CHEAP BENZINE.

Press, Volume LXII, Issue 18888, 31 December 1926, Page 12

CHEAP BENZINE.

DR. PAGE'S BOAST. A.-P. COMPANY'S STATE PARTNER When tho Commonwealth Government and the Anglo-Persian Oil Company become equal partners in an oilrefining business (Commonwealth Oil Refineries, Ltd.), to which the company would act as supplier of crude oil, many people wondered whether the A.-P. Company, after taking first profit as owner of the Persian oil-wells, would leave any margin for profit-staking by the relining company, C.O.R. It is rather an unusual occurrence for a private company to stand in the dual position of being owner of the oil-wells, and also partner with a Government as oil-re-liner. First profits are sometimes last profits. Would the A.-P. Company's anxiety, as a producer of crude oil, to sell its product at a high price, overcome its enthusiasm, as a partner of the Government, to buy the refinery's raw material at a low price? These and similar questions were asked by people who scented a conflict of interest. The then Prime Minister of Australia, Mr W. M. Hughes, the political architect of C.0.R., replied "Wait and see." Years have passed, and now a onetime political opponent of Mr Hughes —viz., Dr. Page, second man in the Bruce-Page Government —has also uttered a benediction of C.0.R., and has voted that both the companies are making profits, while prices of refined products have dropped. Bulk and Pump Prices. "Tho C.O.R. balance-sheet," says Dr. Page, "supplies an answer to hostile critics of the company. Despite _ the difficulties of building up an entirely new business against powerful competitors, the Commonwealth Oil Refineries, in the second year of operations, have been able to show a substantial profit. This has been obtained in spite of the fact that their entry into the field has gradually forced petrol prices down from 2s I£<l to 1b 9d per gallon. I j notice that the chairman in the report j said that tho constitution of the company prevented it from entering into any combination for price-fixing purposes. Its activities wil be soon sufficiently extensive to relieve the position of many garage proprietors, from whom he has been receiving letters bitterly complaining of the fact that since they have been tied by the erection of the new petrol pumps, they are just working for the foreign oil companies. li T am glad also to see the statement of the directors that the other large shareholder, the Anglo-Persian Company, is supporting the directors in their policy of making petrol as cheap as possible, and is prepared to contribute its full share of any capital required to meet the needs of expanding business. lam gratified to note'the definito declaration of the chairman that arrangements have been made to provide adequate supplies of spirit "to meet the growing demand for Commonwealth Oil Refinery spirit, which it is proposed to continue to market at prices favourable to the consumer.

Refineries for Other States. When CO.Ii. was initiated, with one refinery near Melbourne, its critics alleged that, even if crude oil were supplied to it at a reasonable price, it had not within reach the population to make refining pay. They said that there were not enough people in Melbourne and Victoria to provide a paying turnover, and that Australian railway and coastal freights were bo high that C.0.11. would not bb able to compete in other States of Australia against case oil shipped to those other States direct from American ports. ' Yet to-day C.O.R. claims a trading profit of £39,552 on the year ended June 30th. Also, it is published that '•new refineries at Sydney, Brisbane, Adelaide, and perhaps Perth, are contemplated, and sites have been consid°rTn'their annual report the directors of CO.lt. state that, "m view rci "the public attention directed to the Com monwealth Oil Refineries, connexion with the tax caßtroversy, and of many irresponsible.a*, well as inaccurate statements which have appeared respecting the company and its operations," the report, affords She BoarS an opportunity -to indicate tho general purpose and objects of tne company, and to invite attention to its suwessiul efforts in contributing to the supply of cheaper petrol. On the financial side it had repeatedly been suggested that '.'the undertaking was a Government instrumentality, and, as a consequence, must be heir to an the disabilities which are ° ft « n n at , tr i°uted to such enterprises." Rebutting this suggestion, the directors write: "The concern is a public company incorporated under the ordinary company laws of the State and subject thereto. Its business, is conducted on strictly commercial lines by. the directors free from dictation or interference by the Government or the Anglo-Persian Oil Company, who are the shareholders. At no time has either of these shareholders interfered with the management of the business. The function of the directors is to I direct the business and to market the products of the refinery at the lowest I prices possible, compatible with expanding the business and providing for the ultimate return of a fair interest upon the capital invested. The company is bound by its constitution not to enter into any combination with any other concern for price-fixing or similar purposes. A.-P. Company and Cheap Petrol. "It may bo emphasised that the An-glo-Persian Oil Company (itself a commercial enterprise) has supported the directors in the policy of marketing petrol as cheaply as possible, and it is prepared to contribute its full share of any capital required to meet the needs of its expanding business. It is therefore absurd to assume, as some have assumed, that this company is sinking capital in an undertaking. which is merely operating as a public philanthropist, and has no regard to business principles." Dealing with the operations of the company, it is stated that, whereas for the financial year ended June 30th, 1925, the trading account disclosed a loss of £24,379, last financial year snowed a trading profit of £39 ; 553, which constituted a favourable difference between the two years of £63,931. The position, the directors continue, might therefore be considered as encouraging, particularly in the light of the prices at which bulk benzine had been marketed by the company over the two years' period. Thus, in July, 1924. the price was 2s ljd a gallon, a year later it was 2s a gallon, and in June, 1926, the price had been reduced to Is 9d a gallon. Until the latter part of the financial year the refinery was not running at full capacity. The provision made for depreciation was £29,433 for 1925 and £31.931 for 1926. The directors point, out that the trading account submitted does not include shareholders' contributions for the financial year of £42,368 towards establishment expenses.

Distribution Activity. The directors write that they do not think that business prudence justifies them in discussing future developments under way and in contemplation. They however, mention that installations for the expansion of bulk distribution throughout the Commonwealth are well in hand, and arrangements have been made for providing adequate supplies of spirit to meet the growing demand for the company's product. This,

they remark, will be "mado available at prices favourable to the consumer, and without regard to what other oil corporations may choose to do." After pointing out that in these days, when motor transport and the internal combustion engines play so large a . part in both the commercial and the general life of the community, they add that it was of vital concern to the public that the product which created the energy for these purposes should reaoh the* consumer at the lowest possible price. This objective the directors claim "to be forwarding in every legitimate way, and as tho public of Australia are interested not only as consumers, but also as large in the company, through the Government holding in the concern, it is suggested that it be judged and supported upon its merits, and not upon the representations of those whose interest it may be to discredit it." The directors oonclude by stating "that the concern, viewed from the standpoint of a business undertaking, is still making satisfactory Headway, and that a full through-put is being maintained, which is proof of publio appreciation of the high standard of production." The actual profit shown for the year, after making allowance for depreciation of £34,954 is £4600, and as there was a debit balance at Juno 30th of £982, that has been wiped out, and £3618 is carried forward as a credit to profit and loss.

Foil Throughput Moans Profit. "A much more encouraging report (comments the "Argus") is issued by the Commonwealth Oil Refineries, Ltd., for the year ended June 30th than that for the previous twelve months. Then the future of the undertaking was under discussion because of the need for providing additional contributions on capital account, and for carrying the concern through the stage of establishing its business. It was reported that the refinery during 192425 operated at only about one-third of its capacity. Directors now advise that a full through-put is being maintained, and that the concern is making satisfactory financial headway. The trading account in 1924-25, showed a loss on refining and trading of £24,379, which with £29,433 allowed for depreciation called for contributions of £53,084. The full employment of the plant last year altogether altered the financial position, as instead of a loss a refining and trading profit of £39,552 was recorded. The contributors, who constitute the Commonwealth Government and the Anglo-Persian Oil Co., Ltd., will each feel gratified that the operations for the term show such a turn in finance. Sir Robert Gibson, as chairman, signs the report for and on behalf of the board. That document is interesting as supplying a definition by the directors of the basis of the enterprise. The point of the statement is that it cannot be interfered with in the management, also that it must not enter into combination with any other concern for price-fixing or similar purposes.'-^