KEROSENE PRICES

Dominion, Volume 13, Issue 19, 17 October 1919, Page 3

KEROSENE PRICES

IS THERE'PROFITEERING?

VACUUM OIL COMPANY'S DENIAL,

At tho offices of the Prices Commission on Wednesday, further evidence was taken regarding the present price charged for kerosene to the consumer. The chairman (Dr. Jethro Brown) lind with him Mr.. Percy' J. A. Lawrenco. Dir. A. W. Piper, K.C., with Mr. G. M. Evan, appeared for the Vncuum Oil Company Proprietary, Limited. The first witness called was Mr. Harry C. Cornforth, of Melbourne, managing director of the company. Mr. Piper stated that Mr. Cornforth was there to give evidence, and was (prepared to answer any questions, and to eivo the fullest information possible. The purposo of Mr. Evan and himself in appearing, was in no way with a view of resisting the inquiry or preventing tho fullest information being supplied, but quite to the contrary. He would like to draw attention to somo statements that had appeared' in tho Press, and might to a certain extent havo been responsible for that inquiry. The chairman: I think it woutd be more in order if Mr; Cornforth was sworn, and wo could at a later period, if necessary, consider any remarks you tlcsiro to ranked Mr. Piper sard he was not going to make an application, but to indicate that while Mr. Cornforth desired to give all the information the commission might spontaneously desire, ho hoped the opportunity would be taken of questioning him upon matters which, perhaps, might not ctWrwisfl occur to his mind regarding statements made in the Press arising out of the inquiry by the Now South Wales Necessary Commodities Board. Tho chairman said he had been formally approached by Mr. Piper on the previous day with reference to the in-* quiry, and whether it was or was not desirable or permissible that counsel should be present to asst'st in the inquiry. Tne policy of tho commission had always been to opnduct its investigations with tho utmost fairness to the witnesses beforo it. In fact, it' could only do useful work by following those lines. Tho chairman asked the witness if ho had any general knowledge of business conditions in Melbohrne. Tho witness replied that h« had a fair general knowledge. The chairman: What is tho tendency there of tho prices of commodities generally? The witness said to form a fair opinion it was " necessary_ to separate primary products from imported lines. Tho tendency of the world's markets in the majority of essentials _ that wero manufactured—clothing, minerals, including petroleum arid its products, and drugs—was higher to-day than when tho nrmisitice was signed. There was a genoral tendency, not only as affecting Melbourne, but throughout the world, for increases in general commodities, due iargely, in his opinion, to the feet that the loss entailed by the war had meant that production must ho increased to catch up with that lose. . -The chairman: You aro speaking of tile general world tendency, but as regards Australia do'tho same causes operate? The witness said tho same causes were operating in the case of all imported lines, and raw material. As to the'effect on primary products, ho was not quite in a position to say, but felt confident that, comparing Australia with the balance of the world, Australia's increased cost of a'll products was. decidedly lower than tho increased cost in other porta of the world, excepting New Zealand and South Africa. The,chairman: How do you aocount fo- tjiat? witness said poetfbly it was duo to ..'the low cost of Australia's primary products.',' Their bread and meat were s<)r..i, at a,jnuch lower price than in any f4if ( r -part 'of the world, except in some " ji colonies. . ; i-iie chairman asked whether the wit- ,. ?s lt?(l noticed, as ho himself had in • j that apparently there was f ) «*«i>.pt.'Ution amongst .traders . where the ■ demands of customers was in excess of the supply; and that people were prepared to pay almost anything to get what they wanted. The witness replied that from his observation with the Business fraternity in Melbourne nnd his general impressions in travelling in Australia, increases in price were not due to the fact that tl"> •importers of certain lines took unfair advantage by raising the prico because qtli'er importers of those lines might run jpiit tf of supplies. His obsirvations were among, the better class of business • people—big Inter-State traders. He had not seen the thing which the chairman inferred. The chairman: If my conclusion is right, there are two forms of mania in the community—one amongst consumers to purchase at any price, and the othet tunongst. suppliers to raise prices of commodities. ■■ ' The witness: That might be applicable to some classes of trade in the retail shops regarding possibly wearing material and suchlike commodities. Mr. Lawrence:' That might applv to Victoria, but conditions in each Statu are entirely different. The chairman: Quito so. The witness said his remarks, applied to the wholesale trade, and he knew very little of the retail aspect of the case. The chairman: Are people spending wisely and with the thrift to be expected of them after the war, or are they rot? • t The witness said, generally speaking, he thought they were no,t.. The chairman explained that ho had asked the general questions in yiew of the belief that the public was in a. mood to buy at any prices, and were inviting high prices. The I. think, eo, generally speaking: The chairman: Now we como to the price of kerosene. The price was raised irdoen'Uy. Whcta was th'o /rise?—On August 18. How much?—ls. a case. How much is that a gallon?—l.o4d The chairman: What was the reason why the. price was raised! The witness said fundamentally, tho cause of tho increase was due to the rates of exchange and the conversion of £ sterling into the ' dollar, plus the fact that since January 1 the actual cost, f.0.b., of kerosene had advanced by practically Is. sld. a ease. Tliat increase mado'up three increases in the market value due largely' to the fact that t.l>« world's stocks of kerosene were depleted, and there had been a big ca.ll upon the world's refineries, together with the law of supply and demand. The chairman: You aro speaking of f.o.b. rates? [ Tho witness oxplnined that he was. Ho said they would not have advanced the price of kerosene had they not been incurring a loss on exchango. ■ Tho chairman: How long do_ you thinlr the rate of.exclityige is going to, to? adverse The witness was unable to say. When the exchange dropped from i dollars 75 cents, to i dollars 00 cents ho could readily see the effect it would hava upon' their business. That nearly three months ago. He passed it ovr, The next thing he knew was that the exchange had Mien to ' dollars 40 cents. At a meeting of the directors of his company in Melbourne U .was decided to carry on in the hope that exchange would stabilise in a few weeks. The onpnsite occurred, Jand exchange dropped down as low as i doll am 12 rpjiN. DiTinc the Inst hvo innntliß it had ranped Whveen 4 dollars 12 cents, nnd approximately 4 dollars 25 cents. He had talked with bankers in Australia end had sent cn.bl»« to different part" of tho world, including London and America, in an endeavour -to find out when exchange might become stable again, and he had found that the world's financial men were tunable to tell him. Tho chairman: You are aware that at the beginnint? of the war the rate of exchange was the other way. It took a-bout se'-on dollars to liquidate .£1 in London. Tho witness explained that that lasted fo'- a few days onlv. .The chairman: Don't you think that, the creat recent drop will soon redress itself? The witness sincerely hoped so, but he hed no basis to go on. The chairman: Don't you think something will soon bo done in order to stabilise the matter? Tho witness did not know, He wanted to make it clear that ordinary indentors of merchandise generally bought

through an indent house. They received invoices for their goods, and tho conversion from the dollar into tho pound sterling was made practically at the ruling rate of tho day. His company, did not convert their invoices at tho time of shipment, as was done by tho averago importer. Their invoices, their debits and credits ran into thousands. They remitted their money back to London to pay for their bills. That money was converted hack into dollars at New York. Tho chairman: Do you remit money to London?—" Yes, all our money." In what form?—"By telegraphic remittances." The witness explained that they paid the money into their bankers to bo remitted to London. Tho point he wished to make quite clear was that ,it was on tee moneys they were remitting and had been remitting that the exchange altered from i dollars 75 cents,'and they wero making their losses not upon the mere fact that the goodg they had received or were on the water might have been invoiced or shipped at the time the exchange wns'4 dollars 75 cents. They were actually making their loss on goods that they sold four months ago. The chairman: Th» policy of this commission is not to fix prices if it can lieln, because there are so many factors which can go to make the price of a. commodity, and the commission would have to sit night and day varying and regulating prices. What the commission has generallv done has been to jet business me* before it and discuss the situation. Would it hurt the company you represent if you stood out against the tendency to .raise prices? ' The witness said it certainly would, for the reason that their application for t'.ho inoreose of price did net cover Hie actual losses they wer" makimr. Tl'pv we.re carrying at a selling price of IBs. fid. a neaterproportion of the burden than ; the consumer was carrrin? even by tho incren.se of Is. a case. Their cost to-day was based on an exehnure of 4 dollars 2.5 cents, which was bW""- than the actual rate of exchange, which now rans«d from about 4 dollars H cents to i dollars 18 cents. The item on the statement regarding income-tax could lie eliminated. Tn other words, he doubted very much whether thev would have any income-tax to pay this yenr, so he felt in justice they could eliminate that charge. On the same stocks, excepting those which had been sold on September 1, the actual cost of their Laurol kerosene was 18s. 2d. a case, and the increased selling urice was Ilk 6d. The chairman: One of the troubles the commission has felt is that I s aurel kerosene is only one of a very large number of oils sold by your company. Can you not soil that lino at a loss for a timo without affecting ; your business as a whole The witness: It is sold at a, loss now, even at the increased \price. _• Tho chairman: Quite so. I am asking if you could not continue that lass or increase it, taking into consideration the business', as a whole. Business men huve frequently come before us and said the price of this,or that article must iiof. be reduced, because it is one of their best paying lines, and out of that best paying lino they havo to make up the loss on other lines: but the argument cuts both ways, and the feeling 1 have is that the business must be considered as a whole. It is impossible for the commission to allow a trader to make very high profits oil one particular line on the ground that that pays for tho losses on another line without sometimes approaohing traders, and asking if they cannot continue a loss on some lino, having regard to tlieir business as a whole. The witness would like the chairman to put himself in the position of n trader, and to suggest that ho should inquire what were the average profits the company ho (the witness) represented had made in South Australia. The chairman: I do not want to ask for that, for I havo already got tho material. Mr. Pipj 1 ■■'■: May we know what that material is|"so tliat we may know what you are going on? The chairman (holding up a document which hod been put in by tho company): It is fairly given here, <1 think. Mr. Piper: That is a loss of Is. 2d. on the case. The chairman: Yes; that is so, but it does not. answer my question. I am Raving the commission. 13 driven to consider a business concern as a whole, aud.it prefers, instead of fixing a price to approach those in control of a business and to discuss matters with them. Hero you have 50 lines. You' will not bo answering my question, bv saying there is a loss on kerosene. What I am asking is whether, taking your business as a whole, you cannot carry tne loss un kerosene? .The witness said to carry the loss.on kerosene to any greater extent than they were carrying on their sales throughout Australia would be absolutely impassible. ' The chairman: That is tv say, tho business as a whole will not allow it. The witness said it would bs impossible for him to. say whether at the present time they wero going to make a loss or a profit on the entire trade of 100 odd lines throughout Australia, New Zealand, and the islands during. the coming six months, He did know' they were mailing a loss now based on Tates of exchange for kerosene and benzine. In the mind of the average man, who knew very little about their business, iiud had read newspaper reports, showing big figures, there might .'fco an impression created' that their profits on kerosene, say, in South Australia, ran into big figures. The chairman: That is not the evidence before the commission. Tho evidence before the commission is that there is a loss, but the question is whether that loss .cannot be carried. Let us consider the question more minutely. You say that the loss has been made on kerosene? Tho witness: Yes, during tho last two months. The chairman: On whom does that loss fall? The witness: The Vacuum Oil Company Proprietary, Limited. The chairman: Who,are the Vacuum Oil Company Proprietary, Limited? Tho witness said it was the Australian Vacuum Oil Company Proprietary, Ltd., and was registered in Victoria under tho . Companies Act. There were eight shareholders in it, one in Australia, one who recently left tliQ Commonwealth; and the others in Now York, If it mado a loss the shareholders would have to bear it. The chairman: You don't think it would be met at tho other end ?—"Which end ?" The chnilrman: New York. The witness said tho paid-up capital was i 1,600,000. ' . Mr. Piper knew there was a suspicion curreni that tho capital was not paid up in ctißh. That had been raised by Mr. Justice Eldimindß in Now South Wales. They were much perplexed regarding his foundation for his statement in that connection. The chairman; I have no doubt about it. I'aasumo it lis paid up. Mr. Piper was pleased to have that point clearly set out. It had been stated by Mr. Cornforth before the Inter-State Oommiasion that the amount was paid up in cash by the shareholders, and was fresh capital. Mr. Piper then quoted from tho evidonoe taken by the InterState Commission, which clearly showed that the £1,000,000 capital was subscribed in actucf cash. Tho chairman: A difficulty we havo in approaching thin question is that we hear of two Vacuum Oil. Companies. < The witness (replying to Mr. Piper) said one of the shareholders was tho Vacuum Oil Company of New York. The other shareholders were individuals. The Australian Vacuum Oil Company Proprietary, Limited, had actually supplied tho capital. Mr. Piper, addressing tho commission, said tho company had-assets, ono way and another, and bovond the capital paid un had another .C 1,500.000 to trade on. It practically had capital of .£3,000,000 to trado on. It wanted a fair return for that amount. The chairman: What aro the relations of the Australian company with tho Vacuum Oil Company of New York. Mr. Piner said that was the only Vacuum Oil Company of which they had knowledge. There might 'be others. Tho New York company wok a shareholder in the Australian company, as represented by Mr. Cornforth. Tho chairman: Docs it have a controlling interest? Mr. Piper said it might on its investment. That did not concern him as it did not really affect the matter beforo the commission in any way whatever. Tho chairmnn: Possibly it has. Mr. Piper said even if it had it would

not mutter, because its influenco would have no effect on tho question More the commission. He could see tho train of thought in some minds that there was a Vacuum Oil Company in America which pou.ved out kerosene, anil that even if it mado only a small profit here it mado a big profit there. That was, 10 put it mildly, a most gravo misconception. What ho asked the commission to do was lo probe thoroughly whether tho Australian company, which sold its oil in tho Commonwealth, bought through its agents in New York from independent supplies in tho open market. If it lost capital here it would have to do the best it could. It. had no resources or means at tho other end to tu.ni a nominal loss here into an actual profit there. This was a matter upon which the Vacuum 011 Company Proprietary, Limited, courted the fullest investigation and inquiry. Mr. Piper further pointed out that none of the shareholders in the New York Company was a supplier of kerosene, and that company itself was not a refiner or seller of kerosene. Tho chairman: They are riot producers? Mr. Piper: No, nor merchants. The chairman: It is a necessary part of their business to be manufacturers of lubricating oils. They are producers in that sense? Mr. Piper explained that tho Vacuum Oil Company Proprietary in Australia had works at Sydney, Melbourne, Brisbane. and Fremantle, but no kerosene was denlt with. The chairman: Have von a bnlancoshcet of the company? May we see it? Mr. Cornforth: Certainly. ' A balance-sheet of tho Vacuum Oil Company, Proprietary. Limited, dated Mav 31. 191 D, was then put in. The chairma.ll directed the attention o£ witness to an item, "Profit and loss account. credit balance, .£938,000." Mr. Cornforth stated tha,t Mr. J. C. Blair (accountant and auditor of the company) would explain the matter. Air; Blair: Those are accumulated profits since the institution of the business, and are now used as eapital in tho production of income. They are reserves. The chairman: Over what period is that credit balance arrived at? The witness said it concerned the twentv-four years during which the company had been established in Australia. 'flip, chairmnn (referring to another item on tho balance-sheet): This 6undry account seems very large. Mr. Blair explained that that item dealt with accounts that wore not itemised on the balance-sheet. There was no such thing in the company as secret reserves. It was their praotico to make n, trial balance every month, and to take out a. balance-sheet every six months. The chairman (to Mr. Cornforth): In Mi is evidence before this commission, Mr. Clark said he was unable to give us any information about a statement which was made by the Inter-Stato Commission that the Vacuum Oil Company had made 40. .50, or BO per cent, profit. The witness did not know that the Intor-Stiito Commission actually mado that statement. They were dealing with the per cent, of profit on paid-up capital. which would be quite misleading. The witness said it was percentage of profit made on nctunl capital used in the business or percontafs of profit i made on the turnover, which was the fair test. The percentage of net profit made on the total' capital used in the business, as shown by tho last fourteen half-yearly balance-sheets, had averaged 12.50 per cent. . Mr. Blair explained that the capital lised in tho business included the actual paid-up capital, plus accumulated profits and reserves. ■ Mir. Cornforth said the question of capital was worthy of consideration. The company had used in the war period, as compared with the pre-war period, an inciecsi! in capital of. ,£1,074,000. Tho actual capital used in the business in the war period as compared with the pre-war period was equivalent to 100.91 per cent, increase. While they had that increased capital used in the business they made a decreaso of 2.048 per cent, of profit on tho capital used during war years, as compared with the percentage of profit made on capital used in the pre-war years. The chairman: .Tust wait a moment. You are making a statement now which syenis to be directly in conflict with statements .that have jappeared in the Press, and I want to be sure I have it right. What per cent, loss do you say von have made during the war period?— "During the war period we have made 2.SUS neir cent, less profit on'tho'actual capita] used in our business os compared with pre-war year*." Wha.t becomes of the statement about 40 to fiO or 70 per cent, profit during the war period ? Mr. Lawrence: I saw that in the report of the Tnter-State Commission. Mr. Cornforth 6a : d it was a statement made by' Mr. Justice Edmunds in open court, and how ho arrived at that erroneous conclusion he thought be could explain briefly. If they took the percentage'of profit made during the period under review onlv.on the paid-up capital, which was .GOO.flflO, instead of tak'ng the percentage of profit on the actual cnital used in the business, namely, .'•'■.1*5,782, they naturally got very different re=u'ts. If they desired to get tho actual percentage of profit on capital the only tnio method was to take the total capital used in the business as the bas : s of calculation. Mr. Lawrence: Yes; vou would take tho whole capital in tho business, and not only a part of it. The chairman: Do you understand the statement as to 40.!ifi and 70' per cent, profit was 2>robably made by estimating the profits on the basis of the actually subscribed capital, without any reference to the iti<i\ of ,£038,000 which represents profit which the company had not distributed but had kept in tie business ? Mr. Piner: I think Mr. Cornforth, like myself, is able lo answer the question, which proceeds iipon the suggestion that the Inter-State Commission paid so. The chairman: I understand the statement wa.s made on the supposition that ell profit* kept in the business and not distributed wero not to 1» u=ed for calculating the rate of .profit. The rate of profit was to" be estimated on the nctivilly subscribed cap'tal — I "Newspapers in their reports are ant to pick upon some big item. That 72 per cent, has often been referred to by newspapers. It is based on the then paid-up capital, that is, of ,C80!),000." Tho chairman: You have thrown a good deal of light on the subject. Whether a business concern which, instead of distributing its profits as dividends, keeps them for the purpose of business expansion should b9 treated in subsequent years, as shown here, i.s a. question of policy which I don't propose to go into. Most companies consider themselves entitled either to distribute their profits or tn keep them in the company to expand (he business, according to the circumstances of tho case. The important noint is that the references made in the Press fo the high percentage of profits are largely bas"d on the fact that the comnany had kept in its hands, instead of distributing profits mado in previous •years. Mr. Blair: The company did distribute profits by way of dividends, but if was necessary for them to retain certain of the profit for lt.io in its business, otherwise the 'balance-sheet would show.they wero trading on borrowed moncv. Thev lmd either to keep the money in tlie business and be shown as a solvent concern, or bo shown bv their balance-sheets to be practically insolvent. The cheirman: That clears the rrounil considerably as far as these alleged profits of from 40 to 70 per cent, are concerned. They are mythical from the business point of view, because every lmsincss concern is entitled to distribute some part; of its profits as dividends and retain some in the business for expansion. That, is one of thn first essentials of a organisation. The witness; T have made a statement, in which T have taken each balancing period and worked it out for each half-year, showi"" the rate for each of 14 lin'f-ynnrly balancing periods, dating back lo 19)2. The average _ percentage rale of profit on the cnnital used in the business for each balancing period is 12.00. The chairman: Is that Tier annum?— "If you lake it on the basis of per cent, per annum voii would have to doublo the six-monlhly periods." 'file chairman: Wc have got rid of a certain amount, of misconception, and that, is a'helpful starting point. Tho witness: I would call attention to the decreasing amount of profit mado during the last few periods, which are really war periods, comparing them with tho first four, which aro pre-war periodi!.

Tho chairman: I see that. I take it you want to say that during the war period, so far from taking advantage of the war, you were making less profit? The witness: We made less per cent, of profit on the capital actually used in the business than ire did before the war. I want to clear up the misconception about the large amount of profit we might make when I answered your question regarding the big loss on kerosene, to offset what might possibly be in your Honour's mind in reading newspaper reports, that wo might well afford the' big loss. The chairman: We had the Inter-Slale Commission's report, which, if I might say so with due deference, does not a]>pear to go on very business lines. Mr. Piper: That is what we have felt very much. The chairman said tho figures regarding the profits were for recent, half-years:— To November 30. 1017, 15.102 per cent.: May 31, 1018, 0.137 per cent.; November 30.'1918, 7.514 per cent.; May I 1919. 5 W per cent. The balance-sheet brought linn back to the question whether a business which was paying on the capital an annual profit of 21 per cent., could not legitimately stand a loss on one of its lines. The' witness said the company was standing a loss at present on kerosene. The fiejjres presented had been given in justification of the increase. They were losing also on lubricating oil, as well as on kerosene nnd benzine. Mr. Blair explained the method on which the trading account was kept, and stated that the balance-sheet disclosed the actual net profit. The witness said the company did its own distributing. Tlysre wng absolutely no connection, directly or indirectly, between the Vacuum Oil Company and any other oil company. It bought in the open market at. t.ho lowest possible price. The chairman: Have the shareholders in tho company a controlling influence in any other oil company? The witness said, under the Sherman Act no director of one oil company was allowed to sit on a board of any ■ other similar organisation. Regarding kerosene, tho chairman of directors tho company, who was resident in New York, bought in tho open market wherever he could to tho best advantage. Tho original invoices were sent ; ;o Australia. Tltero was no buying or shipping commission. It was a question whether they might not justly reduce their profits by suggesting that a_ charge should be made for those services rendered. The Australian people had tho benefit of that work. Australia got the benefit of payments made locally in deriving income tax from them. ' - The chairman said, according to the latest returns, tho profit of the total capital of the company for the halfyear ended May, 1919, was 5.8 per cent. That meant 11 per cent, per annum. Again he put the question to Mr. Cornforth whether the company would not be ablo to mako a fair profit without charging increased prices sor kerosene, which was ono of the many lines in which it dealt. Tho witness (emphatically): No. That is largely due to the fact that it is making a loss on nearly all its lines, due to exchange. The chairman: What is the proportion of your trade in kerosene to your total trade, in terms of money? The witness could not give that so far ns Australia was concerned, but in South Australia it worked out at. between 50 and 55 per cent. ~ : Tho chairman: That i! enough. I wanted -to get a general indication. If l'tlhad been 10 per cent, of your turnover there would bo a great deal to be saio for what I have just now mentioned about maintaining original priccs, even at a loss. If it is 50 per cent, your case is much stronger. Mr. Lawrence: In order that we might bo quite clear, I take it you meant, when referring to invoices, that tihey aro not "salted" at the other end? The witness said that was so. He hoped the commission n quite clear on that point. Ho had come prepared to answer questions regarding ihonie consumption values, compared with invoice cost and f invoice cost compared with export prices on the same dav. The invoice price for the kerosene they had in South Australia that day was considerably less than ''lo home consumption price on the same day the shipment was made. '. The witness here produced an original invoice in confirmation of his statement. Mr. Lawrence: Cnn you .'rive the commission information regarding the quality of kerosene used in America and the quality used 'here, and the relation in cost (retail selling price), ns ngainst, the value here? . The witness said the ou.'lity of kerosene used on the Australir.-i market was better than tho quality of'kerosene "old in the United States, generally Fiieaking. In fact, it was better qualitv ("erosce than was used throughout Europe. Tho same remark applied to benzine. So far as their Plume grade of benzino was concern°d. there. ww} none of that class sold in the American market. R.esarding tin cost of home consumption, lie could not do morn than give f.he commission ex. tracts from the "Oil Print'and Dru? Reporter." which was a recnenised authority. The American storekeeper hou"V. his kerosene, which wns of lower qualitv tlinn that sold in Australia, for 1(1 cents per wine gallon bulk from a tai'V wagon. In considering that thev hid tn remember that tho kerosene sold in Australia wns by the Imperial trnllon, which wns about a fifth greater than a wine gallon. The chairman: It has been stnted tl'at the Australian consumer pays four times as much ns the consumer in New York. The witness: He may pay a larser prico ner separate unit, owing to the fact that his kerosene has to put into a container, and that container has to be carried thousands of miles with tho different charges attaching to it. The present selling price here is 10s. Od. a case, that is, Is. lid. an Imperial gallon. I do not know what the New York retailer sells it for, but I know what lio pays for it. The storekeeper there pays about Sd. per wine gallon, which is a 6mallßr measure than the Imparial gallon. The equivalent would bo about Is. 7d. per wine gallon here, as against Bd. per wine gallon to tho New York retailer. Ho is supplied in bulk in New York. The difference between the Bd. and the Is. 7d. is mado up in the cost of packing, etc. Coming to the question of f.o.b. cost, on the basis of the actual kerosene thai you havo on hand'in South Australia, ex tho Marguerita, and comparing the actual invoice prico for that particular shipment.'with the home consumption price, the retailer pays plus tho cost of the . caso and two tins, plus the standard cost of a ecnt, per wine gallon for the better quality. It shows that our f.o.b. cost is 6.025 cents below the home consumption pnrity.' The export quotation for the same cla.'ss of kerosene ns imported' tp Australia on the same date that that shipment was made, but in tiii9 and cases, is 3.15 cents per wine gallon higher than the actual invoico of a shipment made on the same date ot the same port (as per invoice already handed in.) Mr. Lawrence: We understood from Mr. Clark that when you receive a shipment you Jake your stock and the shipment and average your cost to base your selling priw. The commission can tako it that if you. have any losses now through 'having to remit owing to the adverse conditions of exchange, in another six or ten weeks if the exchango runs the other way you will base your Belling price on that alteration?—" You can take that quite as an assurance." Mr. Piper: And tbo public will get the benefit. Mr. Lawrence: That is what T want to como at. You aro continually reconsidering youi averago cost?--"! don't anticipate, unless things materially change, wo shnlj come out on the right side of the ledger this yoar." Mr. Lawrence: The commission may lake it that you average your cost and reconsider your selling charges on that protty frequently?—" Yes, for Australia every month." The chairman: The profits referred to in the Inter-State Commission's renort were made with the full •understanding and implicit consent of the Onmmo"wenltli Government. Is that so?—"I will not Kiv they wero mado with the full understandin'r, because we do not know, and nover will know, what wc are going tn make on a period unlil our balancesheet is out three months later: but they never refused an application for an increase in price after the most careful investigation." Tho chairman, replying to Mr. Piper, said an interim report would be issued bv tho commission as socn ns possible, dealing with that and other matters, and

if it did not fix the price of kerosene and petrol the reason would be staled. .Mr. Cornfnrlh, referring to the activities of the company, witli the approval of the commission, said it had its own properties, manufacturing appliances, wharves, docks floating equipment, and so on, in Australia, :n a permanent form. There wore, directly and indirectly, approximately 10(10 employees. By its welfare work amongst its employees the company was recognised as among the leaders in the world in that respect. It had a pension scheme which entitled workers to a special pension, after 20 yea re' service, at (10 years of age. There were also death and sick benefit schemes. There were tea rooms and eo on for the female employees. During the past, four years a bonus equivalent to a month's salary had been paid to each employee owing to the increased cost of living, and there had been tho usual periodical increases in salarie c . The company, in view of the facts, felt strongly regarding certain remarks made in ssonio quarters in a compar'son of tho capital used in the business. A large amount, of capital had been lirought into Australia, helping to dovcuip it. Tho company was selling a claw of product thai could not be produced in Australia, and at a price (talc'.ng freight* and other things into consideration) that was equal to the world's parity. The company was giving service to the country in moro vav*i than one.' and it did not like to be judceil as a "fly-by-the-irght" concern. It had a. good name, and was very proud of it. Reference- to 72 per ee'it. profit aiu.l such impleading statements did no good, but reflected upon the standing of the company. The chairman: And do not correspond with reality? Mr. Cw"forlh: "No.'' He hoped the people of South Australia would reaHy ki■ r.w fo v what the eompnny stood. The chairman.: That is why we got yo" to come over here. Mr. Cornforth replied that he was glad to be present. He added that he would l.v pleased to answer any further _ question's. At the invitation of the chairman he undertook to supply documents of the conmany for the guidance of the Commission.—rPeprint.rd by arrangement from the Adelaide "Advertiser," September 25, 1919.]