use of diamond drills in testing
virgin territory for oil on the Pacific slope. Only during the past five
years have the progressive California operators begun to appreciate the
various advantages gained by spending a little time and money on coring
of one kind or another. ‘
-The more conservative companies have hesitated to abandon entirely
their practice of boring a big hole from the very beginning or “spudding
in;”’ and so have tried to adapt the antiquated systems to the cutting of
cores out of the strata as occasion required it. The Keystone Drilling Co.,
of Beaver Falls, Pa., has improvised a device for extracting a short core
*See “Causes of Increase in Yield,’’ Chapter V; also, for technologic details read
chapter by L. C. Sands in vol. I, Day’s ‘‘Handbook of the Petroleum Industry,” pub-
lished by John Wiley & Sons, 4382 4th Ave., New York; see also “Highty Per Cent of
Oil Not Recovered,’ by K. C. Heald, of the National Research Council and U. S.
Gevlcescel Survey, in The Oil and Gas Journal, Oct. 18, 1923.
; See the author’s illustrated article on the U. S. Army coal mines in The Engi-
neering Magazine, January, 1906; or the Review of Reviews, February, 1906.
44 OILDOM: ITS TREASURES AND TRAGEDIES
while operating the ordinary cable tools. In connection with rotary tool
drilling for production in the Gulf Coast region one company transformed
a piece of common pipe into a combination core-barrel and cutting tool by
making chisel teeth at the lower end thereof and bending alternate teeth
inwards to hold the core. It cuts like an ordinary post-hole auger. Ac-
cording to R. E. Collom, some companies have been using a coring device:
in soft formations in which the core barrel is incorporated in the center
of a fish-tail bit. Suman states that a certain Gulf Coast driller uses a
EFFICIENT AND NON-WASTEFUL
WAY OF HXPLORING FOR FUEL
DEPOSITS.
The first systematic attempt to pros-
pect the mineral resources of the Philip-
pines. This was done at the U. 8S. Army
coal mines where the author served as
superintendent of explorations, asso-
ciated with Major H. L. Wigmore, in
1903-4 while Chief Justice Taft was
Governor. Credit is due the progressive
Corps of Engineers, U. S. A., for thus
introducing a_ scientific and practical
method for finding truth and conserving
capital. The first drilling for oil in the
Archipelago began a little later, but un-
fortunately cable tools and not core
drills were used. (See Chapter VIII for
recent drilling in the Islands.)
—-The Engineering Magazine, Jan., 1906.
DIAMOND DRILLING IN THE
PHILIPPNES.
piece of common pipe with a V-shaped notch cut in the lower end. Upon
rotating this at the bottom of the hole it has cut cores from 8 to 10 feet
long, and these became wedged in the barrel by dropping into the drill
stem small pieces of cast iron. This last appears to be an independent
imitation of the more perfected Okell core drill manufactured in Los
Angeles and used by the Shell Company and others in drilling through
both hard and soft formations. A contrivance more complicated but easily
repaired has been used by van der Gracht for coring in soft formations
with rotary tools.
Coring with the regular oil well rotaries in California has not proven
altogether satisfactory. The heating of the core barrel through the rapid ro-
tation volatilized or drove out the petroleum (or gas) from the sample en-
tering the core barrel, and the latter, therefore, gave no reaction with
ether.* On the whole, drilling systems designed primarily for development
or production are neither so economic nor so dependable as the specially de-
signed coring systems of usually smaller caliber but of equal or greater
capacity in depth.
Core Drilling in California Oil Wells.; ‘‘Core drilling, as practiced
in California oil wells, is only for the purpose of taking samples at critical
*The core is sometimes heated so intensely that it becomes hard to tell whether
the rock is igneous or sedimentary—a very important matter—for it is a hopeless
task ty drill for oil in granite or lava.
¥. C. Merritt, Los Angeles, in Mining and. pee ae August, 1922. See
also “Technique of Core Drilling,” by J. E. Hlliott, M. and » October, 1923.
OILDOM: ITS TREASURES AND TRAGEDIES 45
depths. The core drill is not intended to supplant the fish-tail bit in rotary
drilling. Sampling by such method is necessitated since accurate well
logs cannot be obtained by the rotary method. Oil sands are often ob-
scured by the heavy mud used in rotary drilling, and may be easily pene-
trated without the driller’s knowledge. The hydrostatic pressure of the
mud-flush column at times suffices to drive the oil back into the formation
so that no evidence of it may be seen at the surface.
- Core drills have been evolved in California for the purpose of taking
samples at frequent intervals when the expected depth of the oil sand
has been reached. Only within the past year has an active campaign of
core drilling been carried on in California, but at the present time it is
the usual practice of many of the larger companies in the southern Califor-
nia fields to takes cores at 10-foot intervals at promising levels.
There are two general styles of such core drills in use, the single-
barrel drill and the double-barrel drill.. The single-barrel drill consists of a
length of drill pipe with teeth in one end. This contrivance is rotated in the
bottom of the hole, and at the conclusion of coring sufficient weight is
given the drill pipe to bend in the teeth. The double-barrel drill consists
of two barrels, one within the other, both fitting into a steel shoe equipped
with removable teeth. The mud flush passes between the two barrels to
the bottom of the hole.
Both types have advantages and disadvantages. The single-barrel
drill is cheaply and easily made, but the cores extracted are not always
reliable. As the mud flush does not reach the bottom by several feet, the >
so-called cores cut by the single barrel are often only compressed cuttings.
_ Furthermore, the generated heat is often enough to fuse the material, or at
least to change into gas any oil that may be present in the cored material.
The double-barrel drill extracts a true core without danger of contamina-
tion by the mud flush, and without “burning,” but it is more expensive to
make and to operate, and requires greater skill from the operator.
Many of the companies are now using a core drill to locate the proper
formation in which to cement the water string (of casing), and find that
they have a greater percentage of successful water shut-offs by so doing.
Geologists study the cores extracted so as to correlate shale strata by their
contained micro-organisms. Sand cores are analyzed for their salt and total
solubility content. The oil operator realizes that the core drill is the big-
gest forward step made in the art of rotary drilling. He wants to evolve
a type of drill that will retain the speed and simplicity of the fish-tail and
at the same time preserve an accurate sample of the formations.”
OPERATIVE DIVISIONS.
Custom considers the petroleum industry divided into the four distinct
functions of production, transportation, manufacturing and marketing
from the standpoint of economic organization. Viewed otherwise, there
should be added a fifth function, namely exploration, the operation of
which is almost as peculiar to the oil industry as that of the others. It
is gradually outgrowing the production division to which it has hitherto
been subordinated. Synonymous already with scientific “wildcatting,”
4
.s)
OILDOM: ITS TREASURES AND TRAGEDIES
—Sullivan Mchy.
Co.
BORING FOR PRODUC-
TION IN MEXICO WITH
A DIAMOND CORE
DRILL.
A Sullivan “P-2” diamond
drill showing pressure con-
trol rig, rod brake and a
saver of oil. Before 1922
few operators would be-
lieve that the diamond
drill was good for any
purpose except for testing
wild-cat territory. In
Oklahoma recently a well
unfinished with cable tools
was completed to a depth
of 4,700 feet with a dia-
mond core drill.
DIAMOND DRILL BITS BEFORE AND AFTER FULLY SET.
At left the blank bit shows socket chiselled out to fit irregular shape of a
carbon or black diamond. Sheet copper is used to help make a snug fit. Clear-
ance or projection on cylindrical face yaries from 1-64 to 1-82 of an inch.
Water grooves are also shown.
OILDOM: ITS TREASURES AND TRAGEDIES 47
exploration as practiced by the efficient operators is fast coming to mean
core drilling in connection with thorough geological investigations of sur-
face signs. Drilling experimental wells—ordinary ‘“‘wildcatting’’—has
stood at the base of the discovery of new oil fields without which the in-
dustry would have dried up. For every field thus found, hundreds of
worthless holes have been put down. Scientific wildcatting will not only
minimize the number of resultless borings but will also cut the cost of
each test at least in two, particularly in remote regions where transporta-
tion, fuel and living conditions are controlling cost factors.
Now that such enormous reserves of coal and ores of iron and copper
have been largely measured by means of the diamond core drill the time has
come that many of the skilled men and their machines can be released for
the even more essential task of discovering new deposits of petroleum so
as to maintain if not increase the relatively low ratio between known re-
serves and current consumption or production.
Exploration with the Diamond Drill. The diamond drill and the rotary
oil drill work on the same general principles, the main difference being
the ‘cylindrical steel bit set with ‘“‘carbons’”’ or black diamonds* which is
used by the former instead of the fish-tail or other type used by the rotary,
as already narrated. On account of the brittleness of the carbon and the
danger of breakage if suddenly struck, it is not feasible to attach a dia-
mond bit to the rotary drill stem. The operating mechanism of the dia-
mond drill must be subject to much more sensitive control than the rotary
drill. The bit must be rotated smoothly, without the jerks incident to the
operation of the clutches and chain drives on the rotary draw works, and
the feed must be controlled in a manner much more delicate than the
action of a brake on a hoist. Accordingly, diamond drills are usually
built as a self-contained unit with the crank shaft of the engine geared
direct to the drive shaft that turns the drill rods. One or two hydraulic
cylinders connected with a high pressure pump control the feed so definite-
ly that the bit can be raised or lowered at will, while the bit is rotating,
by the simple operation of valves. The smaller-sized drills for very shal-
low work generally have a screw feed control instead of the hydraulic
feed; and their portable nature adapt them for outlining structure where
key beds lie less than 500 to 600 feet below the surface. The heavier
drills are used for scouting, i. e., obtaining data as to the character of the
oil sand and the quality of the oil.t The heaviest drills have lately been
*The diamond drill has long been recognized as the most efficient method of
recovering a continuous core in rock. All other drills use steel in some form for
cutting, but this drill, as its name implies, uses a black diamond, found only,in Brazil.
The black diamond 1s pure carbon or is chemically the same as the colorless gem,
_ buat differs in crystalization and is tougher for use in industry or drilling. The great
advantage of the diamond over steel cutters in core work is that it cuts freely and
Maintains gauge. To core any distance this is essential as any loss in gauge means
loss in clearance, with the consequent choking of the washing fluid, whether mud or
water. A steady supply of wash water prevents heating of the cutting tool. The
diamonds cut thousands of feet in soft sedimentary formation without appreciable
loss in weight. 58862
SOUr bakes so ess 450 130,869 Hills sea ee 974 6,545
Vinton (ia = ee 140 TE SO Damon Mound___-_ - 358 6,185
Edgerly (ia,)a23 2225 76 77,194 —
AVGra Seu a eee 5,697 56,400
PAST YIELD PER ACRE OF OTHER AREAS TO JANUARY 1, 1921.
Caddo (La.) (1 property). _ 44,800 Cushing: (Okla) 22.23 eee 11,000
Kern River (Cal.) 6,982 a.-__— 82,300 Glenn “Pool (Okla) 2.22 7,500
Healdton (Okla.) (1 property)__ 29,450 Bartlesville (Okla:)— 22222 ee 1,800
Operators in the high-grade Tonkawa filed in Kay and Nobles coun-
ties, Oklahoma, believe that the South pool thereof will ultimately yield
30,000 to 35,006 barrels per acre. Col. A. E. Humphreys, of Mexia and
Powell fame, quotes F. Julius Fohs as authority for an estimate of 600
million barrels total future production of the Los Angeles basin. Includ-
*Part of this data derived from “The Sunburst Oil Field of Montana’’, a paper
prepared by Dorsey Hager for the American Inst. of Min. and Met. Hngineers, and re-
printed in The Oil and Gas Journal, March 1, 1923.
{ The Oil Weekly, January 21, 1922. Weighted average computed by the author.
+The Japhet lease of 20 acres operated by The Texas Co., had produced to the
early part of 1928 about 12 million barrels in 5 years, or 600,000 barrels to the
acre, and is still good for 4,000 barrels a day.
OILDOM: ITS TREASURES AND TRAGEDIES 71
ing the output to the end of 1923, and assuming that 15,000 acres—one-
eighth of the state’s total—covers the proven territory in Los Angeles and
Orange counties, the writer roughly gets 60,000 barrels per acre as the
ultimate average yield of the Los Angeles basin.*
Production Per Well. Knowledge of the usual or expected yield per
normal well is of more practical value than that of the average yield of a
field that is spotted, spectacular, or otherwise irregular. in the spacing and
performances of its wells. (See Chapter XI.) The law of averages works
better after a pool or property has passed its days of flush production.
This law helps valuation engineers to prepare decline curves and future
production curves so that the value of undrilled but proven oil land may
be ascertained within reasonable limits.¢| Information as to the initial
yield of a single well, particularly the discovery well that proves 160 acres
centered about it, is of little value. The flow may be at an extra high
rate because of the great original gas pressure, compared with the corre-
sponding flow of later drilled wells; and this rate, stated for the first 24
hours, may be based upon the actual yield during the first 2 or 3 hours
only where the measuring unit is limited. Interested speculators and stock
promoters advertise promptly and widely a well’s initial flow and refrain
from publishing its daily record at the end of 30 days when the flow has
become more or less settled and generally less than one-fourth of the
initial. Appraising engineers prefer a monthly record extending over
half a year at least, if the value of a property must be based upon the per-
formance of a single well. Rarely does the rate of yield rise after the
first 24 hours. Exceptions include: (1) The largest well known in the
Cushing pool to the end of 1915, which increased from 10,752 barrels the
first day to 10,848 the second day and settled to 4,000 within a week; and
(2) a number of wells at Signal Hill or Long Beach, which in 1922 in-
creased their flow after freeing themselves of sand.
During September, 1923, the average daily yield of nearly 300,000
wells in the United States approximated 2,250,000 barrels: or 7.5 barrels
per well. The Census Bureau reported 37,400 wells producing oil or gas
on December 31, 1889. In that year they yielded a little over 35 million
barrels of petroleum or at the rate of 2.6 barrels daily, disregarding the
*In arriving at this result, due consideration has been given to Joseph Jensen’s
paper read before the Los Angeles convention of the American Association of Petro-
leum Geologists in September, 1923. Estimates therein were made of the yield in
1924 not only for Santa Fe Springs, Long Beach, Huntington Beach and several older
fields, but also for Torrance-Redondo and the latest discovered field at Compton. As-
suming the producing area of all California fields to be 60,000 acres (in addition to
55,000 acres proven but undeveloped), and the total yield 1,800 million barrels to the
end of 19238, the average output per acre becomes 30,000 barrels to date. Thickness
of sands, their number, porosity, degree of saturation, pressure of the gas, and vis-
cosity of the oil, are the chief factors affecting the ordinary recovery per acre.
jt See page 73, revised “Manual for the Oil and Gas Industry,” by Fay, Reinholt,
ete. Note particularly the Law of Equal Expectations advanced in 1918. The original
edition of this Manual contains data of 11 years’ yield from 6 wells on an Oklahoma
property from which the author has computed the yield per well per day. The re-
sulting averages lend themselves to the construction of a typical decline curve, as
follows, beginning with 1906 and ending with 1916: 25.6, 14.5, 6.9, 5.05, 3.22, 2.06,
1.12, 0.75, 0.49, 0.26, and 0.10. The original ‘‘Manual’’ was prepared by Ralph
Arnold, James L. Darnell, and others.
72 OILDOM: ITS TREASURES AND TRAGEDIES
number of gas wells included. On this basis of 750 million barrels output
in 1923 the daily average per well approximates 7 barrels, an increase of
4.4 barrels in a third of a century. Calculated from Census data, the
daily average was 2.8 barrels in 1909, 4 barrels in the 5-year period of
1910-1914, and 4.5 barrels in that of 1915-1919. The steady gain has
been more marked during the past four years in the daily output per
well than in the number of producing wells: 1920, 4.7 barrels from 258,-
600 oil wells; 1921, 4.9 barrels from 274,500; 1922, 5.3 barrels from 285,-
000; and in 1923, 7 barrels from 300,000 oil wells.
Causes of Increase in Average Yield. Ordinarily the daily yield per
acre or per well would drop off from month to month and year to year,
as it has been doing in the older fields east of the Mississippi excepting in
the few where artificial means* supplement the failing gas pressure that
usually drives the oil through the porous rocks and into the pumping wells.
Thus, in a certain part of the Illinois field, where no such process is used,
the production per well fell from 3.22 barrels in 1911 to 0.99 barrels in
1920. Artificial methods, such as vacuum, compressed-air, and water-
drive, not to mention the mining of sands, could show a gain for the whole
country if universally applied. But there is no economic incentive for
such conservation as long as new fields, overlooked pools, and deeper
sands are discovered at frequent intervals. The finding of these and their
development are then the causes not only of the increased average daily
or yearly yield per well but also of the great gain in aggregate production
which is now enough to overflow our domestic markets. These two results
are distinct inasmuch as it would be possible to have the same relative
growth in the number of producing wells and in the total production with-
out any concurrent increase in the yield per well.
Overproduction of 1923 from Deep Wells. Practically all of the oil
now coming from the three leading California fields—at a rate of more
than 650,000 barrels daily during September, 1923,—has to rise from
4,000 to 6,000 -feet to reach the surface; and that from the flush (Cor-
sicana-) Powell field in Navarro County, Texas,—at a rate of 170,000 bar-
rels—starts from a level nearly 3,000 feet deep. In other words, 36 per
cent—more than one-third—of the petroleum being produced in the
United States during the fall-of 1923 was coming from an average depth
not far from 4,000 feet. These four fields, now among the first 6 or 7 in
rank of current production rate, account for all the 700,000 to 750,000
barrels increase in the course of a year since September, 1922, in which
month the daily rate averaged 1,540,000 barrels. No other natural resource
developed on a large scale has ever shown such a gigantic gain, almost 50
per cent, in so short a time. This is all the more sensational since the
record output was not reached in response to any sudden and inordinate
demand for more petroleum.
Tragic Consequences. A number of economic tragedies have resulted
from this phenomenal and unexpected flood of mineral fuel: (1) Loss of
crude oil through lack of gusher control and suitable storage; (2) upset
*In the Allegheny and Bradford fields, Pa., 18,000 wells attached to one pipe
line showed 23.8 per cent increase in 8 years due to the. so-called ‘‘water-drive” by
which water pressure is put on the rocks. A shot of nitro-glycerine has also been
known to rejuvenate an individual well. ;
—Mining and Oil Bulletin.
OVERPRODUCTION IN
1923 HAS COME FROM
DEEP WELLS,
PARTICULARLY IN
SOUTHERN CALIFORNIA
Above appear two views
of Signal Hill at Long
Beach, one taken before
and the other after devel-
opment began. This over-
developed field was discov-
ered June 25, 1921, by the
Shell Co. of Calif. Despite
their large holdings there
was, in August, 1923, only
2 acres to 1 producer on
the average. About the
middle of November, 1923,
the 272 wells were yielding
about 240,000 bbls. daily.
Estimated yield in 30
months ending with Dec.
31, 1923, 86,000,000 bbls.
Deepest well, 5,972 ft.
At left is seen the Shell
Co.’s Andrews No. 3 well.
It came in at 5,050 ft., be-
ing the first producer below
the 5,000-foot level. This
compares with the average
depth of 2,800 ft. for all
the U. S. domestic yield in
1921-22.
74 OILDOM: ITS TREASURES AND TRAGEDIES
in markets with the general bad effect of uncertain prices and the worse
indirect effect of abnormally low prices for motor fuel upon the output
of motor cars with all their attendant tragedies; (3) waste in use of
products because of cheapened gasoline in particular; (4) overbuilding
of storage and pipe-line facilities at great expense which the ultimate con-
sumer must eventually stand; (5) financial failure of many small pro-
ducers either from inability to store their crude product or from necessity
to sell it at a loss; (6) elimination or reduction of profits, in turn cutting
off, or down, the customary dividends to numerous stockholders of whom
some may have no other source of income; and (7) consequent depression
in the market value of securities of crude oil producers. To illustrate the
last stated effect, the shares in 10 leading companies declined from the
year’s high early in 1923 at an average rate of over 56 per cent to what
they were quoted at late in September, that is, during a period of about
six months. With reference to (5) and (6) the losses to some producers
in 1928 must have been immense in their aggregate—much more than the
net loss of nearly $60,000,000 on 551.2 million barrels crude marketed in
1922 for. $775,000,000.
CHAP. VI. ECONOMIC ASPECTS—Continued.
A Demoralized Market and Past Price Fluctuations. The predicting
of crude oil prices is as great a guess work as the forecasting of future
production and the estimating of recoverable reserves for the entire
country. Past price records are worthless in forecasting petroleum prices
for short periods of one-half to three years in view of the fact that nobody
knows just when and to what extent a sudden slump or a precipitous rise
may occur in production, respectively through a simultaneous stoppage
or slackening in nation-wide new development or through contemporaneous
discoveries and stampedes of drilling in new fields or deep sands. De-
spite the present demoralized market, better prices are bound to come,
certainly within a year, since the majority of producers cannot and will
not carry on much longer at a loss*. The only oil well operators who are
profiting during the temporary stage of over-production are the few lucky
lessees in the new fields of California, Texas and Oklahoma. Price control
is apparently not in the hands of the older or more permanent producers.
As a matter of fact, in their most important current aspects the oil in-
dustry and the oil markets are dominated not so much by current events
as by estimates or conjectures of what is ahead, either probable or possible.}
Price changes in crude petroleum during the past ten years prove
that the industry has not been coordinated and that fluctuations do
not closely follow the prevailing trend in prices of necessities. Just after
the outbreak of the War, crude oil quotations fell off while prices in general
were boosted because of the menace to merchandising; and again, through-
out 1920, prices for crude oil were maintained at the level of the latter
half of 1919, while prices for most commodities continued to drop. In spite
of many downward reactions, the price trended sharply upwards at an
average rate of 22 per cent annually during the eight-year period, 1913-
1920. Pogue claims this upward tendency is mainly due to (1), the increas-
ing: cost to drill arising from the great number of well-feet per barrel;
(2) the increased cost of labor and material, and (3), the mounting de-
mand for oil products. However, except in fields nearing exhaustion and
in so far as the high-cost areas set the price pace for the entire country,
the cost of production does not dominantly influence the price of crude
petroleum, which has to carry in addition the intangible but very appre-
ciable item of (4), incentive for exploration. With steady progress toward
*Out of more than 285,000 oil wells in the United States some 260,000 are
being operated at a loss, declared W. H. Gray before the American Oil Men’s Associa-
tion at their Chicago meeting, October 2, 1923.—The Oil Weekly, October 6.
*Standard Daily Trade Service, January 27, 1923. Gilbert and Pogue, in Bulletin
102 of the U. S. National Museum, p. 13, state that the price of crude petroleum (at
any one time) varies considerably according to quality, distance from market, and
other factors. The paraffin oils of light gravity, such as those produced in Penn-
sylvania, are the most valuable because they yield the largest percentage of products
in demand, while the asphaltic oils of heavy gravity, such as those from parts of
California and the Gulf region, bring a price roughly a fourth of what the best quality
oil commands. .
¢ Page 241, “Hconomics of Petroleum,” published by John Wiley & Sons, Inec., 1921.
(75)
TO OILDOM: ITS TREASURES AND TRAGEDIES
depletion of the resource, the increasing proportion of drilling needed to
sustain output may be expected to make the cost of production rise and
weigh more and more in the price outcome.*
PRODUCTION AND WEIGHTED AVERAGE ANNUAL PRICE OF
CRUDE OIL AT THE WELL
At 5-year intervals since 1875 ae During the 11 years, 1912-1922
Million Million
Years Bbls. Dollars Years Bbls. Dollars
ISSO 1S 70s. eae Aloo 74.1 2.92 FOV 23 Ree ort A eae 222.9 0.74
WG CN Je ea 9.1 2.52 1019. ee ee eee 248.4 0.95
TSSOs se ee ee ee, 26.3 0.93 1914 Se ee eee 265.8 0.81
A Moko s eieetyaaranrt A By Meee oc Mince 21.9 0.94 TORO Se Be ee ae ees 281.1 0.64
1 S9QS Sees) cose Ae eee 45.8 0.77 1916352 SS eS ee 22 SE SSS BAG
y fio be 1a ee se Sees mee cee Sa eee 52.9 1.09 Oe ee ee eee 335.3 1.56
LOGO 0 22S Ra es ae 63.6 1.19 BIS Wy Bo ak eee ma ce Sie Re ae 355.9 1.98
tL D0) eS eee ee ee ee 134.7 0.62 TOTS eee eee ee ee 378.4 2.01
29102 Se Dee Se 209.6 ° 0.61 1920353 Gee eee 442.9 3.07
TOR oh ee rey ee 281.1 0.64 192}6 2 ee ee 472.2 1.72 —
AO 20s eee Oe ee 442.9 * 3.07 a! A’ Seen or Mea es Spe ua. 551.2 1.66
Variations in specific prices for particular grades have been greater
than in average prices. Thus, because a market had to be made, Penn-
sylvanian crude depreciated from $20, the earliest price on record, which
persisted from September, 1859, to January, 1860, to $2 in December, 1860,
and to 10 cents during December-January, 1861-1862, averaging but 49
cents for the year 1861. This grade reached another peak in 1864, $14.00
during July, the average for that year being $8.06. Extreme lows in
Pennsylvania. prices were recorded as follows since 1862: 491% cents in
July, 1882; 51% cents in June, 1884; 50 cents in August, 1891, and 50
cents in October, 1892. The lowest average annual price of this high grade
petroleum reached since 1862, when it was 49 cents, belongs to a year
of very dull times, 1892, when it was 55.6 cents. Between January, 1869,
when the specific price was $7 per barrel, and March to December, 1920,
when it was $6.10, Pennsylvania crude sold at $4 or more only in these
other years: 1870, 1871, 1872, 1876, 1918 and 1919. According to the
U. S. Geological Survey’s report, “Petroleum in 1918,” by E. R. Lloyd,
the average price per barrel for the 1,221.8 million barrels of Pennsy]l-
vania crude produced in the entire Appalachian field from 1859 to 1918, in-
clusive, approximated $1.43. The corresponding figure for the 787.4 mil-
lion barrels of similar grade produced in Pennsylvania alone during the
same period was about $1.45.
Other fields have experienced exceptionally low prices for crude oil.
The average yearly price of petroleum marketed in the Lima, Ohio-Indiana
field during 1888 and again in 1889 was only 15 cents. These were the
third and fourth years of its productivity, and then-for the first time this
field furnished more than one-third of the total yieid of crude oil from
the whole United States. In the Gulf field, during 1901, the year of the
Beaumont or Spindle Top discovery, its 38.6 million barrels of heavy
* The result will be complicated by the advancing use of engineering methods in the
place of unorganized wildcatting, by a more scientifle analysis of depletion data, and
by the growing strength of the demands for petroleum products, all of which tend to
stimulate.increased prices for the crude.—M. L. Requa, General Director of the Oil
‘Division, U. S. Fuel Administration.
OILDOM: ITS TREASURES AND TRAGEDIES ft
crude (not yet in demand for fueling) brought an average price of but
17% cents per barrel, although this quantity made no more than 5.2 per
cent of the nation’s output. The great gushers of the Midway-Sunset field
in California prior to 1915 yielded so much oil that prices there slumped
to the low level of 20 cents and storage was over-loaded. As a result of
the war and the rapid strides of the automotive industry, the great surplus
was wiped out.* Prices rose throughout the State and stimulated the
search for new fields. The average price in California was 42.2 cents in
1915; 59 cents in 1916; 91.8 cents in 1917 (the year of the Montebello dis-
covery), and $1.218 in 1918, the first Pa that “dollar oil” had appeared
in the State since 1894.
PRICE CHANGES IN PENNSYLVANIA CRUDE OIL DURING
9 MONTHS. TO OCTOBER, 1923
Date Price Increase Date Price Increase Date Price Decrease
Dec. 30, ’22 —-$3.00 Hebi ee Se $3.80 10 May Gres = as $3.75 © $.2
ol fs iea vi 85 or Se Yipee og es WS es Po aes jE Ghia os ad AO 3.90 10 Maya 14 See 3.50 =
GAS 0 aU oe ag ae 3.35 10 SGD On es Bene 4.00 10 DUNC. LO = 3.25 20)
Ay in 7a boy a eee 3.45 10 Me pe | hi Ges 4.25 .20 SULY MO Soe 3.00 pa
Jane Oe ae 3.55 10 Aprilia eS 40 -257 Sepbac0 mice ras PhS P20
Premiums and Posting of Prices. The bulk of the crude oil produced
in this country is purchased at open-market prices that are announced or
“nosted” by big marketing companies or purchasing departments con-
nected with the big refiners. Most of the oil is taken from the producers’
field tanks by pipe lines that are owned by or affiliated with the big re-
fining companies and pumped through the lines from the fields to the re-
fineries or to storage tanks of the purchaser.
The posted price is the price at which one or more ofthe principal
purchasers in a given field offer to buy crude petroleum at the producer’s
tank. Some of the crude petroleum is bought direct by small refiners, who
often pay a premium over the posted price. The producer, in selling to the
large purchasers who offer to buy at their posted prices, has the advantage
of an assured sale at any time, irrespective of quantity. Hence, the small
refiner must offer the producer an extra inducement in order to secure the
small quantities his refinery can usually take.
When the small refiner pays a large premium it is usually for a par-
ticularly desirable quality of crude; or because, in’times of declining pro-
duction he is not able to secure sufficient quantities otherwise. On the
other hand, in times of flush production small refiners have often been
able to buy their oil at less than posted prices. When the large purchasers
find that the proportion of oil sold at premium prices is so great that they
have difficulty in securing oil to meet their own requirements, they advance
their posted prices.
*Wric A. Starke, formerly geologist with the Standard Oil Co. of Calif., quoted in
the Wall Street Journal, April 27, 1923. See ‘Stocks, Storage and Stabilization” fol-
lowing. Prices and stocks generally move in opposite directions. For view of Spindle
Top see page 36.
*Decrease. Altogether 7 cuts, aggregating $1.65, were made up to Nov. 13, the
date of a 15-cent cut.—Bosion News Bureau. The geographic range of prices during
1923 is given in Chapter VIJI. All prices of crude are at the well. Prices in most
fields east of the Rockies rose late in December. Since the low of $2.60 for Penn.
crude was established Nov. 13, its price rose $.25 Dec. 14, $.25 Dec. 26, $.15 Dec. 31;
$.15 Jan. 7, 1924, and $.10 Jan. 10.
78 OILDOM: ITS TREASURES AND TRAGEDIES
The glut of oil from the Cushing pool proved calamitous to premiums
for light oil of the Mid-Continent field. The posted price in 1915 sank to
40 cents per barrel, though large quantities also sold as low as 25 cents. At
other times premiums have gone to unprecedented levels, and in the
Ranger Field, where the production fell off sharply in 1920, they ran as high
as 50 cents per barrel. In the Garber pool, Oklahoma, the scarcity of
high-grade refining crudes resulted once in the payment of premiums as |
high as $1.75 per barrel.*
Causes and Cures for Overproduction. Domestic production seemed
to satisfy demands quite fully up to 1916. Beginning with that year a gap
occurred and gradually widened so that in 1920, notwithstanding the great
gain of 65 million barrels over the yield the year before, the shortage
amounted to 87.5 million barrels of crude oil. In 1921 the shortage was
practically 54 million barrels and in 1922 only 35 millions. In the mean-
time, Mexico had been more than filling the gap so that a reduction of
23.5 million barrels in stocks during 1916 was changed to a surplus of
over 62.5 barrels at the end of 1921. Exports of crude petroleum have
never proven to be an important factor; they increased from hardly 5
million barrels in 1918 to little more than 10 millions in 1922, the average
from 1913 to 1917, inclusive, being but 4 millions.
Sensational reports of the salt water invasion of the southern or light-
oil district in Mexico, circulated early in 1921, certainly stimulated wild-
catting in the United States. As a matter of fact, Mexican shipments to
our country have been maintained at a remarkable rate. despite a partial
realization of the pessimistic forecasts. (See Chapter IX.) Asa result of
A CONTRIBUTOR TO OVER-
PRODUCTION
The deep Powell pool
(Woodbine sand) in the old
Corsicana field was not found
before January, 1923, and
since has furnished a great
sensation, in October, putting
Texas next to California.
This view shows a _ shallow
well of the original Powell
pool (650 to 950 ft.) opened in
1900; the deep development is
pictured in Part Two.
—The Oil Weekly.
the wide-spread wildcatting, a number of new fields have been found north
of the Rio Grande, one of them even close to the Canadian line, namely
the huge Kevin-Sunburst field in Montana. Fear of a failing supply from
Mexico can scarcely be blamed for the great discoveries and the resultant
enormous over-production that have occurred in California. It is this over-
abundance of high gasoline oil in a State which hitherto had been ecnomic-
ally extraneous—as far as it affected the region east of the Rockies—that
has sort of dynamited the markets of the east and the middle west. Great
*Pages 3 and 32, Report of the Federal Trade Commission on “The Advance in
Price of Petroleum Products,’’ published in 1920 as House Document No. 801, 66th
Congress, 2nd Session.
OILDOM: ITS TREASURES AND TRAGEDIES 79
as the gain has also been experienced east of the Rockies, the American
market could easily have absorbed it all because of the abnormal, even out-
rageous, advance in the output of automobiles and because of the ten-
dency to substitute fuel oil and kerosene for coal wherever feasible.
Four causes for the excessive yield in California have been stated by
Ralph Arnold.* (1) The false assumption that initial production can be
counted on as the average for the life of the field, deluding many into
drilling where fewer wells and slower development would prove the proper
and (more) profitable solution; (2), rapid development through the use
of rotary drills at twice the cost of cable drilling; (3) small holdings
which have induced intensive drilling, and (4), stringent lease requirement
for offset drilling. President Thos. A. O’Donnell, of the A. P. I., speaking
at the St. Louis meeting in December, 1922,
referred to two reasons for the scandalous
over-production in California: (1) When oil
was at a good price extreme competition be-
tween the active companies of the State for
leases which brought about heavy drilling
operations as well as extravagant bonuses and
royalties, and (2), following that there has
been a development of the well-known pro-
moter type.
Various remedies have been proposed to
rectify the resultant depressed situation which
has prevailed throughout the entire petroleum
industry with the exception of the tanker trade
and the business of building pipe lines, storage
and refining facilities. The State of California
has made more rigorous the requirements of
small and speculative operators to have a large oS
bank deposit before being granted a permit to PRES. THOMAS O0’DONNELL
drill. Some Burbank (Okla.) operators agreed, ee hate, 1993 Bee
as long ago as late in April, 1923, to stop new —The Oil Weekly.
wells near the top of the sand and not drill them into production until
pipe line facilities had been improved. Additional storage as well as
needed pipe lines have been provided. The drilling of new wells has been
suspended here and there, and old wells, particularly those farthest from
tidewater, have been pinched down or shut in completely so that one time in
the late summer of 1923 it was estimated that the potential production
exceeded the actual output almost half a million barrels per day. Pipe line
companies have compelled curtailment on the part of producers by pro-
rating the pipe runs. These various remedial measures of an economic
nature must not be confused with conditions which are subject to tech-
nologic control and which retard capacity production such as improper
shooting of wells, water not shut off, improper cleaning with packed sands
*Address quoted in Mining and Oil Bulletin, August, 1922, published by the Cali-
fornian Chamber of Mines and Oil, Geo. M. Swindell, Secretary.
80 OILDOM: ITS TREASURES AND TRAGEDIES
KARTHEN STORAGE OF
VERY HEAVY OIL
Kern River field, near
Bakersfield, Calif.
This oil contains very little -
gasoline and kerosene and thus
the evaporation loss is low.
INTERIOR OF A HUGE
CONCRETE LINED RESER-
VOIR, ONE OF 5 IN A TANK
FARM NHAR SAN PEDRO,
CALIFORNIA
Capacity is 750,000 barrels
each or an average day’s pro-
duction of the 10,000 Califor-
nia wells in 1923. Note the
roof supports and the chief en-
gineer, H. G. Smith.
‘ —Oil and Gas Journal:
WASTEFUL OPEN STORAGE OF CRUDE OIL CONTAINING LIGHT
PRODUCTS, SMACKOVER, ARK., 1923.
While the bulk of the Smackover oil is heavy it is not as heavy as the Kern
River oil of California and yields some gasoline and kerosene that is quickly lost
through evaporation in open reservoirs.
OILDOM: ITS TREASURES AND TRAGEDIES 81
and clogging up of sand pores and casing perforations with asphalt or
paraffine.*
Stocks, Storage and Stabilization. Large stocks of crude oil carried
above ground have the evident effect of steadying markets when the rate of
production is either stationary or declining, and’ capacious storage facili-
ties have the same effect in the face of a rising rate.+ Storage construction
has been stimulated perhaps to a point beyond future needs if the industry
would but recognize the economic advantage of relying more upon the
natural, inexpensive and non-wasteful storage underground. In 1923 it
cost 27 cents a barrel or $200,000 each to build permanent concrete reser-
voirs of 750,000 barrels capacity. During this closing year of tragic over-
production, the big companies in California kept their reserves under-
ground as far as possible and bought their needed oil from the mushroom
operators while awaiting better prices for their own product. It is of.
utmost economic importance to know that crude oil desirable for gasoline
cannot be held long in storage to advantage or profit.
TREND OF CRUDE OIL STOCKS IN TERMS OF THE COUNTRY’S
NEEDS
Year Stocks, Dec. 31 Mos. Supply Year Stocks, Dec. 31 Mos. Supply
1909 tiga, phbisies 23a 8.4 1916 162 mMil Se bps et. ae 6.1
1910 gf Rg rn Lea = Yee aa 8.2 1917 LAG; «* td Cee Re i oe 4.7
1911 (Con DS SURES So ie a 7.8 1918 A Se 6M se AO a Oe BE
1912 a 3 Nae a hs on pe a A ON i 6.2 1919 L285 -* A wean ke Speeds 3.1
1913 a 43 WSs A cae aap Sea ee ay 4 G2 O vre 4Go LAD wend et LT be oe B78
1914 142-3% Sr 9) cee ee ee 6.5 1921 9 lege oe part oem) Mahe. - 4.5
1915 164 ‘ <_ aeerae y F e ifv? 1922 26D0n ah ees 37 CaS 5.4
MEVCHIS SAVOrAP CG. eo, fie VEATRs a VER Leo Tee 4.5
On September 1, 1923, the stocks of crude petroleum held elsewhere
than on leaseholds in California and at refineries throughout the United
States aggregated 298 million barrels. This was sufficient for 5 months’
consumption at 59.5 barrels per month, the average for June, July and
August.
To provide for all contingencies, such as war or a geological catastro-
phe, it would not be unreasonable for this country to carry a reserve sup-
ply of petroleum and its products equal to a year’s consumption (if it were
not so immense).{ This has always been referred .to as something im-
possible in view of the mounting domestic demand. Below is summarized
*The Lamp, house organ of the Standard of N. J., Dec., 1922, answers the query,
How can an oil-producing concern slow down and reduce its output when there is an
excess of oil? with two suggestions: (1) Cease sinking new wells if his property is not
all drilled up; and (2) if lucky enough to own all of a pool he could tap it as desired,
closing his wells when the prices were unsatisfactory or speeding up production when
they were advancing. Unfortunately, almost all important producing territory is
divided among many owners or lessees; and so long as one of them produces regardless
of market conditions the others must follow suit or see their oil underground taken
away from them. Arnold has condemned our present leasing system as inconsistent
with ideas of conservation.
jRead “Storage as a Relief for Overproduction,” The Oil Age, Sept., 1922, p. 15.
tOiu. Paint and Drug Reporter, June 11, 1923, page 45.
82 OILDOM: ITS TREASURES AND TRAGEDIES
in round numbers the inventory of all forms of mineral oil in the United
States as of September 1, 1923.*
Mil. Bbls.
Domestic pipe-line and tank-farm stocks plus imports (U. S. G. 8.) ---------- 298
Crude oil held at refineries (84% domestic, 16% Mex., Bur. Mines) ____________ 34.3
Total crude petroleum, except most producers’ lease stocks______________ oo2.e
Partly refined oils held at refineries (Bureau of Mines) _-_-_-__-__--__-_-=_---= 30.7
Total crude oil and other unfinished forms=2 22 2 eee 363.0
$ Finished Products (Bureau of Mines) :
Gas and fuel oils (1462.2 million gallons at 42 gallons a barrel) ____________ 34.9
Gasoline (1053.9 ts fs con AD, Scag ( ) eee 2570
Kerosene ( 2438.6 ue “ come Paes 0) 5.8
Lubricants ( 220.4 S st SrA’, pha 8 1G (2S ey
All others (23120 “ sana Sodas (‘3822 0.7
(Total 8011.1 mil. gals:, or 71.6) mil. «bbis. fine sprod:)
Grand total stocks of crude, partly refined and finished___________________ 434.6
| Finished products not susceptible to liquid measurement included
128,000 short tons of asphalt, 87,500 tons of wax and 20,500 tons of coke.
The average monthly rate of increase in pipe-line and tank-farm stocks
plus imports has been as follows, in millions of barrels since the depletion
period of 1915-1918: 0.5 in 1919 (over 1918); 1.5, 1920; 3.3.92 ea...
1922, and 5.6, 1923, based on the first eight months’ accumulation. It will
be noted from the second preceding table that the stocks of crude not at
refineries have more than doubled in about nine years; nevertheless we
have ahead one month’s supply less than we had at the end of 1914, or
three months’ supply less than we had at the end of 1909, notwithstanding
the tremendous gain in production in 1923—almost 500 million barrels be-
yond that of 1914, or 575 million beyond that of 1909!
THE REFINING INDUSTRY
Manufacturing Operations and Refined Products. Advanced informa-
tion from the Department of Commerce} indicates that petroleum refining
now ranks above all other manufacturing industries, except “Slaughtering
and Meat-packing” in point of value of products. Expressed in millions
of dollars these values for the 12 leading industries in 1921 were as follows:
Se Me ed a
Slaughtering and meat-packing__$2,201 8... Flour and erist) miss $1,180
Petroleum. rellning. 2.5 3a a 9. Printing and publishing period-
Automobiles (including trucks)_. 1,671 ieals: 22 oo See 1,124
Foundry and machine shops____-— 1,565 10. Bread and bakery shops_=—____ 1,090
Steel Works and ralling mills__ 1,482 11. Women’s clothes making_______ 1,023
Cotion=>iill ss. ee a eee 1,278*+..12.-Men’s. clothes making=s22. 220 935
Railway. - repairs -shopse-2=—2- == nae US thea) —---
Total for 12. industries____ = $16,456
Petroleum refining precedes all these industries in respect to
the value of output per wage earner. The Manufacture of motor
* C. O. Wilson’s figures for this date, Sept. 1, 1923, published in The Oil and Gas
Journal, Sept. 138, differ slightly from the author’s. His sources are probably the
same, U. S. Geological Survey and Bureau of Mines; but he evidently includes all
stocks held on leases and markets in order to arrive at the greater grand total of 445.6
million barrels. His pipe-line statistics are gross, thus a few millions more than the net
figures of the Survey.
7 Courtesy of Eugene F. Hartley, Chief Statistician for Manufacturers, Bureau of
the Census. ;
OILDOM: ITS TREASURES AND TRAGEDIES 83
vehicles is looked upon as highly efficient, but its 143,658 wage
earners in 1921 averaged only $11,640 each compared with $27,340 for
each of the 63,189 employed in petroleum refining. In that year there
were 366 petroleum refineries in operation and 385 establishments making
automobiles. The number of different individuals or corporations operat-
ing refineries in 1919 was probably less than three hundred* compared with
9,814 operators in the natural resources of both gas and petroleum.
Petroleum refining has grown more rapidly than any other branch of
manufacturing except automobile making.*
; Wage Value Wage Value
Census Year Earners of Products Census Year Earners of Products
pH OE a eed 1,473 $6.4 million BS Thc Sa tt On eee 16,770 $175 million
Ree eet 1,870 26.9 pe 7900 ee ees 13,929 237 aie
aro Leer 9,869 43.7 he OT 4a a ee ~ 25,366 396 A
vt to) ll see 11,403 85.0 a oe He ig SS ae ont ie 58,889 1,633 oe
LeOo Sse 12,199 123.9 ss cb a a Gato sou tet 4
The gain in the 10 years, 1909-1919 was 323 per cent for wage earners
and 590 per cent for value of products. -
Herewith are tabulated the actual quantities of the different refined
products and their total values for the year 1921, as published by the
Bureau of the Census in 1923:
Million Value Unit Value
Refinery Products Gallons Millions Cents
CSONSROW BENELLI Sh i a ee ee 5,098 $ 840.7 16.45
NaGitoe ewouZING. Ot: ~.oses2t J. 5 no 275.2 40.7 14.8
EROtaimTonbest WLOCUC Use ==. == Dolton $ 881.4 16.4
ECOMISL Tea LLC TOL ae met 2 a Se ee ee SS 6,894.5 232.4 Bee
SO Sm Sea ae ne es as ee ee 1,634.3 Spio 5.2
PRS Hey COR emcee ate ce ee ve Ree A 1,220.3 59.6 4.9
mniaueruet mili #8 secre: oP es a 9,749.1 $ 377.3 3.87
Witiminatins’ oils, (kerosene) ===... £22. = 1,963.8 bo ass 7.8
eich wile aOLISWeesse = eRe Sree eS 949.2 194.6 20.5
Dotaletolse es JOG DrOductss2= == soe 2S 18,035.3 $1,605.8 8.9
Greases (petrolatum, axle g., etc.) —~--------- 24.4 $ 9.8 40.0
AST asec mn Od Coe Olsen ses ey ee ee 168.4 7.8 4.6
All other products (wax, asphalt, coke, candles,
CS) ape ay eee ie ees SOD FER ro i Eh 2 * 104.1 Te es
COL ee DV DEOGUGLS 2 ce cece Ces a IY (4.0 mil. tons)
$121.7 ($39.20 a ton)
*In 1919 158 refining companies ran 84 per cent of the total refined crude through
their stills; probably no more than 162 smaller operators refined the remaining 16 per
cent.
On January 1, 1922, according to the Bureau of Mines, there were 270 different
active operators of 325 plants with a combined refining capacity of 1,854,590 barrels
per day. At the same time there were shut down 154 refinerics of 254.610 barrels daily
capacity.
See Chapter VIII for their geographic distribution.
7 These may all be considered as gas-engine or motor fuels—‘“motor spirits” as
they are designated in the British Empire.
¢ In the absence of Census details, the author has apportioned these approximately :
asphalt-——1,200,000 short tons; coke—1,000,000; paraffin wax—225,000; besides the
575,000 tons of asphaltic oils and 100,000 tons of greases above expressed in gallons;
and miscellaneous—900,000 tons. The unit values have been determined by the author.
The percentage relations in quantity are shown at the end of Chapter IV.
84 OILDOM: ITS TREASURES AND TRAGEDIES
Converting the liquid measure of the major products into short tons—
about 63 million tons—and adding this to the weight of the by-products
makes but 66 million tons, or roughly, 13 million tons less than the yield
of crude in 1921. Part of this difference is due to direct consumption of
crude; part is accounted for in crude run into storage instead of into
stills, in losses of liquid from leakage and evaporation, and in worthless
residues. If these figures are correct, they indicate that by-products con-
stituted 6 per cent of the weight, or likely little more than 5 per cent of
the bulk, but contributed 7 per cent to the total value of refinery products
in -LoZie
A Chronic Problem. Fundamentally the refining of petroleum is un-
like any other process of manufacturing except meat-packing. From the
raw product of the mine, the forest, or the field the manufacturer need
produce only the article or thing. that his consuming public may. prefer,
whether radio sets, steel plates, fancy shoes or fine furniture. His basic
raw material does not change and his apparatus, process and methods
can be standardized. Not so with the oil refiner as his raw product changes.
with the discovery of each new pool and usually presents a new refining
problem. During the first fifty years’ growth of the industry, kerosene
was the primary product and processes were developed for its maximum
yield. From a market requirement of 58 per cent kerosene and 9 per
cent gasoline in 1900 there was a change to a demand for 24 per cent
kerosene and 26 per cent gasoline in 1914.7
Not commercially correct but economically true are the following re-
lations, according to Pogue: Gasoline receipts pay for the raw material;
kerosene for refining, and fuel oil for marketing, leaving the receipts from
lubricants as profit. He concludes that skimming plants are profitable
only in periods of flush production. In Texas alone, on January 1, 1922,
there were 46 such plants shut down out of 97 refineries exclusive of eight
skimming or topping plants being built. Such evidences of inexperience,
miscalculation or mismanagement are monuments similar to the many
milling and reduction plants that dot. the gold and silver districts of the
West where deep exploration did not precede construction. As a whole,
the industry has to stand the expense of these emblems of tragedy as it
_has also to cover the cost of the numerous dry wells drilled each year.
*The petroleum refining activity is the largest and one of the most efficient
chemically controlled industries in the United States. Yet while the most competent
branches of the activity have carried the production of the main products forward
with effectiveness, they have not been able, alone, to draw more than a modicum of
value from the by-product possibilities inherent in the resource. During the past only
10 per cent of the total value ascribed to refined products was credited to some 200
by-products which made up 15 per cent of the total bulk (not weight) of products and
waste. The waste made 5 per cent of the total. The cost of refining has been borne
by the four main products—gasoline, kerosene, fuel oil, and lubricants—which con-
stituted 90 per cent of the value and made up 80 per cent of the bulk, until more
recently, as shown above. See part 6, bulletin 102, National Museum, by Gilbert and
Pogue, 1918.
7E. M. Clark in The Lamp, February, 1915. In minor disagreement—as to designa-
tion—F.. A. Howard wrote in The Oil and Gas Journal for Dec. 9, 1921: “Not manufac-
turing, but merely the separation of crude petroleum into its parts and then cleaning
and polishing the parts.’’
OILDOM: ITS TREASURES AND TRAGEDIES 85
True Cost of Refined Products. Because of these and other condi-
tions it becomes very difficult to determine the true cost of gasoline and
other refined products, as brought out before the hearings of the Senate Sub-
Committee on Manufactures. One of the witnesses, Mr. Coombe, of Ohio,
likened the problem of costs of various oil products to the problem of a
butcher who buys a whole beef and cannot determine what the porter-
house in it costs compared with soup bone: The demand for the porter-
house carries the soup bone (which is often thrown away); the demand
for gasoline carries (in part) other petroleum products. This expert
kad studied it for years with discouraging results. Engineers for the
Federal Trade Commission, after intensive study during the war, found
it impossible to get at the true cost of gasoline in particular. The Census
of 1919 made no effort to spread the costs over the different products, giving
only the costs for the refining industry as a whole. Itemized, these were:
pose Mmalion. Darrels crude petroleum, at $2.38_.-_____-._.-__ ssc $867,646,475
A Ome Daeee sy CIstll ates = = Sr a ee eS Se 151,824,598
uembiona parrelsscasing=h ead. casolnegsw eS. — 2. ae Fe 59,857,628
16.7 million thousand feet? or cubic feet wet natural gas____________ 1,256,834
Chemicals :
TOM GIS CAIs ine SOU a = = 2 Sets Soe ee SS oe 1,736,670
NOS LUO ee TOMS eSUIMIITLC RClQ. 225 2a a eo ee ee 10,327,060
BOL a uGiin a ries ss ee 8 ty Be See ee eS 224,700
pe eee LOMB aS UL foEtl a 2.5 eo = = eee er ee 136,828
2 OLMere elven Cr) Sere eee Se ee See ae 663,660
Tee SCAT teat f Ol et eTil yee ee ee Ee Tn 2,9 6Dgh 20
Containers and materials therefor :
WOoGctmts+ cOl ton, metal, $26,193,0 Td. total. =a a ee ee 60,994,807
SY CU te a re ee ee ee es ee oS oe 37,358,257
Te ieee ent (EO be cTON Ole ne ee eee eB 53,505,109
Total cost of material, containers, fuel and power______________ $1,247,908,355
Unit cost of the 415 million barrels of liquid petroleum_____________________ $3.00
The above unit cost allows nothing for depreciation of plant, expendi-
ture for labor, and various outlays for overhead charges, which alto-
gether have to come out of the $384,624,411 value added by manufacturing
according to the same Census.
Present Rate of Yield in Major Products. The average daily rate of
refining during July and August, 1923, was equivalent to annual rates as
follows for the four leading refinery products, based on the latest Bureau
of Mines statistics,* which indicate that the quantity of crude run through
the stills this year will approximate 615 million barrels, including im-
ported oil to the extent of 4 per cent:
Per Cent
Refinery Product Million Gallons Million Bbls. of Crude
ORR o/s ba i ae aD BEE 7,570 180 29.4
GOT eee pee Mie ns alo Ra ee 2,210 52.5 8.6
ereue seria ka ek 12,150 290 47.5
LO Nek Yo) ge ape ed ae ee 1,070 25.5 4.2
Lotalswour -Major’-Productss._—.-.—= 23,000 548 89.7
From the above it appears that twice as much kerosene as lubricants
is being produced; more than twice as much gasoline as of the former two
*Compiled by W. C. Hill, Petroleum Economist, Department of Interior.
86 OILDOM: ITS TREASURES AND TRAGEDIES 2
together; and almost four times as much gas and fuel oils. Compared
with 481 million barrels of the same products obtained in 1922 the apparent
increase is only 14 per cent as a whole; but for gasoline the increase is
22 per cent, the yield being 147.6 million barrels or 6,202 million gallons
in 1922.
| Gasoline
Kerosene
Fuel & Gas Oil
Lubricating Oil
Wax, Coke & Asphalt
Miscellaneous
Loss
Total,
WAX, COKE mo
. ; abe
WHAT THE REFINERS GOT OUT OF A BARREL OF CRUDE ABOUT
TWO YEARS AGO
Less gasoline than now, but more kerosene and lubricating oil
Because of the stimulus to refinery construction in California the daily
potential of all the refineries in actual operation must now, towards the
end of 1923, be nearly 2,100,000 barrels daily or 200,000 barrels short of
the maximum daily production of crude oil. In general the actual runs
make 70 to 80 per cent of the capacity, considering only the plants in
operation. Counting all those being built, shut down, and in operation,
OILDOM: ITS TREASURES AND TRAGEDIES 87
the aggregate number and capacity at the beginning of each of the past five
years were: 1918, 267 plants, 1,186,000 barrels; 1919, 289—1,295,000; 1920,
472—1,530,000; 1921, 469—1,889,000; 1922, 509—2,164,000.*
TRANSPORTATION OF PETROLEUM
The liquidity of crude oil has led to the development of a remarkable
system of transportation without parallel in its cheapness and efficiency.
This system comprises a network of pipe lines spread over much of the
country, supplemented by specially designed tank-steamers for coastwise
and foreign trade. A relatively small quantity of crude is handled by the
railroads in tank-cars. To a preponderant degree, therefore, the move-
ment of mineral oil is independent of the normal carrying agencies upon
which commodities in general depend.}
Railway Transport. Tank-cars are mainly used for hauling refined
products. During a recent period the railways derived 52 per cent of all
their revenue freight from the products of mines, quarries and oil wells.
Crude petroleum constituted only 1.2 per cent of the tonnage of these pro-
ducts, or 0.6 per cent of all the paying freight handled during that time
by all the railways of the United States. The number of tank-cars in the
United States and Canada on January 1, 1914, was nearly 50,000; seven
years later the number had reached 137,500. In May, 1923, the Interstate
Commerce Commission issued estimates of the revenue per car of various
commodities on the basis of 1922 tonnage at 1923 rates. This revenue by
the individual railway from petroleum was placed at $86.28 compared
with $79.28 from anthracite, $64.20 from asphaltum, $63.17 from bitumin-
ous coal, $45.17 from iron ore, and $35.72 from gravel, sand and stone. The
highest car rate for mineral products was from base bullion and matte,
$164.52. The three highest rates for agricultural products were from dried
fruits, $133.73; wheat, $121.75, and citrus fruits $115.41.
Pipe Lines. Before the advent of the tank-car, the tank-steamer, and
the pipe line it was not an uncommon sight to see a string of half a hun-
dred wagons hauling the-oil from the wells to the refineries hundreds of
miles distant. This furnished employment to many men and teams, and
these men naturally became jealous of any system that meant the loss of
their jobs. The.result was that the pioneers’ attempts to transport oil by
* Published January, 1923, in Mining and Oil Bulletin, of Los Angeles, and in-
cluding data of small refineries that failed to answer the questionnaires sent out by the
Bureau of Mines. Late in 1923 the potential of all refineries, whether operating or not,
must be close to 2,300,000 barrels.
+ Joseph HB. Pogue’s “Economics of Petroleum,” John Wiley & Sons, 1921.
Alfred Liggett, Editor of the (London) Petroleum Times, wrote in his book,
“Petroleum” (1919): ‘About 50 years ago a few master minds came to the front,
and loyally supported -by John D. Rockefeller, undertook the herculean task of practically
girdling the United States with a system of oil pipe lines that has no parallel any-
where. They eliminated the jaded horses, oil boats, wooden tankage and slow freights—
all tedious methods and questionable practice of handling petroleum—and substituted
therefor the steampump, the iron conduit, the steel-tank storage and systematic and
businesslike methods which soon commanded the confidence and respect of all oil-pro-
ducers. They extended their pipe-lines to almost every producing well and established
a transportation system which serves the industry to-day as no other on earth is
served. The advantages of the modern pipe-line to the oil-producer (and indirectly to
the investor) are very obvious,”
88 OILDOM: ITS TREASURES AND TRAGEDIES
pipe line were repeatedly made in vain, the lines being destroyed time
after time. It was only by the constant guarding of the property that —
the system was finally placed upon a safe basis. Now millions of people
walk and ride daily across these underground conduits, unconscious of
the fact that beneath their feet is flowing the crude product on its way to
be refined for use in running and oiling their motor cars and in lighting
or heating their homes.*
These buried pipe lines now carry to renherice nearly all the petro-
leum; discharged by the 300,000 live wells in the United States. They
measure almost 60,000 miles, three-fourths being main or trunk lines. —
Their aggregate length makes over one-fifth that of the railways or
sufficient two and one-half times to belt the earth at the Equator. Un-
like the railways, whose routes are controlled largely by relief, the pipe
lines extend in fairly straight courses.
Through an act of Congress the pipe lines must be operated as com-
mon carriers. In common with the railways they are supervised by the
Interstate Commerce Commission “for the purpose of assuring that the
charges and facilities for transportation shall be reasonable and that there
shall be no discrimination between shippers.” As a rule the tariff rates
of the trunk pipe lines have ranged from 50 to 70 per cent of the railway
rates for shipping crude oil the same distances. In 1916 it cost the
shipper 70 cents to “pipe” the oil from the Cushing pool in Creek County,
Oklahoma, to either Baltimore, Md., or Bayonne, N. J. Local gathering-
line cost per barrel has rarely been less than 4 or 5 cents. As of January
1, 1922, the 33 principal pipe-line companies in this country reported
$365,000,000 invested in pipe lines alone besides $287,100,000 in tank farms
and other facilities.
Tanker Transport. While pipe-line transport of refined oils in par-
ticular is less expensive than railway haulage in either tank cars or small
containers, water transport of any kind of oil in bulk is by far the cheapest
method of moving it to market or refinery. For instance, in July, 1923,
gasoline bringing 10 cents a gallon at Oklahoma refineries could not be
laid down at New York under 15 cents, while California gasoline could be
delivered there at 12 cents, although it must be carried nearly three times
the distance.t In fact, at no time is it as economical to carry crude nm
pipe line when water transport is available.
Prior-to the development of the bulk-oil carrier, practically all ship-
ping was done in barrels and in wood-enclosed cans, the latter known as
“ease oil.” In 1885, about five million barrels were exported in barrels
but only forty thousand in bulk; less than twelve years later, shipments
in barrels had dropped to forty thousand while the transport of bulk oil
had risen to 11.5 million barrels, thus more than reversing the ratio.
“Gluckauf,” first modern tanker, was built in England in 1866. It was
provided with a safety space between the boiler room and the oil storage,
*“Wages and Hours of Labor in the Petroleum Industry’’, Department of Labor.
*They do not carry the oil all the way to the refineries; in some cases only to
tide water for further and principal transport by tankers. In the case of the new
California fields the distance is less than 15 miles on the average as two of them,
Long. Beach and Huntington Beach, are situated on the seacoast.
tN. O. Fanning’s “Transportation Costs of Retined Oils,’ Oil and Gas Journal,
Aug. 2, 1923. ;
OILDOM: ITS TREASURES AND TRAGEDIES
allowance for expansion of the oil when
heated, and reduction in the danger of
the oil shifting with the roll and pitch
of the vessel, thus differing from those
earlier built to carry the liquid next to
the “skin” of the ship. Since that year
the increase in size has been no less re-
markable than the growth in the number
of tankers. The greatest impulse to this
arose with war time requirements. Be-
fore 1915, the average deadweight of
bulk-oil steamers was less than 6,000
tons, but now it is nearly 10,000 tons or
60,000 barrels. The largest tanker, the
S. S. “William Rockefeller,” registers
20,000 tons and has a capacity of 140,009
barrels.* )
During 1919 and 1920 also, there was
a big gain in tank steamers, due mainly
to the expansion in imports from Mexico.
All the big oil companies using them
added greatly to their tonnage and at
the same time the U. S. Shipping Board
built some 80 oil tankers. But in 1921
a collapse occurred in the oil markets,
and much of the new tonnage went out
of use and nearly all the boats of the
Shipping Board were tied up. Early in
1923, the trade between California and
the East through the Panama Canal be-
gan to grow so great because of the un-
expected flood from the new fields of the
Los Angeles basin, that all available
tankers were required. The Shipping
Board was enabled to charter its idle
vessels at high rates—up to 90 cents a
barrel—and to sell many of them, at the
low price, however, of $85 to $40 per ton.
Before September, about 55 of the gov-
ernment tankers were taken over by pri-
vate interests besides those under char-
ter.f |
The ocean rate on crude from Cali-
fornia to the North Atlantic was 82
cents about September 1, 1923, a 27
per cent drop from the peak of $1.12
reached last May. The decline was
partly the cause and partly the result
* John G. Pew’s ‘Modern Tank Steamers’’,
Mining and Metallurgy, December, 1922.
{World Shipping Turns to Oil’, The Qil
and Gas Journal, Sept. 6, 1923.
S. SHIPPING BOARD TANKERS AT MOBILE, ALA.,
89
30, 1922, TO THE UNION OIL CO. OF CALIF. GROSS
SOLD DEC.
wo. Us
—Courtesy of Union QOil Bulletin.
70,000 BARRELS EACH.
ABOUT
CAPACITY
TONNAGE ABOUT 7,075 EACH;
90 OILDOM: ITS TREASURES AND TRAGEDIES
of the demoralization of the oil industry traceable to over-production. For
October, 1923, the rate was even lower, only 70 cents, and applied as well
to gasoline as to crude for loading at San Pedro, California, as far ahead
as January, 1924,* Early in October a Norwegian tanker was engaged to
take crude from Tampico, Mexico, to Fall River, Mass., at only 27 cents
a barrel compared with this year’s high of 50 cents. The continued reduc-
tion is due no doubt to the over supply of tanker tonnage; over 400 bulk-
oil ships being on the California run alone late in August with the com-
peting operators realizing that a slackening demand is sure to come sooner
or later.j The latest cuts made it possible to move gasoline at a cost of 2
cents from California where it could be bought in bulk at 6 cents, making
the total 8 cents a gallon at New York. This will likely never happen
again, in the history of petroleum.
NUMBER AND TONNAGE OF THE WORLD’S TANKERS, JUNE 30, 1923.
(Bureau of Navigation, Dept. of Com., 9-1-’28.)
Thousand - Thousand
Flag Number Gross Tons Flag Number Gross Tons
ATCT CANS eee eee 466 2,470 Italian. G2 See 18 79
British 235s. ee 367 1,894 Japanese 2 es 10 58
Norwegian (= 2en2 37 195 German (eee 10 34
Duteh +2. ees 43 126 Belgian... ease 8 37
Fren¢h "2222227 Soe 23 a | Dannie ssn 4 36
Twenty-six countries altogether had 1,036 bulk-oil vessels with a
combined gross tonnage of 5,160,534 at the middle of 1923. Those of less
than 500 tons were not included in these totals, which, however, did in-
clude 98 sail and barge vessels of 147,050 tons. The United States with
47.8 per cent, Great Britain with 36.7 per cent, and Norway with 3.8 per
cent, together controlled 88.3 per cent of the world’s oil tankers which, in
turn, made up 8 per cent of the world’s entire shipping (33,507 steam, gas,
and sail vessels of 100 or more gross tons each and totalling 65,166,238
tons) on June 30, 1923. During the nine preceding years the number of
tankers had increased 188 per cent—from 366—and the gross tonnage 258
per cent—from 1,441,196 gross tons. The Bureau of Navigation has
taken its statistics from Lloyd’s Register, except those pertaining to the
United States, and they all exclude Navy, Admiralty, and other Govern-
ment tankers.t¢
* Wall Street Journal, October 17, 1923. 3
+ Although tanker transport is economical it (usually) makes up about half the cost
of California oil delivered at the North Atlantic refineries. The round voyage takes
42 days, including 2 days for twice traversing the Canal. To cover the distance of
10,000 miles means the burning of 1,700 tons of fuel oil, the eating of 5,000 meals
plus night lunches, the paying of $5,000 in wages and an average of $15,000 to $20,000
in Canal tolls —The Lamp, W. F. Dunning, December, 1922. In 1921 it cost $3,250,000
to build the tanker “Tamiahua” of 16,340 tons deadweight or 100,000 barrels capacity,
making $32.50 a ton. According to the Wall Street Journal the cost of building in
American yards now averages $80 a ton, compared with British building cost of about
$65, referring presumably to gross tons, making the cost less for a deadweight ton.
t The Lamp of June, 1928, reports 969 tank steamers of 7,723,951 deadweight tons,
which, at 6 barrels to the ton would make a total carrying capacity of about 46,350,000
barrels for the world’s'tanker fleet, evidently not counting the sail ships and barges,
but including some idle steamers.
OILDOM: ITS TREASURES AND TRAGEDIES 91
DISTRIBUTION AND UTILIZATION.
Distributing and Marketing Products. Great differences exist be-
tween the marketing agencies and conditions of the crude oil industry and
those of the refining industry. Due largely to the relatively huge number
of producers, 16,000 in 1919 according to the Federal Trade Commission,*
the business of crude production is on the whole inefficient in recovery,
uneconomic in caring for the product, and highly competitive and there-
fore at times unprofitable in marketing. Transportation, refining and
marketing of refined products are activities concentrated in the hands of a
relatively small number of corporations. As a rule, the refiners market
their own output, and the degree of concentration in refining—138 com-
panies directly controlling 84 per cent of the refinery yield in 1919—is an
index to the degree of concentration in the marketing of refined products.
Because crude production has grown more rapidly than the normal in-
dustrial development of the country, becoming a sort of free-for-all game,
the petroleum interests have neglected it and instead, as Pogue says,
paid unremitting attention to the means for extending the markets for
the manufactured products. As a result of the competitive, individualistic
methods of ‘production in vogue, harmonizing with the unrestrained wild-
catting, there is usually present a plethora of raw material. To prevent
a paucity in demand for all of the products and by-products, on the other
hand, requires highly organized efforts.}
It is interesting to note that most of the thirty-two companies that
each produced a million barrels or more and together 58 per cent of the
crude in 1919, were either refiners (and marketers) or were practically
identified with them through common stockholders and thus controlled 50
per cent of’ the refined products that year. Being engaged simultaneously
in production and refining makes it possible for the integrated companies
to benefit from the advance in the price of crude oil both as producers
and refiners (as well as marketers) while those small refiners who do not
produce crude complain that they are placed in a difficult position.
Marketing in general is in the hands of three groups: (1) Standard
companies, (2) independents, and (8) jobbers. The Standard group,
which runs through their stills a little less than half of the crude refined
each year, usually distributes two-thirds of the gasoline, buying the dif-
ference from the independents. The independents, therefore, directly dis-
tribute relatively less gasoline but more of other products and the crude oil
itself. The jobbers handle practically no crude oil and fuel oil, preferring
the more profitable and attenuated distribution of gasoline, kerosene, and
lubricants. In the marketing of gasoline in particular, the larger in-
dependents are aping the Standard group in perfecting systems of dis-
*Report in response to House Resolution No. 501, ‘‘Advance in the Price of
Petroleum Products’, pages 30-31, under “Competitive conditions in the marketing
of crude oil’’, 1920, followed in 1921 by a report on the ‘‘Pacific Coast Petroleum In-
dustry’’ which considers marketing and refining in the United States, pages 196-220.
The Census Bureau gives only 9,814 producers of petroleum and natural gas in 1919, ~
from less than 1 to about 70,000 barrels daily for each.
+To-day, therefore, the marketing of oil, with its preparatory steps of transporta-
tion and refining, is found to be a closely integrated enterprise, handling tremendous
volumes of products, through diverging and ramifying channels of distribution of a
unique and singularly efficient character.—Pogue’s ‘‘Economics of Petroleum”, page 213.
92 OILDOM: ITS TREASURES AND TRAGEDIES
tribution for directly placing the refined products in the hands of con-
sumers by means of service stations in the cities and tank wagons and
tank stations in rural regions. The division of marketing territory among
the Standard companies, continued since the Standard Oil dissolution in
1911, is shown on a map in Chapter VII in outline.
On account of the increasing competitive conditions* numerous special,
local, regional and national organizations have sprung up during the last
few years, largely for the purpose of stabilizing market conditions. Many
States have their own marketers’ associations, one of the youngest being
formed in Indiana during September, 1922: The Mid-Continent Oil and
DISTRIBUTING STATION IN A FORMER DESERT
Union. Oil Co.’s plant in the Imperial Valley, Calif.
Gas Association is probably the strongest of its kind in the country but
was not organized before October, 1917. It kad more than 2,000 members
in March, 1923.; On February 17, 1923, nearly one hundred representa-
tives of refiners, jobbers and marketers met at Chicago and formed the
newest marketing “club’—the American Oil Men’s Association—merger
of two others, the National Petroleum Marketers’ Association and the
American Independent Petroleum Association.
Prices of Refined Products. There should no doubt be a definite rela-
tionship between the price of a crude oil and the prices of its various
products.t This seems all the more reasonable in view of the unique fact ~
that ordinarily the manufacturing consumer of the raw material (crude
oil) fixes the price of that material.|| This is certainly a saving influence
*Mor “Factors in Cost of Marketing’’, see page 16, The Oil and Gas Journal, May
3, 1923. For ‘Investment in Marketing Equipment’’, see Chapter XII hereof.
yOfficers, 1921-1924: W. N. Davis, pres., W. B. Pyron and Chas. T. Wilson, v.
presidents, H. H. Smith, sec.-treas. This influential body is credited with getting the
following favorable report from the Federal Trade Commission: “It seems that there
is a greater justification in assigning the advance in price of crude oil and petroleum
products to varying conditions of supply and demand in the light of emphasized and
pessimistic statements as to future of supply than to a combination in restraint of
trade.’’—Oil Trade Journal, March, 1928.
tC. M. Alexander, Gen. Mngr. Texas Oil Products Co., in The Oil and Gas Jour-
nal, Oct. 11, 1923.
|| Oil, Paint and Drug Reporter, May 7, 1923, page 17.
OILDOM: ITS TREASURES AND TRAGEDIES 93
in the industry, especially when it is possible to discourage over-produc-
tion and waste through the cutting of prices from above. While the gen-
eral trend of crude and of refined prices do not diverge greatly from that
of all commodities from year to year, there are these two differences to
be noted between the first two: (1) crude oil presents a much greater
percentage range in price than do the refined products taken together,
and (2) the prices of the products being apparently more stable they lag
a little behind those of the crudes when the latter go either up or down.
For purpose of comparison the prices of Oklahoma oils, crude and re-
fined, are herewith given according to The Oil and Gas Journal of October
18, 1923 (wholesale or refinery prices during.a period of depression) :
Gal. Refincd Oi! Bbl. Cts.
Grade of Crude Oil Bbl. Cts. Fuel, 0) eee $0.85 2
Healdton, below 28° __.. $0.50 ta RoAgwolle GO ga are as 1.05 2.5
es OO RUOR OO esate: 70 1.7 Kerosene dist. 44° _-____ 2.10 5
Mid-con. below 33°_____ 90 a1. EES cea io 2 Raa vas ee ia ae 3.36 8
os soo MLO eoo.0o. 1.30 3.1 Lube 200 vis. 23-28 cold
uf 40° and above io 4.2 LOSU a tab ee ee es 6.30 15
Consumption.* The U. S. Geological Survey publishes monthly sta-
tistics that indicate quantity of crude oil delivered to consumers
by the pipe line and other marketing companies. These deliveries do not
necessarily mean immediate consumption as considerable stocks must be
carried by refiners and other consumers. Three classes of consumers of
crude should be comprised within complete statistics of ‘‘Consumption.”’
The most important factor is the refinery; next is the group using
petroleum in its natural state for fuel purposes; and third is the export
factor. The first and third are determinable with a fair degree of
accuracy; the second is still definitely uncertain, but usually makes about
one-fifth of the domestic production of crude oil.f The following analysis
shows how the indicated deliveries of crude oil during September, 1923,
were determined:
Million Bbls.
Stocks of domestic and imported crude, Aug. 31, 1923__.______ LGR IAS TE 298.9
Pomesticuproduction. during September. 222s 222s a ee 64.3
Imports during September (mainly from Mexico)_-_-_-__~_-___=_.______ 6.0
NoLaresupply. avellaple: tor. demand =.) ses eee ee ae 369.2
Exports of crude during September_-____---_____-_-__.. 1.6 mil. bbls.
Stocks of dom. and imp. crude September 80_______~_ 3807.2 mil. bbls. 308.8
Difference—Indicated deliveries during September______-~_________ 60.4:
AVerrrean dally rate: Ofmndidaled > déliverlessm 3.22 a es Ee 2.0
*“TIn the consideration of any domestic industry the factor of home consumption
must not be overlooked; indeed, home consumption is. more directly connected with
national welfare than exports.’’—George Otis Smith’s “The Economic Limits to
Domestic Independence in Minerals’? in Mineral Resources of the United States, 1917.
7 Report of the Federal Trade Commission on ‘The Advance in Price of Petroleum
Products,” 1920, page 26.
94 OILDOM: ITS TREASURES AND TRAGEDIES
CONSUMPTION OF CRUDE OIL IN THE UNITED STATES BY
MONTHS FOR 1923
(Expressed in thousands of barrels)
Daily Daily
Month Total Average Month Total Average
JaRNaT yas eee 58,448 1,885.4 J tly ee ee 61,192 1,973.9
Pebruery (22 242—= 51,522 1,840.1 AUS UStHt oes Sates _ 62,447 2,014.4
Marreh 22 en le er eee 59,849 1,929.3 September’ 22222622 ~ 60,447 2,014.9
April ise Soo ae eee 57,350 1,911.7 October: 2222 _ 63,412 2,045.5
May ice eee ee 58,020 1,871.6 Novel Deny o.0= gee 61,204 2,040.1
Junes a Sees ease 54,396 1,818.2 December 28) =a See
First 6 months___ 339,545 1,878.6 Second 6 months____ 868,555 2,005.0
' Partly estimated for the entire 12 months of 1923__-___-_______ 708,100 1,940.0
Production gained slightly over consumption during September,
bringing the stocks of crude oil in this country up to the highest figure
in history, namely 307.2 million barrels. This quantity is additional to
that held on leases and at refineries. The recent gain in consumption is
almost marvelous—81 million barrels or 31.3 per cent, comparing the
first half of 1923 with that of 1920. It was 117.4 million barrels or 45
per cent greater during the second half of 1923 than during the first
half of 1920, based in part on an estimate for the last month of 1923.
CORRELATION OF MARKETED PRODUCTION WITH CONSUMPTION
OF DOMESTIC CRUDE OIL
(Millions of barrels)
Pro- Consump- Pro- Consump-
Year duction tion Year duction tion.
LOU O ices Shee eae eel 209.6 229.5 LONG rie So OR ater cetien aaa SoD S51ie
yh 5 BS ppc ae a eet ae wah a 220.4 214.2 eA 8 Rs Ugeeeeeee Peeie c aeee RR AS 1 355.9 380.2
AOD 35 ter eer) tae ee eee 222.9 231.3 T9195 8a late ene Spleeeaee Hee 378.4 371.6
LOLS iss eee eee 248.4 248.5. LODO Re Sie S Reach eos renee aie 442.9 429.6*
TODA es ee ee Boe ae ee 265.8 247.0 1921 SS Pe ee 472.2 406.8*
DOUG oe ea ee ee ee 281.1 258.9 1920) 6.5 eae 5dt.D 592.4
NOL G RIS eek Ses ras A ee 300.8 302.1 1923 SRI AE OE See (ey) 708.1*
Utilization.—Petroleum is used chiefly as a source of power, light,
and lubricants, and these are the uses that everyone knows. Crude pe-
troleum is used in decreasing quantities from year to year; and more and
more of. it is prepared for higher utilization by breaking it up into refined
products of greater value. The light-gravity ethereal products are em-
ployed as local anesthetics. The gasolines are the universal fuels of inter-
nal combustion engines. The naphthas are extensively used as solvents
and are blended with raw casing-head gasoline to make commercial gaso-
line. The kerosenes, though used chiefly for illumination, are employed
increasingly as fuel for farm tractors. The lubricating oils and greases
are indispensable to the operation of all kinds of machinery. The waxes
derived from petroleum of paraffin base are utilized in many forms—as
preservatives, as sources of illumination, and as constituents of surgical
dressings made for the treatment of burns. Petroleum coke, an almost
pure carbon, is used in metallurgy and in making battery carbons and
arc-light pencils. By-product fuel oils obtained from refining are used
for generating power by industrial plants, railroads, and ocean steamers.
Road oils lay the dust on streets and highways, and artificial asphalt, a
product of petroleum, has been used in some places for paving.+
*Exports of domestic crude oil are not included in the indicated consumption.
7 Page 17, “World Atlas of Commercial Geology,’ Part I, U. S. Geol. Survey, 1921
OILDOM: LIs TREASURES AND TRAGEDIES 95
There is a general agreement that lubrication is the most important
sand most irreplaceable application of all petroleum products. One is
justified, therefore, in placing this requirement at the head of an economic
priority list, as follows:
1. Lubrication 5. Gas manufacture 9. Merchant marine
2. Illumination 6. Gasoline manufacture 10. Locomotive firing
3. Chemical byproducts 7. Diesel engines 11. Steam-power plants
4, Automotive engines 8. Naval vessels 12. Heating buildings*
OUR NAVY NEEDS A LARGE RESERVE OF OIL
Naval vessels should be fueled and oiled ahead of the merchant marine, railways,
steam-power plants, and domestic heaters. The U. S. Navy plans to store 50,000,000
bbls. of oil at a cost of $103,000,000, payable in oil from naval reserves. (Wall St.
Journal, Nov. 1, 1923.)
MAKING THE IGLOO COM-
FORTABLE WITH KER-
OSENE
A truthful picture of what may
be seen along the Alaskan Coast
and on the banks of the lower
Yukon. The Eskimo’s brace has
displaced his bone drill and the
rifle his harpoon. (Standard Oil
Bulletin, 1917.)
*Abstracted from article by R. S. McBride in Hngineering and Mining Journal,
Oct. 30, 1920. Pogue says, in his “Economics of Petroleum,”’ page 348: In addition
to the fact that millions of barrels of potential lubricating oils are burned annually
in the form of fuel oil, the application of lubricating oils is in many instances far from
scientific. Losses arising from faulty or imperfect lubrication run from 10 to 50 per
cent of the power consumed. . . . The life of lubricants has been lessened through
crank-ease dilution.
6 OILDOM: ITS TREASURES AND TRAGEDIES
AN OIL-BURNING LOCOMOTIVE IN SOUTHERN CALIFORNIA
About 36 years ago oil was thus used for the first time, being introduced on
California railways by Messrs. Hardison and Stewart when crude oil cost $2.50 a
barrel and coal $22.00. (Union Oil Co. Bull., Oct., 1922.) American railways now
burn 27 per cent of the coal and 8 per cent of the oil produced in the United
States. It would be an economic crime for them to consume more fuel oil where
coal is available.
ARTIFICIAL AND NATIVE ASPHALTS ARE USED IN ROAD-BUILDING
The former represents the residuum in refining oils with asphalt base; the
latter comes chiefly from Trinidad and California... Imported Mexican petroleum
is the source of 60. per cent of our refinery asphalts. (Standard Oil Bulletin.)
OILDOM: ITS TREASURES AND TRAGEDIES 97
What we need now is better and not faster utilization of petroleum.
It is greatly to be regretted that in some parts of our country, particu-
larly in the Southwest, from Texas to California, the last three uses above
enumerated prevail to the almost entire exclusion of coal. The growing
use of fuel oil for heating buildings in the East is directly due to the
recent labor troubles in the anthracite industry. The principal railroads
of the United States consumed practically 45 million barrels of fuel oil
in 1922, an increase of 4 million barrels in one year. Steam-power and
other plants producing electric power utilized in 1922 13.2 million bar-
rels of fuel oil besides 27,172 million cubic feet of natural gas. There
is absolutely no excuse for burning unrefined oil when fuel oil may be
obtained at 60 per cent of the price of the crude according to 1922 con-
tracts of the Santa Fe and other railway companies that buy liquid fuel
from the Mid-Continent refineries. It is interesting to note that 440
million barrels, or ten times the present rate of consumption, would be
required by the railways if all our locomotives burned oil. During 1922
-about 52 million barrels of fuel oil were delivered for ships’ bunkers at
ports and insular possessions of the United States, an increase of 9 mil-
lions or nearly 21 per cent in one year. The U.S. Navy took 5.8 million
barrels, making a total of 57.8 million barrels, for marine and naval pur-
poses. Of this total 60 per cent was of Mexican origin,
COAL VERSUS OIL
Coal the Chief Rival of Petroleum. The coal and petroleum indus-
tries are closely interrelated. Coal and petroleum are largely interchange-
able as sources of energy. Both can be used in their crude state for fuel
under boilers, although crude oil is the more efficient; both provide an
iluminating oil for use in lamps, although kerosene is so much better
than coal oil as to have driven it out of the market; both furnish a satis-
factory fuel for the internal-combustion engine, although benzol, a coal
derivative, has not yet been recovered in sufficient quantities to make it
a competitor of gasoline; both provide a fuel gas, although that derived
Steaming Storage Evaporation Heat Value Freight
- Deterioration
Labor Boiler Capacity and Ash Combustion Efficiency
a
BOILER EFFICIENCY
COAL 74%
GRAPHIC COMPARISON OF THE EFFICIENCY OF COAL AND
OIL AS FUEL; AFTER TIDE WATER OIL CO.*
* Reprinted by permission from Pogue’s ‘“‘Economics of Petroleum,” published by
John Wiley and Sons, Inc.
98 OILDOM: ITS TREASURES AND TRAGEDIES
from petroleum has the greater heat value. Ton for ton, petroleum has
every advantage over coal, and there is every reason why it should drive
coal out of its present preeminent position in industry, except one—the
limitations of the supply. Not only in terms of money, but in terms of
human effort and life, is the liquid fuel far cheaper to produce.* As a
matter of fact, however, petroleum cannot be expected radically to dis-
place coal in industry and transportation, since a crude petroleum produc-
tion of about 3,000 million barrels a year would be required to drive coal
from its ascendency.+ That quantity is four times the enormous yield
from all the 300,000 live oil wells in the United States during the year
1923.
HOUSEHOLD HEAT-
ING WITH OIL
Low-priced Kerosene
or furnace (not fuel)
oil is used in this par-
ticular type of oil
‘burner. At 10 cents a
gallon, 120 gallons cost
less than the equiv-
alent ton of coal at $16.
Moreover, an oil burner
is without smell, smoke,
dust and ashes; _ it
heats evenly without
attention; but it costs
from $200 to $3850 in-
cluding installation.¢
Three things distin-
guish the domestic from
the commercial type of
Te Saal) Pine burner ; Automatic start
\-Throttle Valve = Trees and stop; automatic ig-
2-Regulator or Needle Valve nition, and safety de-
3-Trip Bucket vices for stopping the
4: Trip Bucket Valve feed if ignition fails.
5 Overflow Pipe
Displacement of Coal During 1923. As a result largely of labor
troubles in the coal fields of Missouri, Kansas, Arkansas and Oklahoma,
and of over-production in the oil fields west of the Mississippi, almost
10,000,000 tons of coal were displaced by oil or gas in the mid-continent
region alone during the year just ended. More than a million tons was
displaced by oil in public utilities alone in the four States named. In
Kansas City half a million tons is now eliminated by gas, which also has
displaced 11% million tons in Arkansas and Texas. High costs and un-
certainty of supplies have induced these railways to change from coal to
oil: the Rock Island, the ’Frisco, the Cotton Belt, the M.-K.-T., the Santa
Fe and the Missouri Pacific.||
*“The Coming of Coal,’ p. 88. This excellent book of 1138 pages was prepared by
Robert W. Bruere for the Educational Committee of the Commission on the Church
and Social Service of the Federal Council of the Churches of Christ in America,
Association Press, 347 Madison Ave., New-York.
+ Pogue’s “Economics of Petroleum,” p. 330.
+ (Quinn burner) Better Honies Equipment Co., Baitimore and Washington. An-
other type has been designed by EH. B. Ericksen, 142 Clifton Place, Brooklyn.
|| In the San Francisco Chronicle, Aug. 30, 1928, G. E. Laughery, financial editor,
wrote that New England has altogether (in very recent years) supplanted 25,000,000
tons of coal annually with oil. Read ‘‘Hastening the Downfall of King Coal’ in the
Literary Digest, Sept. 8, 1923. According to The Oil Weekly, Dec. 22, 1923, the con-
version of the Tex.-Okla. division of the Rock Island alone will require % of a million
barrels of oil yearly.
OILDOM: ITS TREASURES AND TRAGEDIES 99
Heating Buildings. Although this use is the last to be recommended
according to the priority list on a preceding page, the tendency of 1922
has continued throughout 1923 in the way of introducing oil burners for
the heating of buildings. Notwithstanding the approval of insurance com-
panies, the New York city authorities have discouraged, however, ihe
storage of as much as 50 gallons of distillates, such as low grade kerosene,
in the basements where coal furnaces have been converted to oil burning.
Such objection will no doubt be overcome by using heavier or less volatile
fuel oil. No prejudice exists for instance in Kansas City where more than
15,000 oil burners have been installed in apartments and residences.*
AMALGAMATING COAL AND OIL
BENEFITS THE OIL BUSINESS
Advantages to the oil industry of the
processing of oil combined with coal: (1)
Heavy cheap oils, on account of their high
pitch content, become more useful for mak-
ing coke than the light expensive oils; (2)
the residues after distilling light oils can
be more efficiently utilized for making mix-
tures for the production of gas, motor fuel,
and coke, than for direct combustion. A
ton of oil will collect all the combustible
from 5 tons of low-grade coal and. make
5 tons of concentrated solid fuel.—Millions
of tons of oils with too much associated
water exist in many oil fields and are sal-
able only to combine with coal (Walter E.
Trent’s “The Fuel Problem of the United
States,” in the National Magazine, Nov.
£923)2
The Trent process consists in stirring to-
gether water, oil and powdered coal. This
yields a partly de-ashed* plastic fuel, called
an amalgam, the oil selecting the coal parti-
cles and largely excluding the water and
ash. The amalgam is mechanically freed
from water in the same way that butter is
worked. It can be fed to the furnace by
shoveling or by forcing through pipes; and
if desired, it can be safely stored under
water. (O. F. Hood, chief mech. engr.,
Bureau of Mines, “The Use of Oil in Clean-
ing Coal,’ Chemical and Metallurgical En-
gineering, Aug. 3, 1921).
Co-operation of the Coal and Oil Industries. Both profit and
popularity will come to the producers of coal and of oil alike if the waste
material of the one and the salt-water and oil emulsions of the other can
be cleansed and combined to form marketable products that can be sold
for domestic purposes in particular at prices noticeably lower than those of
anthracite or of the superior grades of bituminous coals. Even better
would it be if coke instead of raw coal and unrefined oj] were used in this
*The two preceding paragraphs are based mostly on data r
defunct U. S. Coal Commission. In The Saturday Movaiad Post, Ort. 14 1922) wo
W. Parsons wrote as follows on the subject of “Coal Remedies” : Oil for heatin
homes, factories and other buildings is not in the experimental stage, for some of the
great sky-scrapers, hospitals and department stores, as well as homes in New York and
other cities, have long ago gone over to an oil diet and dispensed with their coal bins
The. Oil and Gas Journal, August 23, 1923, stated that the Saving to the Ritz-Carlt n
Hotel during six months after conversion amounted to $25,490: and that the New Y st
prices at. the middle of 1923 ranged from 4% cents a gallon for heavy Mexican oil tor
use in big buildings, to 9 or 10 cents a gallon for refi i ; ;
smaller furnaces, . refined (burning) oils for use in
100 OILDOM: ITS TREASURES AND TRAGEDIES
way, for then the dyes, the benzol, the ammonia, and the gas for cooking
would not be lost. It looks now as if solutions to their conservation and
cost problems have been worked out to apply on a commercial scale. .One
of the practical solutions is illustrated herewith.*
WASTE, CONSERVATION, AND MONOPOLIES
Tragic Waste of Petroleum. The heaviest losses of the natural re-
sources are sustained underground as a result of the destructive competi-
tive drilling and the ineffective methods of production. But the losses
due to inadequate methods of handling the product upon reaching the
surface are far more sensational because they can be seen. Surface ©
losses are greatest in new fields and arise from forcing production before
handling and storing facilities are ready. Thus some of the oil escapes
eapture, sinking into the soil or flowing down streams; great quantities
of the more valuable parts evaporate into the air;+ while fires are blamed
ECONOMIC TRAGEDY ECONOMIC TREASURE
A great deal of good gas was wasted when a'well of the Union Oil Co.
of Calif. blew up at Santa Fe Springs in 1923. Note the material built up
around this gas crater. In many fields away from population centers natural.
gas escapes into the air. In some places it is made the source of carbon black,
as in the great Monroe gas field, Louisiana. In the view at the right appears -
part of a plant at Santa Fe Springs for extracting the gasoline content before
the. gas is burned. (See following chapter and Mining and Oil Bulletin, Dec.,
1922.)
for wastes unmeasurable but immense. Also, enormous volumes of nat-
ural gas accompanying the oil are allowed to escape in the absence of an
adequate demand for this product.
Losses of oil occur not only in producing but in storing, transporting
and refining the raw product. In some cases 20 per cent of the gasoline
content evaporates in storage. Despite the high efficiency of pipe-line
transport it is estimated that 2 per cent.of the oil is lost in trunk and
gathering lines through leakage and evaporation. Tank cars not insulated
* Another solution may be the one described by Lindon W. Bates i ion
Petroleum News, August 16, 1922. v AS aes peli
“On page 63 appears a comparison of the coal:and oil industries as to total value
ae vee ee re vA peel Geitae the aioe: study’ of coal and oil will be the
subjeet of a iorthcoming book under the major authorship of President Fra :
McVey of the University of Kentucky. : aoe
pas The Bureau of Mines states that the entirely preventive losses in the evaporatien
% tg ar from cee Posner on the time it leaves the wells until it arrives
at .tne refineries totals. yearly more than 300 million gallons, or enough to su
1,250,000 autos at 250 gallons a year. % sae
OILDOM: ITS TREASURES AND TRAGEDIES 101
lose gasoline in summer time at the rate of 1 per cent per day. Of the
customary 4 per cent waste in refining about half, in the form of gasoline
vapor, could be saved. The greatest waste above ground, however, takes
place in the utilization of gasoline, fuel oil and lubricants. Thirty per
cent of the heat units in the gasoline goes into the exhaust of the average
automobile (see Chapter VII). According to the Bureau of Mines,*
25 per cent of the fuel oil consumed for steam-raising is wasted through
improper operation of plant. The most criminal economic waste, next to
the underground losses, lies in allowing any oil with a lubricating element
to be burned before refining.
Conservation. If the sub-surface products of the earth’s development
through vast periods of time should be exhausted, whether by waste or
by use, civilization would fall back upon material bases little better than
mankind had in the Stone Age.t It cannot be pointed out too often that
while in a century the unequalled growth in the industrial and transport
demands of our country has resulted in the exhaustion of hardly 1 per
cent of its coal resources, in the 64 years since the Drake well was drilled
RIGHT and WRONG USE of NATURAL GAS
Bureau of Standards, Department of Commerce, Washington, D.C
WHILE OUR LIQUID FUEL
SUPPLY IS MORE LIMITED
THAN COAL, NATURAL GAS
IS MUCH LESS ABUNDANT
AND SHOULD BE _ CON-
SERVED
This shows a practical demon-
stration of the Bureau of Stand-
ards in saving this fluid. See
also Natural Gas Manual for the
Home, Tech. Paper 325, Bureau
of Mines, 1922. Price 10 cents.
Sold by the Supt. of Documents,
Washington, D. C.
WRONG CORRECT
Odors — Porsonous Fumes —Woste of Gzs Good Service with Lew Pressures
ld Best Mets tea 2 EAL
apparently 40 per cent of the available oil has been brought to the surface
and consumed; and the rate of America’s development is still accelera-
ting.t “Yet with all the optimism that can be justified I would urge a
policy of saving as to petroleum that should be rigid in the extreme. If
we are long to enjoy the benefits of the petroleum age, which we must
frankly admit fits into the comfort-loving and the speed-loving side of
the American nature, we must save the oil. We must save it before it
leaves the well; keep it from being lost, keep it from being flooded out,
driven away be water. * * * We must save the oil after it leaves the well,
save it from draining off and sinking into the soil, save it from leaking
away at pipe joints, save it from the wastes of imperfect storage!”
*J. M. Wadsworth’s “Efficiency in the Use of Fuel Oil, ” October, 1918.
j Editorial in Texaco Star, April, 1914.
¢ George Otis Smith in Mining and Oil Bulletin, Los Angeles, January, 1920.
|| Franklin K, Lane in “Conservation through Engineering,” Bulletin (1 eS
Geological Survey, 1920.
102 OILDOM: ITS TREASURES AND TRAGEDIES
The late Secretary Lane’s earnest appeal seemed well on the way
to be answered favorably by the established operators until two years
ago when a legion of interlopers began an orgy of wildcatting and over-
production that in the end will benefit nobody and in the meantime has
crippled the spirit of conservation. In no other branch of the American
mineral industry is a policy of conservation so imperative as in petroleum,
more treasured than gold! How, then, may the life of this golden liquid
be prolonged for posterity? Space here permits mere mention of some
practical steps that may be taken:
(1) Reduce the number of unnecessary automobiles; (2) stop over-
development—by pooling of interests, otherwise by legal restriction; (3)
refuse to sell oil for utilization without refining it; (4) store oil under-
ground through cooperation of producers, thus avoiding vast loss through
leakage and evaporation; (5) develop substitutes for part of the gasoline
used as motor fuel, the growing demands for which has set the galloping
pace for crude oil production; (6) in order to fill prior demands for Diesel
engines, naval vessels, and the merchant marine; develop hydro-electric
power*, and failing that fall back on coal if it is available and not too
costly, even in the oil fields themselves or wherever liquid fuel is lavishly
burned for power purposes; (7) adopt priority rules to get higher
utilization of petroleum, and in connection therewith favor the use of
coal and its products wherever these will serve the same purpose; (8)
increase the recovery of the natural resource by artificial methods already
mentioned, and in abandoned shallow fields begin the mining of oil sands
as soon as the prices of crude oil justify such a step; (9) discourage the
cracking process wherever applied to crude oil having a lubricating com-
ponent, for the increased gasoline recovery is gained at the expense of
the latter, for which there is now no sufficient substitute; (10) educate
the consumers not to waste any petroleum product that can be used over
again, such as lubricating oilt even if it is temporarily contaminated or
diluted; and (11) encourage our nationals in their discovery and develop
ment of foreign fields. .
Monopolies. Since the dissolution of the Standard Oil trust in 1911,
there cannot be said to exist any general or lateral monopoly in the
American oil business such as is found in Dutch East India and other
foreign regions.t The growth of the so-called independents, the oldest
important ones of which began work with the Beaumont discovery by
Captain Lucas in 1901, has been so rapid as to prevent any extensive or
geographic control of crude oil production. What practical monopolies
*The best course for the power industry is the use of natural water-power sources,
as far as practical, for the purpose of saving human energy, coal, oil and other re-
sources. Electric power is an aid to the production of raw material, to transportation,
manufacture and utilization of the products of industry. Frank G. Baum of San
Francisco quoted in the New York Tribune, September, 1923. The building of the
Glen Canyon dam at Lee’s Ferry on the Colorado will result in the reduction in fuel
oil ae ee of about 90 million barrels yearly. Scientific American, April, 1922,
page “
tRead “The Regeneration of Used Lubricating Oil,” Scientific American Monthly,
March, 1920, page 196.
tIt is apparent, from the vagaries of its price performances this year, especially
in the crude oil section, that the industry lacks even the control essential to stabiliza-
tion. How otherwise can one account for such events as the advancing of crude oil
prices in the early days of 1923, when production was running wild; stocks were
already of enormous proportions, and consumption was at its lowest ebb ?—Hditorial,
Oil, Paint &€ Drug Reporter, May 28, 1923.
OILDOM: ITS TREASURES AND TRAGEDIES 103
are known to exist are of two kinds: (1) Local or regional in regard to
pipe-line transportation; and (2) natural or vertical in so far as one organ-
ization may control all the related economic functions of production,
transportation, refining and distribution and thus permit its products to
stay in its own hands all the way from the well to the market.*
The decline in control of the refining industry is evidenced in a brief
submitted to the Federal Trade Commission by R. L. Welch, secretary
of the American Petroleum Institute, who declared that the ‘‘Standard”’
group in 1911 refined 80 per cent of the gasoline produced in the United
States; in 1915, 60 per cent; and in 1919, only 49 per cent. From the
table below it appears that this group, at the close of May, 1923, was
refining only 45 per cent and was producing only 25 per cent of the crude
oil of the United States.
PARTICIPATION OF THE STANDARD OIL GROUP IN THE
AMERICAN PETROLEUM INDUSTRY ABOUT THE
MIDDLE OF 1923+
Per Cent Stocks at the close of May 31, 1923:
€ride oil produceds_=— 2 25 Per Cent
@rideaa trenned a te 45 Crude oil, 164.7 million bbls.___---- 58.5
PerWretimen ie. no es eke oe 40 Gasoline, 648.3 million gals.___----~- 75.7
DOMestiCemMarkets22 2.25 2. Ss 5d Kerosene, 729.5 million gals._____-_-~ 72.0
Tie a hy Co ca ae ee eee 75 Gas & fuel oil, 736.6 million gals.___~ 55.7
Pipewiue ownersnip. oul = 2 60 FAUPICHHCN Be eee ee Soe Sek (f
As a result of the recent findings of the Senate oil investigation com-
mittee, eight recommendations were made to curb the alleged evils: (1)
Establishing a uniform system of accounting * * * so that the reason-
ableness of prices for petroleum products can be found on a cost basis;
(2) starting a compulsory system of reports to the government showing
the operations of each oil company engaged in interstate commerce; (3)
making pipe lines real ‘common carriers” through divorcing their owner-
ship from the oil transported, etc.; (4) revising (railway?) freight rates
on products so Mid-Continent refiners may again market their output
through Michigan, Indiana, Ohio, Pennsylvania and the New England
states; (5) prohibiting or regulating the exportation of petroleum and
its products for which there is pressing demand in the United States;
(6) starting grand jury proceedings wherever price manipulation is at-
tempted; (7) investigating “implied” or expressed agreements to fix prices
arbitrarily or to restrain trade, and, if warranted, citing parties to the
agreement for contempt of court; and (8) inquiring into all claims for
*In a fundamental economic sense the petroleum industry is highly integrated—
an activity expected from a purely physical standpoint to function with maximum
efficiency as a natural monopoly. The tendency toward financial unity in keeping
with the underlying economic structure was effectively shown during the earlier
decades of the development culminating in a country-wide organization, the Standard
Oil Co. of N. J.—Pogue’s ‘‘Economics of P.,” page 3.
7 According to The Financial World, published by the Guenther Publishing Co.,
53 Park Place, New York, N. Y., who early each year issue a very good review of the
oil industry in pamphlet form for $1.00.
4 In 1921 the Royal Dutch-Shell group had almost 33 per cent of the crude production
in all countries other than the United States.. This control included practically all the
yield in Venezuela, Egypt, and British Borneo, 97 per cent in Dutch East India, 29 per
cent in Rumania, and over 26 per cent in Mexico, while the proportion obtained in
Trinidad was about 16 per cent.—Foreign Ownership in the Petroleum Industry”,
U. S. Federal Trade Commission, Febr. 12, 1923, page 17.
104 OILDOM: ITS TREASURES AND TRAGEDIES
basic patents on pressure still processes used in the production of
gasoline.
According to the Financial Review of August 12, 1923, the particularly
novel evidence brought forth by the La Follette examination was that
refiners evidently think they are justified in shouldering all their expense
upon gasoline production alone. The head of. the American Petroleum
Institute has put himself on record that refiners as a whole have operated
at a loss since 1920.
Such disclosures are sharpening the public taste for mining rather
than for oil shares. The Standard Daily Trade Service of March 12, 1928,
says: It will be the wasting away of natural resources rather than “manip-
ulation” that will slowly carry prices up to a point endangering the pros-
perity both of the petroleum and the automotive industries.
It must be admitted, despite minor disadvantages,-that mergers and
monopolies as a rule make for conservation and make it possible not only
to reduce costs of production, refining and marketing, but also to stabilize
prices even if these are not materially lowered at any one time. It is
decidedly better for the ultimate consumer to pay a fair and fixed price
for gasoline and other petroleum products than to be subjected to the
uncertainties of sudden fluctuations. Abnormal price depressions, such as
the one experienced in 19238, cannot but encourage continued waste of a
fuel supply that is far more limited than even anthracite.
REVIEW OF TRAGIC ’23
The Statistical Story. Two outstanding economic events were the
gasoline war with its disastrous effects and the attainment of the peak or
high point in production on the part of so many large pools within one
calendar year. It is beyond belief that the true prosperity of the American
oil industry will ever be threatened by the recurrence of two such related
events. Practically all past achievements in petroleum were set aside in 1923.
Following are the rounded figures for the more important records reached
in the year just closed compared with those of 1922, itself a year of eco-
nomic eclipses:
Point of Comparison 1922 1923 % Incr:
No. of fields surpassing 100,000 bbls. daily (peak) -___- 1 Sor 00
Rotal numbers of cackiveollecw ells ee eee eee 285,000 300,000 5.3
Avetage. daily yield per--wellj bbls.c-2-. 2. -ssee 2525 2 5.3 6.7 25
Million Bbls. :
Average: daily=vield. of all wells22.22 2S ety 2 31
Total production of all wells —__-_-~_ ae 557.5 735 Sie
Total imports (nearly all Mexican crude) ~ (decrease) — UPA GS 80 (37)-
Tetal new.supply..of-allcrudé-oils 22 = SS ee 684.8 S1O> aslo.
Tank-farm and pipe-line stocks, January 1_---.---_-~ 191 265 38.7
Total old and new supplies for Vea Tse a eee oe 875.8 1,075 22.8
Exports (838 to 85 ee ay ere Vad tire reo beer oe 68 94 38
A t nsum n (after allowin or change in
aaa Ra eeavertee So Righetti Bir i) oh Mapes 592.4 . 08 19.5
Per capita consumption of crude__---------~---------- 5.4 6.3 14
APPROXIMATE STATUS OF STOCKS IN THE UNITED STATES AS
OF JANUARY 1, 1924.
Nature of Stock Million Bbls. Nature of Stock Million Bbls.
Gasoline. 20 3 20s pret 2 es ee DIB: Crude oil, all except on leases-__ 350
AC retined :ols = ee [5 ? Totaleot allt oles ea aes 460 ?
Semi-retined sols so ee 35 ?
OILDOM: ITS TREASURES AND TRAGEDIES 105
As shown in the following chapter, gasoline stocks attained the tre-
mendous peak of 31,800,000 barrels on April 30, 1923. Production reached
its peak or “top-notch” in July with a daily yield of 2,300,000 barrels. It
is to be noted that these are maxima, not for 1923 alone, but for the entire
life of the American petroleum industry. The most popular change was
the drop in prices;* in regard to gasoline probably 30 to 85 per cent on
the average and fully 50 per cent in extreme cases where the gasoline
“war” was carried on. On the other hand, costs to a majority of the pro-
ducers must have climbed, although they fell in a few places where the
average daily yield per well ran into hundreds of barrels, as at Long
Beach and Santa Fe Springs near Los Angeles. But even here the costs
went up as the wells went down; and now, as fast as the newer and deeper
wells cease to flow and are put on the pump, the lifting charges will take
a jump. Data on well depths are not complete, but it may be safely said
that the weighted average depth of production in the United States is
now not less than 3,000 feet compared with an estimated average of 2,800
feet for 1922. +
A Tragic Time in Oildom. To the ultimate consumers of petroleum
products, motorists in particular, the major part of 1923 apparently teemed
with treasure, for at one time they were able to get gasoline for as little
as 6 or 7 cents a gallon in Los Angeles. Also, to these and others outside
of the producing industry who observed the feverish drilling, the increasing
output, the stampede to build storage and to rush the oil away from the
flowing wells by pipe line, rail and sail, the industry may have seemed
supremely prosperous. But to many inexperienced interlopers, to the great
majority of established producers, and to some refiners and marketers,
the year will long be remembered as truly tragic in a financial. way be-
cause of price-cutting, high cost of storage construction, clogging of trans-
port lines on land, ete. Tragedies, furthermore, took form in fires and
explosions causing loss of life and liquid, in local ruination of underground
resources, and in waste of labor and capital through wrong wild catting.t
Lessons To Be Learned. Since it applies with equal force today, a
summary published over three years ago by H. G. James in The Oil and
Gas Journal is reproduced here for the information of sincere American
citizens.
“If the agitation of the past months results in teaching the gasoline
consumer economy, stops him in his mad career of money spending in joy
rides, etc.; if it points the refiner his way to greater conservation of the
*The “Commerce Yearbook” of the United States Department of Commerce (60
cents, Supt. of Documents), gives average prices of crude and refined petroleum from
1913 to April, 1923, in connection with an 18-page review of the oil industry in 1922.
+ The record for extreme depth of a single producer is held by the General Pe-
troleum Co.’s Clock No. 1, at Long Beach, 5,959 feet, finished in 1923. About 10 miles
away, in the Torrance-Redondo field, a world record for rapid drilling was made late
in. November. In the Black Diamond No. 1 well, 662 feet of hole were made and
560 feet of 151%4-inch casing were set during 16 hours working time, according to
The Oil and Gas Journal, December 6, 1923. ‘The great geographic changes in the
oil industry will be taken up in Chapter VIII; the financial events in Chapter XII.
+ “Oil Industry Sick, in Danger of Price Rise,” Washington Herald, Nov. 27, 19238,
in which BE. J. Clapp quotes Pres. W. 8S. Farish of the Humble Oil Co.: ‘‘Marking up
the price too soon would set the wildcatters loose again in areas where we know
there is oil and production would swamp us again.’
Several factors contributed to the finding and rapid developing to maximum yield*
of so many large pools during the past thirty months resulting in unprecedented over-
106 OILDOM: ITS TREASURES AND TRAGEDIES
raw materials with which he has to work, and prompts him to find ways and
means of lengthening out the supply, through more efficient distillation and
smaller losses one way and another; if it forces the automobile manufac-
turer to study more carefully the principle of carburation; if it brings
greater degree of sanity among the people; if it stirs the Government
to a more practical and patriotic defense of a great industry; if it brings
cohesion among petroleum organizations; if it results in a cessation of un-
reliable and unintelligent information concerning the industry to the public;
if it secures the merging of the various departments and bureaus handling
oil matters at Washington into one comprehensive and well directed board,
then shall we have cause to congratulate ourselves over what has been
done.
“One thing more than anything else is needed * * * and that is
not only complete statistics, but a comprehensive interpretation of the
same. One of the difficulties today is not so much the meagerness of oil
statistics sent out from Washington as the unfortunate interpretation of
the same. But there is no cause for discouragement or fear. The oil in-
dustry is progressing and, broadly viewed, is in better condition today than
it has ever been before. It must be borne in mind that from Drake to this
day it has been peculiar of oil that it has always been on the verge of
disaster from either over-production or over-consumpticn, yet its course
has always been forward to bigger and better things.”
production: (1) Wider application of geology, (2) use of (diamond) core drills, (3)
deeper and faster drilling with rotaries, (4) improvements in tools and equipment,
(5) employment of production engineers, and (6) use of trucks and even tractors.
An Associated Press dispatch in the Washington Star, December 31, 1923, quotes
W. C. Teagle, president of the Standard, of New Jersey, to the effect that no other
industry holds quite the uncertainty that the vil business does, since no one can
foretell for any long period ahead the course of petroleum production. ‘‘Throughout
1923 the volume of business has been good, but much of it at prices that allowed no
profit to the producer, refiner or marketer, unless the latter happened to be a jobber
with no liabilities either as a producer of crude or as a refiner * * * With further
gains in consumption (following the late drop in production) it looks right now as
though the country should begin consuming more petroleum than it produces around —
the middle of 1924.’’
A recent estimate appearing in the Wall Street Journal places the total retail value
of petroleum products, inclusive of the crude directly consumed, at. $5,000,000,000
compared with a wholesale value of farm crops of $8,323,000,000 for the year 19253.
The retail value of farm products was likely not less than $15,000,000,000.
The past year proved tragical, as usual, to many victims of oil-stock frauds; but
it also developed a Nemesis in Postmaster General New and another in Attorney Gen-
eral Daugherty, who, cooperating with Texas authorities and the National Vigilance
Committee of the Associated Advertising Clubs of the World have terminated the
-activities of certain “‘worth’’ less swindlers and thus partly removed unjust reflections
on a respectable though leaderless industry (see Chapter XIII, in part two).
CHAPTER VII. GASOLINE AND THE AUTOMOTIVE
INDUSTRY
These two subjects are treated together in one chapter because (1) the
existence of a suitable fuel was the great incentive to the application of in-
ternal combustion engines to the moving of horseless vehicles, and (2) nearly
90 per cent of the gasoline produced is at present consumed by autos, trucks
and tractors.
GASOLINE OR MOTOR FUEL*
What Gasoline Is. It is not a single hydrocarbon (i. e., a compound of
the elements carbon and hydrogen), but a. mixture of very many different
hydrocarbons, some of similar and some of different boiling points; therefore,
gasoline will not boil at one temperature but within a long range of tempera-
tures. Thus a commercial gasoline which meets the Bureau of Mines speci-
fications, will begin to boil at about 140° F., while the heaviest parts of it
will not boil much below 437° F. The main point is that a good commercial
gasoline should have a uniform range of boiling points from the lowest to the
highest, and this and not the gravity should be the criterion of quality.~ In
the early days of refining, when kerosene was the chief product and was
priced higher than gasoline, the distilling operations were so regulated that
the “naphtha distillate,” now practically all used for the manufacture of
gasoline, was then included in the kerosene fraction with respect to the
higher boiling fractions of what is now called gasoline.
Three Sources of Gasoline. The big bulk of this light liquid comes
from refineries using the so-called straight run process. Probably 85 per
cent of all the 147.6 million barrels of refinery gasoline -produced in 1922
was obtained in this way, the cracking processes having been the source of
the rest. According to Messrs. Dean and Jacobs, cracking has now become
a factor of decided commercial importance, the daily production from Bur-
ton stills having been about 2 million gallons during 1921. The processes of
cracking to increase the yield of gasoline came into use in the course of
a decade as a result of the extraordinary demand for motor fuel; but their
use entails a sacrifice of other products. In 55 Mid-Continent independent
refining plants there are no less than 20 different types of the process in
use besides the many more on the market.||
* The term ‘‘Gasoline”’ is used rather loosely in the commercial world. In England
it is called petrol, in Germany benzin, elsewhere in Europe essence, and in some British
colonies motor spirits.
j In the early days the gravity range was only 6°, from 66° to 72° Baumé (Page
175, “Mexican Petroleum” by W. J. Archer) ; now the range is nearly 20° if not greater.
See page 77, “The Texas Company, Its Facilities and Products,’’ by The Texas Co., 17
Battery Place, New York.
t Bureau of Mines’ Technical paper 258, Production of gasoline by cracking
heavier oils,’ 1921.
|| The Lamp, May, 1923.
The Oil Trade Journal, Sept., 1922, describes the McAfee process of the Gulf
Refining Co. which employs aluminum -chloride as a catalyzer at temperatures of 500°
to 600° for converting high boiling petroleums into gasoline, etc., with a recovery of
80 to 85 per cent.
(107)
108 OILDOM: ITS TREASURES AND TRAGEDIES
SKIMMING PLANT INTERMEDIATE COMPLETE REFINERY COMPLETE REFINERY COMPLETE REFINERY TOPPING PLANT
REFINERY
MID-CONTINENT CRUDE FIRE DISTILLATION STEAM DISTILLATION GTEAM DISTILLATION STEAM DISTILLATION CALIF. CRUDE
MID-CONTINENT CRUDE PENN. CRUDE MID-CONTINENT CRUDE GULF COAST CRUDE
el
&
(Fa)
Baan
28cCo%
Sins
‘ at
ayawe
SWAIN
YO OY
‘Aa22
r
Leo2L0LCn
\ SSS = erat
3
CRUDE OILS YIELD UNEQUAL QUANTITIES OF GASOLINE
That is why a ratio between the price of gasoline and the price of crude
cannot be fixed.
This chart also shows that the lubricant element is lost if present in
crude oil run through skimming and topping plants; and why .Pennsylvania
crude commands the highest price. (Reprinted from Pogue’s ‘‘Economics of
Petroleum,”’ by permission of John Wiley and Sons, Inc.)
—The Bessemer Gas Engine Co., Grove City, Pa.
PLANT FOR RECOVERING GASOLINE FROM CASING-HHAD GAS
_ Located at Lamberton, Ark., and owned by Koppers Co., a Mellon subsidiary ;
daily capacity, 7,500 gals. raw gasoline. Note the derrick over the well, the absorp-
tion tower nearby, and the condenser at the extreme left. Unlike oil refineries, plants
for recovering gasoline from natural gas are placed not far from the oil and gas
wells that supply the fluid.
OILDOM: ITS TREASURES AND TRAGEDIES 109
' Natural gas, or so-called casing-head gas of oil wells, is the third
source of gasoline. The liquid, formerly lost, is recovered very largely in
two ways: (1) By compression (and cooling) of very “wet” or rich gas,
this being the first method used; and (2) by absorption with the help of
oils cut usually between heavy kerosene and light lubricating oil, although
by enriching naptha as the absorbent the latter may be marketed directly as
gasoline. It pays to use the second method even if the yield of gasoline is as
low as 0.2 gallons per 1,000 cu. ft.; but not the first, at least in the Mid-
Continent field, if the yield is less than 1 to 1% gallons. Some gas there
contains as much as 23, gallons per 1,000 cu. ft.* Since 1910 the casing-head
gasoline industry has added materially to the supply of motor fuel. In
1911 the 176 plants produced only 277,000 bbls.; in 1921 the 1,056 plants
produced about 10,700,000 bbls. from 480,000,000 M cubic feet of gas. The
estimated yield in 1922 was 506,000,000 gallons or about 12,000,000 bbls.
worth $72,700,000. There are seven times as many compression as absorp-
tion plants, but they produce hardly one-fourth as much gasoline as the lat-
ter. This conservation (i. e., utilization) of a natural resource once wantonly
wasted now doubly helps the motoring public: (1) By blending natural gaso-
line with the refinery product, in quantities up to 15 per cent, an increased
extraction of “straight-run” gasoline is made possible (through raising the
end-point, that is, distilling with it some of the heavier liquids, or fractions
having higher boiling points, such as part of the old-time kerosene) ; and
(2) by making a much better product from a standpoint of motor efficiency
whether in regard to power, mileage, volatility or carbon.+
REMARKABLE GROWTH OF THE GASOLINE INDUSTRY.
Production. The following table shows the rapid increase in output
and in exports expressed in millions of barrels of 42 gallons each:
Year Yield Exports Year Yield Exports
A) ee ee ees Se Oe Tk 6.3 0.6 AS Wo lbs pea sie. ie Se cea = he Ser be 94.2 9.0
LUNN Se SEAS ae hy pape eerie ee 12:3 1.6 pW P48 eaten oly a ba ge. Seren eed 115.8 15.0
CRO it > ee a a ee 34.9 5.0 SSN PTS ea a ae tPA 6 IDyre
ARS Wass Renee ae. a er 41.6 6.5 gS pa) © Aa Eg aie g Gr, See Be 147.6 1330
The yield of gasoline during 1923 approximates 180 million barrels.
The exports are proceeding at a rate of about 9 per cent of the yield.
This tremendous growth, about 2,200 per cent in 18 years, 1904-22, has
been attained: (1) By discovering new pools; (2) by introducing the casing-
head gasoline industry, (3) by applying the cracking processes and im-
* Extraction of Gasoline from Gas, Chap. XIX, ‘The Business of Oil Production,”
Johnson-Huntley-Somers, pub. 1922 by John Wiley & Sons, Inc., New York. Leslie, in
“Motor Fuels” says it pays to use the absorption process if the gasoline yield is 0.1
to 1.0 gallon per 1,000 cu. ft. In (3) the adsorption process, solids are used, such as
charcoal and Silica-gel molecularly and not mechanically to take up the gasoline
temporarily. According to F. P. Peterson,** who has been identified with the business
since its inception, commercial development started near Kinzua, Pa., where a small
plant was built by John L. Gray in the years 1907-1910, closely followed by work at
Sisterville, W. Va., and Bolivar, N. Y.
~The Association of Natural Gasoline Manufacturers is prepared to prove that the
economic value of straight-run gasoline is enhanced by this operation of adding natural
gasoline to the refinery product.—D. E. Buchanan on “‘Handling of Natural Gasoline.”
read at the New Orleans convention of the Western Petroleum Refiners Assn., 3-9-1922
according to The Oil Weekly, April 15, 1922.. See also ‘‘Casinghead Gasoline Manu-
facture” by L. E. Barrows, The Texaco Star, Nov., 1922, and “Gasoline from Natural
Gas’”’ by H. C. Hooper, The Lamp, April, 1920.
110 OILDOM: ITS TREASURES AND TRAGEDIES
proving other refinery methods, and (4) by producing gasoline of higher
end point.*
Consumption and Stoske Harmonizing with the great growth in the
number of registered motor vehicles, the total consumption of gasoline has
annually increased more rapidly than both the production and consump-
tion of crude oil. Although the crude output has steadily gained it has
not kept pace with the vast advance made in the number of operated
vehicles; and so the number of barrels per car has fallen off as indicated
in the illustration herewith. During the 8 years, 1915-1923, yield of crude
gained 166 per cent, while the motor cars increased 470 per cent. The
only way the fuel supply has been maintained has been by getting more
and more gasoline out of a given quantity of crude. As shown above, the
number of barrels of crude oil produced per vehicle has dropped from
119 in 1915 to 45 in 1922, rising for the time being to 53 in 1923.
U's. cRUDE OW INCREASE IN RECOVERY FROM
eh 400.000 CRUDE
Per Cent
Yield in Million Bbls. from
Year Total Crude Gasoline Crude*
LOO Feast cee 183.2 12.9 9.3
gO by: weet 2 ee aten 265.8. - 384.9 17.5
TOTS cae eae 281.1 41.6 18.3
LOL Gor = Peace 335.3 67.9 21.6
LOU cass eS 378.4 94.2 26.1
700,000 MotorVehicles Registered in US. ee Pre oe ae a 180(?) er
* Per cent of crude oil run through the
Oe Seiad tien » stills; not per cent of the total yield.
PRODUCTION
300, 700,000
BARRELS
86 BARRELS
PER MOTOR
VEHICLE
PRODUCTION AND CONSUMP.-
TION PER MOTOR VEHICLE
Million Barrels per Vehicle
Year Vehicles** Crude Gasoline
DOU ras Lee aes 2.4 119 14.3
A OF Gis paca boa alamo 3.5 86 11.5
SEP q IKE 9 R(t dinde® Sash uk 66 11.7
GL Sime ck see aes =O:
3512,000 MotorVehiclesRegistered inUS. een vi ee ve ae tos
1.92.) ae aan ae ee 9.2 48 11.4
SLOD ee Soe oes 10.5 45 10.4
U.S. CRUDE OIL ie age fae Ser 12.2 45 10.5
ao SS eee
BARRELS
** The tabulated statistics of registered
motor vehicles and production of crude oil
per car for 1921 are later than those which
are shown in the figure to the left. MHith-
erto, future production of motor vehicles
has generally been underestimated by the
best of authorities from year to year; and
the domestic saturation point may be
reached by 19380, or sooner if motor high-
ways are rapidly extended.
4 = About 300,000 trucks were owned on
9,500,000 Motor Vehicles Registered in U.S. farms in 1922. ae sore ae per ene alt
piss ' the motor cars belonge ere. n Jan. 1,
THN-YEAR GROWTH OF TWO GIANT 1924, there were about 4,250,000 cars of all
INDUSTRIES (From Mining and kinds owned by farmers in the United
Oil Bulletin) States—or 4% of the world’s motor vehicles.
* “Growth of the Gasoline Industry,’ W. C. Mundt, chief engr., The Teaxs Pipe
Line Co. of Okla., in The Texas Star, March, 1922. The figure on page 124 shows the
rising end point. Semi-annual motor gasoline surveys of the Bureau of Mines show a
tendency toward uniformity in straight run gasoline in'so far as the range in end points
has diminished from 115° IF’. in 1917 to 54° F. in January, 1923.
OILDOM: ITS TREASURES AND TRAGEDIES 111
On the other hand, the consumption of gasoline :per motor vehicle
has fluctuated very little the
last 8 years, as seen in the
preceding table. From 1914
to 19238, inclusive, the trac-
tors, trucks and passenger
cars consumed altogether 80
per cent of the 820 million
barrels used in the United
States beginning with 26
per cent in 1910 and increas-
ing to 43 per cent in 1914,
according to the accompany-
ing chart. Of all the gaso-
line now used, 90 per cent
propels motor vehicles. While
the average annual consump-
tion per car during the past
9 years was 380 gallons,
the annual rate during 1923 PERCENTAGE ANALYSIS OF THE DEMAND
and at its close was about . FOR GASOLINE, 1910-1920*
500 gallons. There exists
not only a time variation, but also a geographic range in the demand for
motor fuel. On account of the climate, the annual consumption per car is
considerably greater in Florida and California than, for instance, in Minne-
sota and Montana, where the winter weather interferes with motoring.
(See chapter VIII.) In most of the northern states there occurs a seasonal
change, the rate of demand dropping with the fall in temperature (or fall
of snow) and with the rise in quality of the gasoline. Furthermore, trucks,
take more fuel than pleasure cars. A few years ago, according to Pogue,
the annual consumption factors were as follows: For passenger cars, 300
gals.; light trucks, 1,000. gals.; and heavy trucks and tractors, 2,000 gals.
In 1923 our total demand for motor fuel exclusive of kerosene ap-
proximated 4 times that in 1916, only seven years before, as set forth in
the following table:
fom)
000
e}O0 00
ogo
& Reale |
[oh AT)
fe)
ie)
°
(e)
(e)
te)
°
[e)
le}
Ok ml enh
1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921
RECENT INCREASE IN CONSUMPTION AND STOCKS OF GASOLINE
(Millions of Barrels)
Year Indicated Stocks Days Year Indicated Stocks Days
Consumption Dec. 31 Supply '. Consumption Dec. 31 Supply
Told 2G 6.7 80 16192 2h S27: 00la~). | 24.0 44
cb) Ry Se eee 34.9 4.9 50 192022026 101.5 TAD 34
1916__...__ 40.6 ? ? a Fo yA) Wehics Sy 108.0 10.6 49
Uy Face eee 58.4 9.8 57 1022 fe 127.0 21.4 t 57
Ep ee 74.8 7.1 port: ta ee ee 160(?) 23.3 : 48
In calculating the number of days’ supply, allowance has been made for the export
demand, in which there was a decided drop in 1919, thus leaving 49 days’ surplus for
home consumption at the end of that year.
*From Pogue’s “Heonomics of Petroleum,’ p. 127; reproduced by permission of
the author and the publisher, John Wiley & Sons, Inc.
Ss
Shove
—NMining and Oil Bulletin, Los Angeles.
“CARRYING COAL TO NEWCASTLE,” MIDDLE OF 1920
The first of 7 train loads of gasoline from Texas to reach Los Angeles for re-
lieving the sharp shortage over three years ago. In this train were 25 tank cars of
8,080 gallons or 192 barrels each. At 27 cents a gallon each carload was worth over
'$2.180. Mayor M. P. Snyder is seen greeting E. W. Clarke, general manager of the
Union Oil Co., of Calif.
OILDOM: ITS TREASURES AND TRAGEDIES 113
PERE
Annval rate of supply (production plus imports)
Annval rate of consumption (domestic consumption plus exports)
Stocks at end of month ny
Number of days supply of sfocks iN &
Gallons in Billions
Days Supply
>h<—----- 1921 ---->4<--------- 1922--->t< -------- 192 ---
june Sept. Dec. Mar. June Sept. Dec. Mar. June Sept. Dec Mor. June Sept. Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. Mar.
91 ----><---------1920 --->«-— - -—> 3--->K< =>-
Sept. Dec Mar.
-—-- I917>}<--------- 1918 ---->}<- ------- 1919
GRAPHIC REPRESENTATION OF THE SEASONAL CHANGES IN CONSUMPTION ©
AND STOCKS, THE TREND IN SUPPLY AND CONSUMPTION, AND THE NUM-
BER OF DAYS SUPPLY OF GASOLINE, FOR SEVEN YEARS
Note that, as demand drops toward midwinter the stocks and the number of days
supply rise. The ‘Kinks’ in the graph of supply (production plus imports) are
largely due to the impulse in production arising from the flush yield of new fields
whose crude oils contain noticeable percentages of gasoline.
Stocks of gasoline increased about fivefold during the past 8 years;
and despite the quadrupling of the output in that time there does not ap-
pear any improvement in the number of days’ supply on hand—50 at the
end of 1915 and about 48 at the end of 1923 (allowing for a seasonal drop
in demand after Oct. 31). Compared with gasoline in the matter of stocks
on Oct. 31, 1928, crude oil shows up to better advantage; 350,000,000
bbls. of crude oil, equivalent to 168 days’ supply, and only 22,500,000
bbls. gasoline, or 47.5 days’ supply. Supplies of gasoline stored above
ground were the greatest in the history of the United States at the end of
April, 1923. They amounted then to the enormous quantity of 1,336.4 mil-
lion gallons, or 31.8 million barrels; and compared with the maximum
monthly yield of 659 million gallons, or 15.7 million barrels attained in
October, 1923. (The illustration herewith, from Mining and Metallurgy,
shows the attainment of peak in both stocks and consumption of gasoline
during the year 1923.)
PRICES AND MARKETING OF MOTOR FUEL
Marketing Gasoline. So little kerosene has so far been used in the
United States for propelling vehicles, that its marketing problems will not
be taken up here. - Public interest is focused on the prices and marketing
of gasoline. The wholesale price of gasoline at Oklahoma refineries in
October, 1923, has already been given in comparison with the prices of
other products, in Chapter VI. The two illustrations herewith set forth
114 OILDOM: ITS TREASURES AND TRAGEDIES
Price, cents.
Lt
6F
Te
ee
@
Le
6¢
9
£9
|
1907
1908
1909.
1410
1911
1912
1913
1914
1915
ae ts ee
“S180 A
1916
1917
1918
1919 a
ane f |
goats, chasms ee q iad | Le
PRICE CHANGES ARE MORE GRADUAL IN GASOLINE THAN IN CRUDE
a, wholesale price per gallon of gasoline in New York City: b, average price of
one-fifth barrel of crude oil. (Bureau of Mines, Motor Gasoline Survey of 1920 and
1921, page 6.) A part of the advance in the price during the latter part of 1915 resulted
from increasing demand for motor fuel and decreasing production of light crude oil,
particularly from the great cushing pool (page 16, “Report on the Price of -Gasoline
in 1915,” Federal Trade Commission, 1917). Over-consumption in 1919 culminated in
the shortage of 1920, felt mainly in California, accounted for the 4-cent increase four
years ago. (For average wholesale prices of gasoline, 1913 to 1921, see page 164, Bul-
letin 320 of the U. S. Bureau of Labor Statistics.) Late in April, 1928, the tank wagon
price of New York City had dropped to 22.5 cents; and on July 23, 1923, it fell
further, to 20.5 cents compared with 238 cents retail. In early December, 1923, the
general average wholesale price in the United States was not over 14.5 cents.
Wy:
!
i
[rads
1
|
!
_ Highest level reoched COMPARATIVE PRICES.
in ears, en eee
susan [79/5-/942. OF STAPLE COMMODITIES —
LUMBER" in Den 1982 at Peak ane
~-tsTeEp Rupes = fore Ine Nake.
mgmee sb ce aC S5cortoN ==
PMMRERRC RES fp
CE
man eae skew eae COAL CINE: MENT.
Deeg etl eth coaleees
vay 8=©— eden Sl re eer ol Be al Nee veeing) SNe FRA dt DEC.. pee eee
wae Sis nih CYL Of AGIA LE PPA War PTIGeS a
GASOLINE NOW IS CHEAPER THAN IN DECEMBER, 1922, WHEN IT WAS
LOWER PRICED THAN ALL THE OTHER COMMODITIES HERE
CONSIDERED, EXCEPTING CRUDE OIL
Coal was at peak price and cement nearly at peak in* December, 1922, when
gasoline was only 25 per cent above its pre-war price in 1913. All the staples above ©
reprepresented, excepting cement, reached higher peak prices than gasoline during the
10-year period, 1913-1922.
OILDOM: ITS TREASURES AND TRAGEDIES 115
three essential facts for popular consideration: (1) Gasoline has not
fluctuated in price as far or as fast as the raw material from which it is
extracted; (2) compared with the pre-war prices of 1913, the price of -
gasoline in December, 1922, had not risen as much as the prices of most
other common commodities; and (3) the peak price of gasoline during
the past ten years was relatively lower than that of all but two of the
other ten articles represented.
This greater stability in the price structure of gasoline compared with
that of crude oil, is supported by the greater concentration of marketing
agencies in the hands of the Standard Oil group and a few large inde-
—Amony Ourselves, June, 1923.
CIVIC PRIDE IMPELS| GASOLINE DISTRIBUTORS TO BEAUTIFY THEIR
SERVICE STATIONS
The various Standard companies handle almost half of the world’s gasoline
and ‘lead in erecting ornamental stations in the United States. The latter often
replace ugly structures, even corner saloons where another and diluted kind of
liquid fuel was once wasted. In this view, taken at Alameda, is seen a eucalyptus
tree, one of the first planted in California by the late Bishop Taylor who intro-
duced, from Australia, this myrtaceous genus of evergreen which is said to grow
400 feet tall. On January 1, 1924, the total investment in American marketing
facilities must have exceeded $800,000,000.
pendents. Fortunately, such concentration has not been badly abused al-
though the Federal Trade Commission reported, June 1, 1920, that “price
initiative today seems to be left generally to the Standard companies and
competition is apparently directed more to developing facilities for gettting
business than to seeking it by underselling.” In regard to economy and
efficiency the distribution of gasoline stands almost without a rival in the
entire commercial field. It is because of its volatile nature and the wide-
spread demand for it that the facilities for marketing gasoline have been
perfected more than those for handling the other refinery products (see
Chapter VI). Differences exist in the marketing practice in various
parts of the country despite the fact that the Standard Oil group refines
fully 45 per cent and sells 65 per cent of the gasoline.
Economically, the marketing of gasoline has become a rather simple
116 OILDOM: ITS TREASURES AND TRAGEDIES
problem since the auto craze began to spread, and this product no longer
remained a “white elephant” or “soup-bone surplus” con the hands of the
refiner. However, with the development of the casing-head gasoline in-
dustry three special methods have arisen for disposing of this very volatile
product: (1) Selling to a refinery for blending with low-grade gasoline in
order to make a commercial grade of motor fuel; (2) buying the low-
grade naphtha for blending at the natural-gas gasoline plant, which then
markets its own gasoline, and (8) selling the product without blending for
‘ special purposes. There is a small but growing market for the light ab-
sorption gasoline in the chemical industries as well as for aeroplane fuel.
American Prices of Motor Fuel. These have never been high con-
sidering the prices paid by the consumers in foreign lands; nor have they
been high recently compared with the pre-war prices of 1913. Throughout
the 11-state territory of the Standard of Indiana and in line with the
rising cost of crude oil, the price of gasoline was advanced 2 cents on
December 29, 1923. In Chicago the prices then became 14 cents from tank
wagons and 16 cents at filling stations; and on Jan. 13, 1924, they rose
respectively to 16 and 18 cents. (See Oil Trade Jn’l., Jan., 1924.)
A
. : —
32
ver
‘ >
rs DRS Ns
PPL
et OKA Oe RR on
Pt eitereres ,0,8' 7 o.
RRR ROO RA MAES OTA op eR
xD
og
ee
KS
ees
KS
*>
:
<>
RS
ee
b
<
SS
S
5650-0. 60.9,
mes
‘)
<2)
CK
CS
reteoceee,
velecee,
<3
4
05
ener,
nae,
KS
neactetes
KE
PKR
Ka
sees
és
<)
<>
4
o
<<
ORS
POKES
eee Meee
h
| |
RRS
BS OO
z Ay
4
<7,
oS
%,
o
BOX
\
XY
_
_
ZA
GASOLINE MARKETING TERRITORIES OF THE STANDARD COMPANIES
Map from the Federal Trade Commission’s report dated April 11, 1917; reproduced
in Pogue’s “Economics of Petroleum.”
The price “war” of the past year was clearly not a wise affair, for
it did not permanently benefit the consumer but instead drove some in-
dependent dealers out of business. However, through cooperative buying,
the farmers of South Dakota and other states should be able to get gaso-
line as well as kerosene so reasonable that they will again turn to tractors
for reducing their operating costs.* Of greater economie importance than
the seemingly high prices prevailing from 1916 to the middle of 1923, is the
* While in the Red River valley, in the fall of 1923, the author learned that
many wheat growers of Minnesota and North Dakota had discarded their tractors
when gasoline went above 22 cents or kerosene above 15 cents.
OILDOM: ITS TREASURES AND TRAGEDIES 5
enormous waste of this popular liquid—95 per cent of the efficiency* and at
least 30 per cent of the substance itself. For obvious reasons, one being
this continued waste of motor fuel, further price increases may be ex-
pected during the year 1924. ;
Few consumers realize that in 1923 there were places in the United
States where distilled water sold for more than gasoline, itself a product
of distillation. How many motorists, complaining at a price of. 25 cents
to 30 cents a gallon for gasoline consider that they pay for coca-cola at
the rate of over 40 cents a gallon when they indulge in the diluted drink
at 5 cents a glass?
Most important for motorists to know, in this connection, is that of
the total of $7,783,000,000 spent on motor cars in 1921,} inclusive of their
operation, less than 11 per cent was for gasoline; yet this item caused more
agitation and animosity than all the other items that made up this huge
expenditure.
A Defense of Fair Prices and a Badly Abused Industry. According
to The Oil Weekly of November 3, 1923, the Mid-Continent Oil and Gas
Association has carried on a publicity campaign to forestall unfair legis- .
lation and to stem the tide of adverse public opinion. Following are the
author’s abstracts of corrected statements published by this independent
organization. They are worthy of serious-consideration by all fair-minded
Americans, members of law-making bodies in particular.
Alleged manipulations of prices and rumors of “dollar gasoline”’ greatly concern
you, as motorists. You may have asked, what truth is there in it? Ask yourself, AM Es
gasoline cost a dollar a gallon, how much will I use?’ Such a prohibitive price would
Tenet motoring among 14,000,000 American families so severely that very little market
for gasoline would remain. Huge refineries would be idle, and the petroleum industry
would lose the business for which it has labored full 50 years.
Since gasoline is the product of a competitive industry, raising its price unreasonably
would prove imvossible. There are about 15,000 separate and independent producers
of crude oil, nearly 500 separate refiners producing gasoline, and 4,000 separate whole-
salers or marketing companies. Competition is keen; and as the price of gasoline goes
up, output is increased until demand is overtaken and the price falls again.
The average refining company makes less than one cent per gallon on gasoline.
This is less than $3.00 on an average annual run of: 5,000 miles per car. Compare
this with the profit on any other commodity known to you. You and your fellow
motorists pay this profit of a nickel on a 5-gallon purchase—for what? For competing
in the oil fields with 499 other refiners obtaining crude oil needed. (For paying in-
terest on refinery investments exceeding 2 billion dollars.) For spending $100,000,000
yearly in repairs and new equipment, maintaining an organization of almost 70.000
employees, and devising scientific ways and means for economically extracting the most
good gasoline from each barrel of crude oil. For finding a market for the products
less in demand so as to keep down the price of gasoline. For carrying ample stocks
of gasoline to. meet emergencies and seasonal changes. For maintaining a wholesale
distributing system to insure the delivery of gasoline conveniently (and often at all
hou For all this service they receive a profit of hardly a cent a gallon. Is it too
much?
At no time during or after the war did the price of gasoline sky rocket. When
you were paying two and three times what you had been accustomed to pay for food,
clothing, rent, and building materials, gasoline for your motor cost little more than
before the war. Even crude petroleum, the source of gasoline, rose much higher than
gasoline (see figure on an adjacent page)... Why has the price of gasoline been held
down? Because the companies have been carefully and efficiently managed under
private ownership. They are not hampered (as in other countries where gasoline is
costly) by expensive government regulations, but have been left free to serve the public
with initiative, energy and economy. Gasoline is cheap today. Governmental inter-
ference could result only in overburdening the industry and increasing the cost of all
petroleum products to you, the consuming public.
+B. F. Kettering. General Motors Research Corporation, addressing the American
Petroleum Institute, St. Louis, December, 1923.
During periods of gasoline shortage, the joy riders rarely reduce their demands
for the benefit of food producers who utilize trucks and tractors.
* According to Dr. Edwin G. Slosson, Director of Science Service, 1115 Con-
necticut Ave., Washington, D. C,
118 OILDOM: ITS TREASURES. AND TRAGEDIES
WHITE TRUCK WORKING OUT OF BAJEN, COLUMBIA,
American trucks, like American drills, are fast invading foreign oil fields. Our
exports of motor trucks increased 53%, from 7,480 in 1921 to 11,455, in 1922—448 to
South America and 983 to Mexico; but in 1921, with the Mexican oil industry at peak,
1922, 10.5 per cent were trucks; but of 4,014,000 made in 1923 only 9.2 per cent
were trucks. ;
MOTORIZING THE
WORLD’S FISHING
FLEET
This type of craft,
brought from sunny Italy
to San Francisco Bay, no
longer depends on Sail alone
for motive power. (Stand-
ard Oil Bulletin.)
Norway’s fishermen now
consume 100,000 bbls. of
distillates every year, being
supplied largely by A. S.
Norsk Braendselsolje, an
Anglo-Persian subsidiary.
i
‘THE FAMOUS FIAT CAR WHICH WON THE ITALIAN GRAND PRIX
The driver was Pietro Bordino, shown here at the wheel. The Fiat is the best
known European car in the United States. (The Lamp, Oct., 1923.)
OILDOM: ITS TREASURES AND ‘TRAGEDIES 119
ALCOHOL, BENZOL AND OTHER SUBSTITUTES
Substitutes Eventually Essential. With few exceptions the varying
supply of gasoline has hitherto sufficed for the steadily increasing demand.
But because of the higher prices abroad, as in France (see page 16), the
advantages of using composite motor fuels have already been recognized.
Eventually, American consumers must pass through this same stage, but
it may be 50 to 75 years before gasoline will be almost entirely sup-
planted. This is a great problem with which our foresighted scientists
are concerned, namely the source of our future supply of motor fuel.
“How much will be needed and how much will it cost?” has been largely
answered by E. H. Leslie in his new book entitled ‘‘Motor Fuels.’’* Even-
tually, when domestic and foreign: deposits of petroleum shall have been
depleted, perhaps in a hundred years, America will either have become
motorless or will have developed satisfactory substitutes. |
Alcohol as Motor Fuel is not of present importance in the United
States. Ethyl alcohol is not fit for use in gasoline motors. Its vapor
pressure is only one-fourth that of gasoline, and its latent heat of vapor-
ization is 3.2 times that of gasoline, wherefore a gasoline engine is started
with difficulty. This may be overcome by adding ether to the alcohol, by
priming the cylinders, or by starting with a special fuel. Alcohol is also
inferior in net heat of combustion, only 4-7 that of gasoline which is
19,000 British thermal units per pound. But it can be burned under pres-
sure 2 to 3 times the maximum under which gasoline may be burned
without knocking. It also burns without forming carbon and is safer
to handle and move than gasoline. However, alcohol is handicapped for
lack of distributive facilities. The maximum yield of alcohol, 202,000,000
gallons, was reached in 1917. Over 27 per cent of this was denatured,
the rest taxable, and the total made but 1.8 per cent of the gasoline con-
sumed in 1921. From all of the 13 kinds of materials hardly more than
500,000,000 gallons of alcohol can be produced, according to Leslie.*
Composite Fuels. | Alcogas is a blend having a variable composition
as follows, according to the U. S. Bureau of Standards:
Components of Alcogas For Aviation For Automobiles
OPS TES A IN ee a ie oN 5 oli SPO Nie nace ES 40 33
Gasoline, ‘ eee teed oe NE here ett ES oh eS ee On 35
Benzol, a 2 NL Pi iy ROE ape ant EARS pain era ee 17 25
Ether, sy De Gf tos 1 Ge DP Th Tae Oe RR eae ene ee 8 7
Alcohol and gasoline do not mix completely, and hence a blending
agent such as ether or an aromatic distillate must be used. Until gasoline
goes above 35 cents a gallon there is no show for a large alcohol industry
on which most composite fuels would have to depend in part. Natalite is
fuel-blend of alcohol and ether made from molasses first in 1914 at Natal,
South Africa. Another composite fuel listed by Leslie is Signal Core
Mixture consisting of 20 per cent benzol and 80 per cent gasoline by
volume. This is not specially superior to gasoline. ‘Hector’ is 20 per
cent benzol and 80 per cent cyclohexane, and has been patented by the
* “Motor Fuels, Their Production and Technology,’ The Chemical Catalog Co., 19
B. 24th St., New York, N. Y.; price, $7.00. The U. S. Dept. of Agriculture has esti-.
mated that 300,000,000 gallons of ethyl or “grain” alcohol could be made yearly
from saw-dust and other mill waste by special treatment.
120 OILDOM: ITS TREASURES AND TRAGEDIES
General Motors Corporation. A mixture of kerosene and benzol called
“Liberty” has been sponsored by the General Engineer Depot, U. S. A.
_ Miscellaneous. Naphthalene is a product obtained in the distillation
of coal tar and is familiarly known as tar-camphor. Its high melting point
alone prevents itS use as
motor fuel; but it may be
dissolved in benzol or gaso-
line, and thus utilized to a
limited extent, as in Ger-
many. From it may be pro-
duced _ tetrahydronaphtha-
lene, or ‘‘tetraline,’ by the
addition of hydrogen. Ac-
cording to a British periodi-
cal,* tetraline gave good re-
sults when mixed with alco-
hol, benzol and_ gasoline.
Dynalkol, as described in the
U. S. Consular Report, is the
commercial name given in
Czecho-Slovakia to a _ fuel
consisting of 40 per cent
alcohol and 60 per cent ben-
-zol. Benzol probably ranks
next to alcohol as a substi-
tute for gasoline in quantity,
but it does not compare in
quality with tetraline. It
yields more heat per gallon
than gasoline but has sun-
dry disadvantages if used . —Union Oil Bulletin.
alone. A table comparing OIL SHALE DEPOSITS IN WESTERN
benzol with gasoline has COLORADO
been made by the Kansas View at the Falls of Parachute Creek.
City Testing Laboratory.+
Shale-Oil as a Substitute. Even if all the coal mined in the United
States were coked in by-product ovens, the quantity of motor fuel (benzol)
produced thereby would amount to only 20 per cent of the annual domes-
* The Pan-American Magazine, 50 Great Russell St., London.
+ Waverly Petroleum Handbook, 8th edition, page 588, W. Oil Works Co., 54th St.,
Pittsburgh. .
Under ‘‘International Aspects of the Petroleum Industry,’’ Van H. Manning wrote
in Mining and Metallurgy, Feb., 1920: The products from the destructive distillation
of coal can be used, in so far as they are available, to replace gasoline; but quan-
titatively it seems out of the question to expect more than a minor alleviation from
them. Coal can largely replace fuel oils. Alcohol can replace gasoline and has the
advantage that it can be made from replaceable material—that is, from plants, pase be-
cause of its cost it cannot compete in a large way with gasoline at present. * =
Finally no substitutes are now known that will satisfactorily replace mineral eae
jn the amount needed. ‘These facts indicate that we must inevitably seek foreign
supplies in order to meet our own needs and compete in the world’s markets. Increased
recovery and wiser utilization of our domestic supplies will help solve the: problem.
See also Hngineering and Mining Journal- Press, June 10, 1922, and The Literary
Digest, Aug. 5, 1922, page 27; Oct. 7, 1922, page 69; and Nov: 24, 1923, page 66.
OILDOM: ITS TREASURES AND TRAGEDIES 121
tic consumption of gasoline. Scientists have therefore turned to our
vast deposits of oil shales with a view of obtaining the future supply of
motor fuel from this source. Few of the optimistic writers on this subject
realize that crude shale-oil contains only a small per cent of low-boiling
hydrocarbons, and that is of poor quality. Tremendous tonnages of the
rock would have to be mined or quarried and large capital would be re-
quired for this purpose and for retorting the rock. The Bureau of Mines
quotes estimates from 1 to 5 million dollars as the cost of a complete re-
torting plant to handle 1,000 tons of shale daily; and if the average Rocky
Mountain shale yielded 42 gallons to the ton it would take at least 2,150
such plants operating 365 days a year to supply our domestic demand for
crude oil at the annual rate prevailing in 1923.*
CONSERVATION OF MOTOR FUEL.;
The Society of Automotive Engineers is interested in the elimination
of all forms of waste, including that of gasoline, the conservation of
which is considered to be of particular importance. Gasoline has become
‘a most important fuel because it has enabled us to place in the hands of
almost everyone a prime mover in small units capable of reasonably satis-
factory operation even by the most unintelligent. Due to the lack of tech-
nical skill of the great majority of the operators the tendency toward
waste of fuel operation is greatly increased. Changes in design of auto-
motive apparatus except in the direction of more automatically correct
operation does not offer as fruitful a field for improvement so far as
economy is concerned, as does education of the user along the lines of
more intelligent operation of the vehicle.
Consumption. About 23 to 30 billion gallons of crude petroleum are
used annually in this country in producing 5 to 7 billion gallons of gasoline,
of which over 85 per cent is used by automotive vehicles for purposes of
transportation. Of these vehicles, only a very small proportion are operated
under centralized supervision to promote maximum economy of opera-
tion.
In the production and distribution of motor fuel from crude petro-
leum, and in the use of this fuel, there is bound to be some waste as there
is in all other commercial activities. Part of this is preventable by means
already at our disposal. Other forms of waste, where prevention is
probably possible, are the subject of concentrated study at the present
time. The losses which occur in the manufacture and distribution of gaso-
line are not directly within the province of the automotive industry, and
we will therefore confine ourselves in this statement to the preventable
waste in the actual use of fuel.
* “The QOil-Shale Industry With Respect to the Petroleum Situation,” by J. R.
Reeves, Eng. and Min. Journal-Press, April 21, 1923. Read “Billions of Barrels of Oil
Locked up in Rocks,’ by Guy EH. Mitchell, National Geographic Magazine, Feb., 1918;
Commerce Monthly, Feb., 1922, published by the National Bank of Commerce, New
York; articles by Victor C. Alderson in Mining and Oil Bulletin, Dec., 1919, Jan., 1920,
and Mar. -Apr., 1921, and in The Mining Congress Journal, Oct., 1922, Jan., 1923, and
July, 1923, “Shale Oil Experiments,’’ Chas. EH. Kern, The Oil and Gas Jnl, Nov. 30,
1922 ; “~The Oil-Shales of the U. S. and the Future of Petroleum,” R. H. Tingley, The
Outlook, Oct. 17, 1923, and Bulletin 210, by M. J. Gavin (U. 8.), Bureau of Mines.
“At one time (before the Drake discovery) over 50 companies were distilling oil
from coal and shales.’’ Etienne A. Ritter, Hngineering and Mining Jn’l, Feb. 17, 1928.
+Extracts from H. B. D. Exhibit No. 2, testimony before the Senate Committee
investigating gasoline prices, made February 9, 1923, by H. B. Dickinson, Research
Manager, for the Society of Automotive Engineers, which numbers 5000 members.
122 OILDOM: ITS TREASURES AND TRAGEDIES
Efficiency. The quality of gasoline, which partly determines its cost
and the economy with which it. is used, evidently has a considerable bearing
on the ability of the user to operate his vehicle with maximum efficiency.
This feature of fuel production vitally concerns the automotive industry
and has been the subject of research and development since 1912, under
the auspices of the Society of Automotive Engineers and, further, of co-
operative research under the joint direction of the engineers of the auto-
motive industry and of the petroleum industry, as represented in the
American Petroleum Institute.
Limited Supply. Gasoline for motor fuel has come to be the highest-
priced quantity product of. petroleum, except lubricating oil, and the
motor vehicle is the largest single user of both products. Neither of them
has any competitor at anything like the present prices, and petroleum,
the source of both, exists only in limited quantities which may be ex-
hausted in a comparatively short time. Hence the elimination of waste
is as important for conservation as for the maintenance of a minimum
fuel cost. Unfortunately, low cost and conservation do not always go
together. In so far as the user is responsible for elimination of waste, a
higher cost offers more incentive for economy.
Internal Combustion. Essentially, the automobile engine consists of
a number of cylinders in which gasoline vapor, mixed With air, is burned
to produce pressure which is transmitted to moving pistons and applied
as power to the crank-shaft and thence to the wheels. The fuel must
be vaporized and intimately mixed with air in the correct proportions at
the time that ignition takes place in order to allow of efficient combustion.
Function of Carbureter. The carbureter and intake manifold are de-
signed to mix the correct amount of fuel with the air, and to distribute
the resulting mixture to the cylinders. The mixing of the fuel and the air
begins in the carbureter and after continuing during the fae through
the manifold is completed in the cylinder.
Pre-Heating Helps Complete Combustion. With the low-volatility
gasoline now being supplied for motor fuel, a considerable amount of heat
is necessary for the proper mixing of the air and fuel. This heating may
be applied in different ways, either by maintaining the cylinders at a
proper temperature, or by supplying heat to the carburetor or the
manifold or both. If the correct proportion of fuel to air is not used, or
if the mixture is not uniformly distributed to the different cylinders, some
fuel will be wasted.
As a matter of fact, it begins to appear that the adoption of means
for maintaining the engine at a uniform operating temperature under all
climatic conditions will go a long way to improve economy. Experience
indicates that this temperature should be fairly high to obtain the most
efficient operating results. The economical use of fuel is thus promoted
not only by the better utilization of the fuel itself; but also by maintain-
ing the engine lubrication at maximum efficiency producing the lowest
engine friction. It has been proved that temperatures provided by holding
the cooling water at or near the boiling point are not too high. In addi-
tion, for use in cold climates, it may prove desirable to provide extra heat.
on the carbureter and manifold, especially at the time of starting, when
the engine is cold.
ae
™
a
AUTOMOTIVE, OIL AND AGRICULTURAL INDUSTRIES ARE INTERDEPENDENT
Modern farm operations rely on petroleum for power, light and lubrication ; and in
turn, many oil and gas wells are located on farm lands. Here is shown part of Peter
Swenson’s ranch which helped to make Stephens County once the leader of all Texas
counties in oil. This farmer and his son are not only lessors and royalty owners; they
have been producers since 1918 when they formed the Swensondale Oil Co.
PETROLEUM
PERFORMS A
DOUBLE DUTY
It drives the
caterpillar trac-
tor and also the
dusting outfit. It-
self may be used
as an insecticide.
GOOD ROADS ENCOURAGE MOTORING AND HENCE THE PRODUCTION OF
MOTOR VEHICLES AND MOTOR FUEL
This pictures part of the California State Highway near Descanso on a route from
Imperial Valley to San Diego. California ranks first in yield of oil, extent of auto
roads and per capita motor vehicles. This is a logical consequence of having vast
resources in petroleum and ambitious, progressive citizens who know how to attract
tourists and dwellers from other states.
124 OILDOM: ITS TREASURES AND TRAGEDIES
Common Waste. A mixture may be twice too rich in fuel and still
produce power, without any obvious bad effects to warn the operator that
he is wasting fuel. Overrich mixtures are commonly used for reasons
given below. Tests by the Bureau of Mines on 100 or more trucks and
passenger cars picked out at random on a city street have shown that in
average operation of trucks and passenger cars, 25 per cent of the fuel
drawn into the engine passes out of the exhaust unburned.
Causes of Waste. The causes of waste of this kind are chargeable
partly to the designer and partly to the user of the vehicle, or to the me-
chanic who attends to the adjustment. Practically all fuel systems re-
quire adjustment to give the correct fuel mixture. If these adjustments
are not properly made, the waste of fuel may be 50 per cent, and probably
the average loss in practice is at least 20 per cent. Owing to the large
number of unintelligent and careless drivers who operate cars, it would.
be better if the carbureter setting and other adjustments could be made
at the factory, but owing to variations in fuel and in weather conditions,
this has not proved feasible up to date. :
If the carbureter is so constructed that the correct mixture is not
supplied under all driving conditions without continual hand adjustment,
or if the mixture between the fuel and the air is not sufficiently complete
at the time of ignition, there will be waste which no amount of care in
adjustment can prevent. As to the question of a sufficiently intimate
mixture, this involves the complete design of the power plant, including
the carbureter, manifold, and engine, it being understood that the final
DEGREES
F.
475
ANALYSES BY
450| O=U.S. BUREAU OF MINES
A= AUTOMOTIVE FUEL CLUB, DETROIT
X= MISCELLANEOUS
mixture is produced by means of a violent agitation with the addition of
heat. There.is little doubt that one-half the cars in use are deficient in
design in the respects which make for proper mixture of fuel and air
before ignition, and that the fuel consumption of these cars could be re-
duced at least 20 per cent by slight. modifications in design and, in many
cases, by simply replacing the parts which make up the fuel system by
parts more efficierit and already available. _ ;
Another direct source of fuel waste is the. bad mechanical condition
of many automobile and truck engines in sérvice. Worn or improperly
adjusted pistons and valves and ignition failures all waste fuel. Waste
of this kind is partly a question of design and construction.
; Raising Boiling Point Increased Supply. Commercial gasoline as sold
to. the consumer has become more and more difficult to use with economy,
OILDOM: ITS TREASURES AND TRAGEDIES 125
Gasoline is a mixture of different constituents having different degrees
of volatility or ease of vaporization. Up to about 1912 commercial gaso-
line contained only the most volatile constituents and offered no difficulty
in vaporizing for producing a satisfactory mixture for use in the simplest
type of engine. With the increasing demand it became necessary for the
producer to include heavier and less volatile constituents, which require
more heat for their vaporization, and as this process went on from 1912
to 1920, the utmost efforts of the designers were necessary to keep pace
with the change in fuel and maintain reasonable economy.
We believe that the American automotive engineer is even now in
advance of all others in the technique of economical fuel utilization. In
dealing with the fuels of low volatility marketed in this country he has
learned much as to the behavior of fuels in the engine and has profited
by this knowledge in the design of efficient vehicles.
Mileage per Gallon. European cars average more miles to the gallon
than American cars, but when reduced to a common basis of weight and
reserve power the American cars are superior in economy. Due to high
cost and taxation, European design has tended to attempt to secure high
mileages by reduction of weight and reserve power. The demand of
American car users, partly due to the poor condition of roads, has called
for heavier weight and greater reserve power of average American cars.
Our best information indicates that a majority of 1-ton cars in the
hands of average drivers actually cover not more than 16 miles per gallon
of fuel. If these same cars were more carefully designed and provided
with more satisfactory means for supplying the correct fuel mixtures,
we are convinced that under the same operating conditions they would
average 20 miles per gallon instead of 16, and that a further improve-
ment of at least 25 per cent would be possible: through more careful
operation by drivers. .
The fuel waste in commercial vehicles seems to be even worse. Some
fleets of commercial vehicles weighing about 4 tons, including load, aver-
age only 5 miles per gallon of fuel, while others of equal weight and in
about the same service average 12 miles per gallon, the differences being
due partly to differences in design and equipment and partly to differences
in the care with which the various adjustments are made and the opera-
tion of the vehicles is conducted.
Excuse for Waste. It should be noted that the automotive industry as
it exists in this country is only about 10 years old. Not only have most
of the engineers and manufacturers been trained in that brief period, but
the rapid expansion of the use of motor vehicles has introduced new and
untrained drivers at the rate of about 1,000,000 per year. The produc-
tion of vehicles which meet the demands of these untrained users has
made the building of really economical units doubly difficult.
Gasoline waste depends partly upon the quality or volatility of the
fuel used for the reason that the volatility affects its adaptability as a
fuel for the engine consuming the greater part of this product.. But the
greater the quantity of gasoline made from a barrel of crude oil, by any
given process, the lower the volatility. The best interests of the public
as well as of the automotive and oil industries will plainly be best served
by obtaining a maximum amount of satisfactory fuel from each barrel
of crude.
126 OILDOM: ITS TREASURES AND TRAGEDIES
Summary of Factors Promoting Motor Fuel Economy. Several fac-
tors which promote fuel economy may be summarized briefly as follows:
(1) Universal adoption of means for mai.itaining the engine and the
carbureter and intake system at the best operating temperature.
(2) The adoption as rapidly as possibi2 of carbureting devices which
can’ be adjusted once for all by the maker tu supply automatically a cor-
rect amount of fuel as completely atomized as possible for economical a
ation under all conditions.
(3) An economically correct grade of gasoline supplied uniformly
throughout the country, but suitably varied, if possible, to meet climatic
conditions. Uniformity of fuel would go far to make possible the adoption
of the more economical carbureting systems suggested above.
(4) Education of the user of motor vehic:es to the advantages which
will accrue to him through fuel economy. These advantages are in reality
much greater than the saving in fuel cost. They include also less wear
in the engine, less carbonization, less upkeep ccst, and freedom from
other minor annoyances.
(5) The gradual adoption of engines using higher compression parle
with resulting higher fuel economy. This can be accomplished only as im-
provements in design or in quality of fuel make higher pressures possible
without engine knock, which at present limits the useable compression
pressures.
(6) Servicing of automotive equipment to maintain it in satisfactory
condition for economy of operation. This refers to the entire vehicle as
well as to the engine, and present conditions can be improved by. educa-
tion of the public and of the garage mechanic, and by improvements in
the service facilities offered by the dealers.
All of these factors, except, perhaps, the education of the general
public, are receiving a continually increasing amount of study by the
Society of Automotive Engineers and the manufacturers, and we believe
that much has already been accomplished in eliminating fuel waste. The
necessity of meeting popular demands inconsistent with economy, and the
difficulty of putting new developments into immediate production have
‘retarded this accomplishment. Even more important, perhaps, is the
fact that the average vehicle now in use is a product of two or three years —
ago, not of today.
‘Auto Suggestions’’, Practical Helps for Winter Weather. Most autos
are used 12 months in the year. They must be given special care during
the winter months or they will deteriorate. Here are a few tips: (1)
Change the oil (for lubrication) every 250 miles since the danger of gaso-
line passing the pistons and. diluting the crank-case oil is then at maxi-
mum; (2), increase the charging rate of generator, lights and starter being
used more in winter; (3), adjust carbureter to cold weather conditions so
as to enrich the mixture; (4) thin out the oil in the rear axle and
transmission by adding cylinder oil because cold, thick oil will not reach
the bearings or gears; (5), have a set of tire chains always ready; (6),
keep brakes evenly adjusted, for if one wheel is tighter a bad spill may
result; (7), put alcohol in radiator, renewing it as needed till late
spring.* 3
*Compiled by R. K. Jack, chief engineer, Olds Motor Works, and abstracted in
the Washington Daily News,.October 22, 19238.
OILDOM: ITS TREASURES AND TRAGEDIES 127
Pi
1. Safety Education 2. Adequate Playground:
3. Jail for 4, City Planning 5. Traffic
Speeders Regulation
FIVE WAYS TO PROMOTE SAFER STREET AND HIGHWAY TRAFFIC
According to “Facts & Figures’, 1923, published by the National Automobile
Chamber of Commerce, Ine., 368 Madison Ave., New York. This organization offers
annually 8 prizes for teachers and 3 for pupils. For information write to the Highway
Education Board, Willard, Bldg., Washington, D. C
THE SAFETY ESSAY WINNER IN 1922 OUT OF 400,000 ELEMENTARY PUPILS
Stanley U. Newcomb, then 13, was given a gold watch and a trip to Washington,
where he was photographed on the steps of the Capitol between Mr. Coolidge, Vice-
President at that time, and Mr. H. C. Johnson, Superintendent of Schools at San
Diego (the home of the author). The others are: C. B. Dodds, Sec’y to Sen. Short-
ridge of California: and Stephen James of the Highway Education Board, at the left;
C. L. Bawden of the U. S. Bureau of Education and N. C. Damon of the N. A. C. C
at the right.
?
a
128 OILDOM: ITS TREASURES AND TRAGEDIES
WINNERS OF H. S. FIRESTONE SCHOLARSHIPS FOR GOOD ROADS
ESSAYS
Kansas, one of two states that do Kentucky, known for its fair women
not derive funds for aiding Federal and fine horses, fittingly brought
highways from auto license or gaso- forth one of these winners—in 1923.
line tax, supplied the successful con-. Miss Dorothy L. Roberts, then’ of
iNet O22 5 ig
ee eae a Ge ee Harlan, in the heart of the Kentucky
Mountains, is now enjoying her
Lindsborg lad and son of the author
of ‘‘Surface Marks of Oil Deposits” $4,000 scholarship at Marietta Col-
lege, Ohio. Her subject was, ‘“The In-
(see. Chap. II), is now enrolled in
George Washington University after
graduating from Hastern High School,
Washington.
‘fluence of Highway Transport upon
the Religious Life of My Community”
(see extract below).
—Courtesy of Funk & Wagnalls Co.
“GASOLINE AND THE GOSPEL”
To judge from this. view, reproduced from The Literary Digest of Oct. 27, 1923,
church going in our cities is still a cherished custom, although church support takes
hardly half the sum spent for gasoline alone. All car owners in the cities do not spend
Sunday at the beach, in forest camp or on golf course. Great good will result from
the growth in the use of motor vehicles in rural regions. Wrote Miss Roberts in her
prize essay: “Good roads will encourage the auto truck, diversity of crops, improved
farming methods, cooperative selling, contentment, and an increase of the economic
surplus. This surplus will be invested in churches and schools. Good roads will mean
fewer churches, but better, larger ones; fewer ministers, but better trained, educated
community leaders.’’
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OILDOM
ITS TREASURES AND TRAGEDIES
A PROFUSELY ILLUSTRATED BOOK OF LATE
AND BASIC FACTS ABOUT PETROLEUM AND THE
DEPENDENT OIL AND AUTOMOTIVE INDUSTRIES
POPULARLY PRESENTED FOR THE BENEFIT OF INVESTORS, MOTORISTS
AND OPERATORS
By Oscar H. REINHOLT, B.S.
Engineer and Geologist; Specialist in Mineral Resources; Co-Editor, Revised ‘‘Manual for
the Oil and Gas Industry.’”’ United States Treasury Department, 1921; Member,
American Academy of Pol. and Soc. Science, American Institute Min.
and Met. Engineers, Geological Society of Washington, D. C.
Eighth International Geographic Congress
PART TWO
Covering Finance, Geography, Governmental Relations, The Human
Element, Latin America and the Prevention of Failures
David McKay Co., Publishers
South Washington Square, Philadelphia
Price, $3.00 postpaid.
Price of both parts in one binding, $4.00.
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PUBLISHER’S STATEMENT
In presenting to the public this long expected second part of Mr. Rein-
holt’s unique work, a few explanatory words seem called for.
Part Two is complete in itself and does not demand previous acquaint-
ance with Part One for its understanding, enjoyment and utilization. In-
deed, this is largely true of every chapter in both parts; each is more or
less an independent treatment of one phase of the almost fathomless sub-
ject, Oil; any one of them, without the others, may be consulted with
profit should time or interest be limited.
In regard to the Author’s purpose, that has been fully stated in the
preface to Part One as the “Conservation of Capital.” He has kept this
in mind while preparing Part Two. What shall it profit our people if the
legitimate industry in cooperation with the Oil Conservation Board shall
prolong the life of our petroleum deposits and, on the other hand, the
investing public shall squander capital by encouraging inexperienced in-
terlopers and dishonest promoters? Since natural resources may be con-
verted into capital, Mr. Reinholt has incidentally emphasized that full
and timely utilization of oil, while it is cheap, will indirectly advance the
cause of capital saving. Unfair criticism has often been leveled at lead-
ing operators and the industry as a whole. But if publicists and politicians
had more correct information at their command most of the abuse and
condemnation would be avoided. Some of the facts given in this volume
invite fairer treatment of that industry which supplies efficient motor
fuel for more than twenty million American trucks and automobiles.
As to the exceptionally wide scope of this work the reader is referred
to the Outline of Contents as well as to the comprehensive Index. As to
the preparation it may be stated that the Author, in the course of many
years accumulated a vast file of valuable oil literature not contained in
books. From these data he has deliberately selected the best material for
use in OILDOM: ITS TREASURES AND TRAGEDIES. He has traveled exten-
sively for the Government and on his own account, not only visiting all
the major oil fields in the United States and Mexico but also attending
many conventions of engineers, geologists, producers and marketers. In
devoting a quarter of a page to a review of Part One, the London Oil
News noted that it appeared to be “a good and workmanlike contribution
to popular knowledge.” As to the treatment: A topic in bold type intro-
duces almost every paragraph, and outstanding facts clearly and con-
cisely stated make this story of oil easily understood by the layman. Sta-
tistics—in round figures or large units—are readily digested. A California
critic designated Part One as ‘‘a valuable reference volume, written in a
readable style, free from technicalities.”
Whatever the various causes for the delay in publishing Part Two, the
procrastination has permitted the inclusion of much interesting matter
that might otherwise have been omitted. Deferring the issuance of this
part to early 1927 made the contents quite down to date. Future editions
will inform about other operators than those herein described.
May this unusual assembly of important.facts provide substantial service
to thinking, thrifty people who appreciate the recent truths about a world-
wide business of greatest benefit to the American people whether considered
as consumers, investors or workers.
Philadelphia, January 31, 1927.
~
CONDENSED TABLE OF CONTENTS
PART ONE—FIRST SEVEN CHAPTERS
I. THE PETROLEUM PANORAMA—International Treasures and Tragedies; World
Reserves, etc.
Il. THE NATURAL RESOURCE—Origin of Oil, Geological Occurrence and Distribu-
tion, ete.
Ill. COMMERCIAL GEOLOGY—Description of the Major American Oil Fields;
Canadian fields.
IV. MECHANISM OF THE INDUSTRY—Drilling, Producing, Transporting, Refining ;
Core Drilling.
V-VI. ECONOMIC ASPECTS—Brief History, Recent Overproduction ; Price Variations,
Review, etc.
VI. GASOLINE AND THE AUTOMOTIVE INDUSTRY—tThree Sources of Gasoline,
Growth, Conservation. (
PART TWO—LAST SEVEN CHAPTERS
VIII. GEOGRAPHY OF PRODUCTION AND REFINING—Treasures and Tragedies,
Geography of Soil versus Geography of Oil, Depletion Compels Shifting in Sources, Tulsa
near U. S. Center of Production, Los Angeles the Leading Port in Domestic Trade, Import
Traffic of Oil Ports; World Sources, Production by Major Fields and Pools, Seven States
More Than Five Foreign Countries, Output per Well; Oil First in the Mineral Industry of
Many States; Petroleum in the ‘“‘Big Three’? States, California, Oklahoma and Texas;
Production of Natural Gasoline by States; Distribution of Refineries.
IX. GEOGRAPHY OF THE MARITIME TRADE—Preponderance of Tankers in Mer-
chant Marine, Movement through Panama Canal, Oil in American Bottoms, Tonnage of
Foreign Trade, Where Imports Enter and Exports Depart; The World’s Greatest Buyer of
Crude Oil; Decreasing Imports of Crude. Position of Petroleum in Import Trade; Oil
Great Force in Export Trade in General; Importance of Maintaining Export Trade in Oil
Products, Mineral Oil next to Cotton, Federal Interference Proposed; Our Best Customers
for Crude and Refined Oils; British Petroleum Trade, 1923-1925; World Consumption.
X. LATIN AMERICA, LATENT AND PRODUCING—Leadership in Many Lines;
Panama and Petroleum; World Trade, Trade with the United States, Oil as a Factor in
Commerce, U. S. Imports from Mexico below 50 Million in 1926; Geologic Occurrence and
Characteristics of Petroleum, Delayed Development, Recent Quickening, Deficiency in Coal;
Cuba, Curacao and Trinidad; Central America, Ecuador and Bolivia; Chili, the Coal Pro-
ducer : Brazil, the Unexplored with Big Shale Deposits ; Argentina Active at Comodoro
Rivadavia ; Peru till Second in South American Oil, Negritos Its Leading Field, American
Capital ; Colombia Coming to the Front with Completion of 360-Mile Pipe Line; ‘Venezuelan
Geology, Maracaibo like California; La Rosa and Mene Grande, Venezuela Advancing
Rapidly, Now Fourth Among Oil Nations, British Dominence ; Mexico, Land of Silver,
Sisal Hemp and Heavy Oil; Happenings of 25 Years in Oil; World’s Greatest Gushers:
Comparison of Mexican with American Oil Fields ; Production and Trade in Petroleum ;
Tampico, Taxation, etc. ‘
XI. GOVERNMENTAL RELATIONS—Manifold Activities Helpful to Prndeeee
Con-
sumers and Government; Bureau of Mines and Department of Commerce; Geological Suc
vey and Interior Department ; Governmental Needs and the Navy Department ; Conserva-
tion Work Accomplished and Required; The Oil Conservation Board and Its First Report
with Addresses of Leading Oil Men.
XII. HUMAN FACTORS AND BENEFICIARIES—The Men Who Toil and Win the
Oil; the Men Who Find through Well Trained Mind; Ladders to Leadership; Hazards and
Heroes, Company Care, Profit Sharing; Consumers the Principal Beneficiaries, Osage In-
dians World’s Wealthiest Tribe; How Oil Men Helped to Win the War; the American
Petroleum Institute a Permanent Result.
XIII. FINANCIAL SURVEY AND INVESTMENTS—A Bird’s-Eye View of the Bus-
iness; Benefits, Assets, Who’s Who; Operating Costs and Capital Expenditures; Fuel,
Power and Electrification ; Geological Work, Leasing, Core Drilling; Cost of Drilling and
equipping Wells; Cost of Producing Crude Oil; Margin between Cost and Market Value;
Valuation of Oil Properties with Data on Some Sales; Depletion and Depreciation; Current
Supply and Demand; Financial Losses and Conservation ;: Conservation through Combina-
tions; Larger Units Benefit Consumers and Workers, Memorable Period of Mergers, Their
Motives, East Weds West, General Petroleum to Standard of N. Y.; Earnings of the En-
tire Industry, Refining More Stabilized than Production, Increasing Gross Income; Income
and Profits of Leading Operators, Gross Sales of 12 Companies, Net Profits of 26 Opera-
tors, Net per Share, Percent Profit of Par, Dividend Rates More Regular; A Type Study
in Oil—The Texas Company; Comparisons with Gulf Oil, Humble and Standard of In-
diana; Other Substantial Operators; Refiners and Marketers in the Philadelphia District;
Financing the Industry; Sudden Need for New Capital, Threefold Function of Surplus,
Capital Increases; Making Money in Oil, Wildcatting Hazardous; Investing in Oil Se-
curities versus Speculating; Shares of - Going Concerns, Dividends Paid in 1925; Ratio of
Current Assets to Current Liabilities ; ; Financial Review of 1926 and Past Years.
XIV. PREVENTION OF FRAUDS AND FAILURES—Why Rogues and Ignoramuses
Prey on Petroleum; A Ten-Year Tale of Tragedy; General and Specific (45) Causes of Oil-
dom Wrecks; Why Small Refiners Fail; Prevention of Failures; How to Win in Wild-
catting; Blue-Sky Laws and Ear Marks "of Fraud; Hammond’s Ten Don’ts; Questionnaire
of the Better Business Bureau.
OILDOM:
ITS TREASURES AND TRAGEDIES
By OScAR H. REINHOLT
PAR Te BraWE®)
CHAPTER VIII—GEOGRAPHY OF THE DOMESTIC INDUS-
TRY—PRODUCTION AND REFINING
“The barrens of the Mackenzie basin and the frozen wastes of Chiltkat now vie with the
tropical jungles of Central and South America in luring the locator of petroleum. Whether
you describe the oil seeker as a geologist or as a scout he is also a geographer. Likewise,
foreign sales present a further requirement of familiarity with geography. Probably in no
field of commerce has America been so important a factor as in the world markets for
mineral oil. In this phase of the business one must know the countries, their peoples, their
customs of living, of doing business, and of financing operations. This takes one, not to the
hinterland, as it does the scout, but to the capitals, the industrial centers, and the water-
ways.’—The Texaco Star, April, 1923.
INTRODUCTORY
Geographic Treasures and Tragedies. There are geographic as well as
financial tragedies attached to the legitimate petroleum industry, but they
are trivial compared with the tragedies arising from oil-stock promotions.
The unique shifting of the oil and gas centers of production may prove
either a bane or a blessing. Tragedies take place in the abandonment of
towns overbuilt because of ignorance, greed, over-optimism, or lack of
foresight. Occasionally fertile farm lands have been more or less ruined
by the flooding of the surface with oil from great gushers thus urging the
owners to settle elsewhere. However, “deserted villages” do not dot the
landscape of oildom so numerously as they do the western world of gold
and silver Golcondas. By no means do the geographic tragedies outweigh
the geographic treasures in oildom. The industry is becoming more and
more one of pioneering in new or unsettled places and often leads to the
development of other and more permanent natural resources such as coal,
potash and water-power (see pages 30 and 63 and foot note 102). Some
cities owe their growth if not their birth in part to the development of
tributary territory rich in gas and oil. Pittsburgh owes largely to natural
gas her great glass industry. Tulsa would probably not be known outside
of Oklahoma were it not for the petroleum industry. Elsewhere references
relate to Baltimore, Casper, Fort Worth, Galveston, Houston, Los Angeles,
Port Arthur, Shreveport, Tampico, Wichita and Wichita Falls.
Geographic knowledge of foreign lands has been obtained through the oil
industry in two ways. For at least thirty years American well drillers
have been going abroad. Their letters get wide publicity in their home
papers, particularly throughout the Appalachian oil fields where many of
them were trained. Also, in the course of a half century, American
petroleum products have been carried into the far corners of the earth.
In a double sense they have served as the “Light of Asia,” for knowledge
of the United States has followed in the wake of illuminating oil. Amer-
ican tankers, cargo vessels and commercial travelers connected with our
136 OILDOM: ITS TREASURES AND TRAGEDIES
exporting oil companies* have continually returned with most interesting
information about distant lands.
Geography of Soil versus Geography of Oil. The fundamental geographic .
differences between ordinary mining and farming are not so emphatic in
the case of oil and coal production.f As indicated in Chapters IJ and Iil
and on pages 40 and 63-64, geologic and not climatic conditions govern the
geographic distribution of oil and gas deposits. Farming may be followed
but no petroleum produced in purely volcanic, granitic and metamorphic
regions. Neither bituminous coal nor oil may be obtained from stratified
rocks that have been violently bent and broken. Metal mining states in
general are not noted oil producers. The few large states that yield both
do so in widely separated sections. Noteworthy exceptions are the lead-
zinc states, Oklahoma and Kansas, since there the ore bodies occur in
sedimentaries.
Depletion the One Outstanding Difference. A contrast between agricul-
ture and the mineral industry concerns depletion. Fertility of the soil may
be renewed, but mineral deposits once depleted are irreplaceable. There-
fore the most striking fact in the economic and commercial geography of
petroleum is the everlasting shifting in the sources of supply. In the course
of a quarter century the center of crude oil output has migrated from the
upper Ohio valley to the vicinity of the Texas Panhandle, a distance of
about 1,000 miles. Oil pools are now more quickly developed and exhausted
than ever before; and wild-catting over wide areas increases the number of
new fields and pools that may be found within a single year. But petroleum
will not forever be mined by the well method in the United States; and so
other geographic shiftings may be foreshadowed. Many a deserted oil-
town, with its industrial tombstones of derricks, may some day be re-
populated when the partly depleted sands shall themselves be mined for
their remaining oil content (pages 42-43).
Another Geographic Difference. Agriculture is extensive, oil production
is intensive. All states contain cultivated areas and yield farm crops of
one kind or another; but 30 states in 1924 failed to produce any crude
petroleum, and three out of 18 that gave forth the combustible liquid con-
tributed three-fourths of the entire quantity. Such concentration is quite
unique and is approached only in the production of natural gas, gold, iron
ore, copper and zinc among the major mineral products and in the pro-
duction of aluminum ore, borax, graphite, manganese ore, marble, phos-
phate rock, potash and sulphur among the minor mineral products.
DOMESTIC CENTERS OF PRODUCTION, REFINING AND COMMERCE
Tulsa Nearest to National Center of Production. Production centers shift
as already shown, but refining points, particularly those located at oil ports,
* The house journals of these operators (such as The Lamp, The Texaco Star, Union Oil
Bulletin and the Bulletin of the Standard Oil Company of California) often contain highly
instructive, illustrated articles not only about the petroleum trade but also about other
matters of geographic value. The photographic views in this book imply how wide a
geographic range is covered by the American petroleum industry.
+ Thus in regions of relatively undisturbed sedimentary rocks agriculture may persist on
the surface while oil wells may tap the wealth beneath the soil. Texas is primarily given
over to farming and grazing; but in the fall of 1923, and again in January, 1925, it
temporarily took second place as a producer of petroleum. During the last four months of
1926 the ‘‘Lone Star State’? stood next to California, and even ranked first during a few
weeks.
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138 OILDOM: ITS TREASURES AND TRAGEDIES
are relatively permanent. The cities of Los Angeles and Tulsa are
apparently tied for first honors for consideration as the oil capital not only
of this country but of the entire world. Tulsa, like Tampico in Mexico, has
depended almost entirely on petroleum for its great growth in recent
years—more than five-fold in less than 15 years—so that its population now
numbers over 100,000. Tulsa is likely less than 200 miles northeast
of the geographic center of oil production in the United States, and in
practically every sense is the center of the Mid-Continent, the first of all
the seven major oil fields of this country. Here are located the homes of
more important oil companies than in any other city of its size; and here
was held the first international petroleum exposition during the fall of 1924.
Los Angeles World’s Leading Oil Port. On the other hand, Los Angeles
is less exclusively an oil city* though for the time being its Port of San
Pedro is preeminent in combined foreign and domestic shipments of
petroleum (see pages 21 and —). These shipments, to the east coast, west
coast and foreign countries, at one time during 1923 proceeded at the rate
of more than 400,000 barrels daily, or about 150 million barrels yearly.
Before 1923 no state had produced crude oil at quite so high a rate,
Unique Location of Los Angeles in a Derrick-decked Domain. One of the
few well-founded boasts of both real estate and oil stock venders in southern
California has probably never applied to any other city in the history of
the world’s oil industry. From the hills of Los Angeles one could, during
1928, look out over the slopes and lowlands from the Puente Hills to the
Pacific beaches and discern the derricks of fewer than 4,000 wells from
which was flowing collectively a quantity of petroleum so immense as to
make for the entire year of 1923 more than 20 per cent of the world’s total
and almost 30 per cent of the total for the United States. Nevertheless,
and in spite of the author’s attachment to his former home city, it must
be admitted that Tulsa is geographically the oil capital of our country as
acknowledged by a majority of oil men. Both California and Oklahoma
have other cities that are very important in the oil industry, such as
Bakersfield in the former and Bartlesville in the latter.
Many Municipalities Dependent on Mineral Oil. Houston, in Harris
County, has grown a little faster than the other three largest cities in
Texas largely because of its proximity to the Gulf Coast pools. Neither
Dallas nor Fort Worth are quite so near to producing fields. San Antonio
has its Somerset on the border of Bexar County, but it is about as distant
from Luling as Dallas is from either Powell or Wortham. Wichita Falls
is unquestionably the headquarters of northern Texas—Burkburnett,
Electra, and Holliday, as Corsicana is for East Central Texas—Mexia,
Powell and Wortham pools. Wichita is the logical oil capital of. Kansas, El
Dorado of Arkansas, Shreveport of Louisiana, and Casper of Wyoming.
In the case of states east of the Mississippi it is not an easy matter to
select the various state centers of production. Lima, Ohio, is the admitted
commercial center of the Trenton or Lima-Indiana field, but Toledo is the
leading refining center of the state, its four refineries having over twice
the capacity of the two at Cleveland or three times the lonely one at Lima.
Los Angeles, Oil City (Pa.), and Pittsburgh are prominent in the manufac-
ture and distribution of oil field equipment; so also Parkersburg, W. Va.
* See “‘Petroleum Refineries in the United States,’’ November 1, 1924, January 1, 1926,
published by Bureau of Mines, recently transferred from the Interior Department to the
Department of Commerce. |
OILDOM: ITS TREASURES AND TRAGEDIES 139
Los Angeles the Most “Refined” Metropolis. In point of refining capacity
only five of the first fifteen refining centers are known nationally outside
of the oil fraternity. Bureau of Mines data show that the 12 leading refin-
ery cities, each with a daily capacity of about 50,000 barrels or more, are
as follows: Port Arthur, Tex.; Bayonne, N. J.; Richmond, Calif.; El Se-
gundo, Calif.; Baton Rouge, La.; Vernon, Calif.; Wilmington, Calif.; Phila-
delphia; Whiting, Ind.; Tulsa and West Tulsa; Casper, Wyo.; Wood River,
Ill.; Avon, Calif.; Baltimore, and Los Angeles. El Segundo, Vernon and
Wilmington may all be considered as suburbs of Los Angeles; and if the
combined capacity of the scattered plants throughout southern Los Angeles
County be included, then Los Angeles is now the leading refinery center of
the world, with a total potential of about 375,000 barrels daily. This made
half of California’s total or one-eighth of the national capacity, May 1, 1925.
Import Traffic of Oil Ports. While Port Arthur (including Sabine Pass)
is the most exclusive oil port in the United States, Galveston stood at the
top during the past year (1924) in the matter of crude oil imports. The
figures following the names of the ports indicate in millions of barrels the
receipts of unrefined oil from foreign lands: Galveston, 19; New York, 17;
New Orleans (including Baton Rouge), 15; Port Arthur (including Sabine
Pass), 7.5; Baltimore, 7; Boston, 5.5; Philadelphia, 5; Tampa, 1.6; all others,
12; total, practically 90,000,000 barrels. However, the aggregate water
receipts of crude oil at the port of New York in 1924, including those from
California (80,000,000 barrels), reached the quantity of 47,000,000 barrels,
or nearly three times the total receipts at Galveston, which did not get any
oil from California.
Export Traffic of Oil Ports. New York is still supreme in the quantity
and value of refined mineral oil exported. But in the quantity of crude,
topped and refined petroleum carried away by water to both domestic and
foreign destinations San Pedro, the port of Los Angeles, has “lassoed” the
world leadership for a few years at least. With new discoveries near
Tampico, in time that foremost Mexican port may recapture her queenship
in petroleum shipments.*
PRODUCTION OF CRUDE OIL
1. WORLD SOURCES
Tremendous Total to End of 1924. During the past two-thirds of a cen-
tury the entire earth has produced over 12,000,000,000 barrels of oil. To
visualize this large amount of liquid it may be stated that to run the same
volume of water would take the Potomac at the “Niagara of the South”
about 185 days or four and one-half months at its summer rate of flow
(compare page 61). Practically all came from countries located north of
the Equator. Two-thirds of the huge total emanated from the United
States in the course of 65 years. One-sixth, or 2,000,000,000 barrels, origi-
nated in Russia, beginning about 62 years ago. A little over one-tenth—
*In regard to combined outbound and inbound water-borne traffic the five foremost sea-
ports in 1924 handled cargo tons of 2,240 pounds as follows, in millions, according to the
Chief of Engineers, U. S. Army, and published January, 1925, in Southern California
Business, organ of the Los Angeles Chamber of Commerce: (1) New York, 48; (2) Los
Angeles, 27.2; (3) Philadelphia, 15.2; (4) New Orleans, 10.3; (5) Baltimore, 10.2. The
figures for 1922, on page 20, are exclusive of coastwise or domestic traffic. Petroleum is
_ still the most important commodity considering quantity alone, in the foreign trade of
those cities.
140 OILDOM: ITS TREASURES AND TRAGEDIES
1,200,000,000 barrels—came out of the ground in Mexico in hardly a quar-
ter of a century. The significant facts are these: Nearly half of the
world yield to date was obtained during the past eight years, or in one-
eighth of the total time in which it has been producing; half of the output
of the United States was gotten in the same period; but two-thirds of
Mexico’s mined mineral oil was produced during the five-year period, 1920-
1924. (See pages 14 and 19.)
1895.2" 1900 SssIGtS es (310 ISIS 1920 1924
Current Output of Leading Countries. All geographic units contributing
half a million barrels or more of crude oil in 1924 are listed below, the
figures representing millions of barrels. It will be observed that the United
States produces more than twice as much as all the rest of the world.
Per- Per-
cent cent
Country 1923 1924 1924 Country 1923 1924 1924
United ‘Statess...: 2s. 7385 718 70.6 PPerd fg wi oer ences 5.7 182 BOE8
Mexicoperien «sci 150 140 13.7 Poland (Galicia)..... 5.4 5.7 6
PRUSSIA ie eee etme e 39 45 4.3 British Borneo....... 3.9 4.5 A
Persiacgee setae 29 32 But AM ME GNCCES YE les ae ay a ce 3.0 4.3 A
Dutch E. Indies...... 20 Zi 2.0 ATSeNtINAS se tor circ aie 3.4 3.8 A
RUMANIA olen s 10.9 iRee: 1.8 JAD AMI alerccersrsn crete 1.8 1.6 ae
W EneZuela ices sie as 4 9.5 mm!) HWSVOt Sete eevee wee 1.0 Ld l
Indias yee. Ree oetle 8.3 8.2 8 Colombia= s.n.ot cee ce A .5x -05
The United States apparently passed its peak in 1924, the first year since
1906 to show a loss, but 1925 and 1926 set new records. Mexico lost
in 1924 as much as the next three countries gained. Rumania gained
twice as much as the Dutch East Indies. But the big surprise was Vene-
zuela which more than doubled her output in the course of twelve months,
rising in rank from tenth in 1923 to seventh in 1924. Colombia managed
to keep her place as the sweet sixteenth just ahead of France. The year
1925 led to further changes, such as Peru passing India and Venezuela
outranking Rumania. Venezuela became fourth in 1926. :
New Peak in 1925; Gain of 50 Million. Unexpectedly the United States
surpassed its 1923 peak of 735 million through an increase of 50 million
over 1924. “This boosted the world total by little more than the same amount
making the output of all countries in 1925 fully 1,065 million barrels, and
increasing our contribution from 70.5 percent to 71.6 percent. South
OILDOM: ITS TREASURES AND TRAGEDIES 141
America’s advance failed to offset Mexico’s loss of 25 million barrels. The
1925 order of producing nations appears as follows:
Million Million
Country ' barrels Pct. Country barrels Pet.
Wnited (States? ccs se. 764 71.6 ANGEN CINE meets yuk Neve) eee 6.5 6
MexicOt arcu os he ets 115 10.8 Polamdaccteteci. oc coe 5.7 5
EMUSSIL, rercteldiere c'est © 6s i0;0 52 4.9 Bry _ Borneovusscsccciun 4.3 A
PSreiee tests dicic