THE OIL PROBLEM.

Taranaki Daily News, 5 June 1920, Page 11

THE OIL PROBLEM.

A WOELD SHORTAGE. KISE IN PRICE CAUSED. AMERICAN INVESTIGATION. Los Angelos, March 31st. What is at the bottom of the oil trouble at the present time is simply that the production of crude oil is not sufficient to meet the demands. To-day the production in California is 2,000 barrel daily less than requirements, and the deficiency for 1920 at the present rate of production will be 10,000,000 barrels. Since 1918 stocks decreased by 14,000,000 barrels. Rumours of higher prices were quickly confirmed, after faint-hearted denials. A week ago gasoline was retailing at in Los Angelos. It is now one penny (2 cents) higher, and crude oil has gone up by Is a barrel. OFFICIAL CONDEMNATION. The State Railroad Commission characterised as inadequate the reasons given by the Standard Oil Company of California for the increases, and in a strongly worded lotter to Mr. K. R. Kingsbury, president of the company, demanded that he make full explanation to the public as to the necessity for the advance. The Commission asserted that the increase ill the price of fuel oil would necessitate an increase of electric and gas rates in California to a total of £1,400,000, and declared tJliat if private control of prices is justified, it must be on the grouni that this private control is reasonable, and that it is not unduly or unfairly burdening the public. In its protest the Commission touched a vital spot when it pointed out that the company gave as its full reason for the increase that "there is a scarcity ot oil, and that oil is selling in the Eastern States at 'higher rates than in California."

"A very disturbing feature of this situation," continued the Commission's letter, "is that there is no assurance that based on the same reasons you have publicly given, the price will not be constantly advanced to a point where the gas business would be practically annihilated." OIL IN GREAT DEMAND. Some relief for the oil situation was in sight, declared Mr. Franklin K. Lane, late Secretary of the Interior, now vice-president and counsellor to the president and general manager ol the Mexican Petroleum Company. He added that the position was, nevertheless, a serious one. The merchant marine had called for tenders for 25,000,000 barrels: of oil for this year, and it would need twice that quantity next year. "Where we are going to wind up over this oil problem, I do not know," he said. "The country is building motorcars and trucks at the rate of 1,500,000 a year, to say nothing of gas engines, tractors, traction engines, and heating plants, all of which will require vast quantities of fuel and combustion oils. "Our latest information is that the Bolsheviks are bearing down on the Caspian front. This threatens the Persian and Baku fields, which England had hoped to open up- This is likely to throw England in tliiß direction for her immediate supply at least.

RELIEF IN SIGHT. "Temporary permits for drilling in. Mexico will relieve the situation a great deal, but will by no means meet our needs. Ido not know how long those drilling privileges will last, but I have the feeling that eventually American oil interests in Mexico will be secure." Speaking of oil prospects in the United States, Mr. Lane stated that the new Oil Lands Leasing Act will permit of prospecting on an area of 4,000,000 acres of public land, which was mostly withdrawn by the Government during the Taft Administration. How much of it would bear of oil nobody knew, but he believed that a gTeat deal of it would be opened up as soon as regulations had been promulgated. SHIPPING BOARD'S DILEMMA. A prospective shortage of fuel for oil burning naval craft prompted Mr. Josephus Daniels, Secretary of the Navy, to call a conference for a discussion of the situation. The position will be fully received by all Government bodies concerned. The United States Shipping Board recently called for tenders for 40,000,000 barrels for its ships. It received offers for only a little over a million barrels. The prices asked in the tenders revealed an increase of from 76 per cent to 90 per cent. Existing contracts will expire within the next few weeks, and at no point has the board ft reserve supply for more than a few days. Oil men stated that the trouble could be definitely traced to the unsettled conditions on the Tampico (Mexico) fields, the principal sources of supply. The board is considering a suggestion that President Wilson .be urged to invoke his war powersi to meet the situj ation.

THE COMPANY IN REPLY. The Standard Oil Company to-day replied to the letter from the Bailroad Commission. "Past history," declared the President, "has shown that an increased price for crude oil will result in increased production, tend to conserve fuel, and check stock depletion. This is the only known remedy. If these results do not follow, the position on the Pacific Coast will be serious indeed. The company has made every effort to increase production, but many operators have failed, in the face of increased costs and heavy war taxes, to produce more at the prevailing prices paid by refining companies for crude oil. "Gaßoline must be kept at a price level at which it will not be shipped to other markets in quantities sufficient to deplete the Californian market. At the present time gasoline is selling m Naw York at 28$ cents a gallon, whole«vle, a difference of nine cents- The rail rate to New York ia seven cents, atid the water rat® does not exceed four cents. Unless a proper differential exists, Piu-fic Coast gasoline will be sold East .it a profit and completely demoralise tho California market. So short ia tho supply that the oampany purejiaeed about 60,000 gallons in ft ffild'CMitimmt Held to send to points usually supplied from California. Th# Fftmfio Owl mipply is rapidly approaching eskwljon. Since Ist May, 191S, ««Ub ml stocks in this State have daefSMoS fremoTO 6Q*00&£8& kftfHWi At tfw

present rate, available stocks will be exhausted in twelve months. The Shipping Board is establishing oil stations throughout the world, and will supply these points from the cheapest market. 'lmproved refining processes will increase the volume of refined products extracted from crude oil and thus reduce the residue for fuel oil. The company is installing at a cost of ten million dollars new processes by which the company expects to secure more refined products, including gasoline, in such quantities that the company's production of fuel oil within a year will lie necessarily lessened by about 30 per cent., or 20,000 barrels a day."