# Mexico's dilemma/Chapter 4

CHAPTER IV
Germany's ally at Tampico
AMERICAN warships are stationed at Tampico to-day to watch Germany's ally in Mexico. From time to time one of them lifts anchor, steams out of the Pánuco River and patrols the Gulf Coast. Suspicious ships are examined, wireless messages are picked up, and night and day the trained eyes of the lookouts search the seas for hostile periscopes. When one returns the other slips away under cover of darkness to a secret destination.
From the Government wireless tower at Arlington, Virginia, the Navy Department directs the movement of these ships as it plans Uncle Sam's moves on the great international oceanic chessboard. Eternal vigilance is the price of peace at Tampico, the greatest oil port in the world. From the jungle sixty miles away flows the endless stream that propels and lubricates the Allied military machine; for the weapons with which the United States, England and France are fighting ​the dictators of the Central Powers in European waters, on land and in the air, are dependent upon Tampico for fuel oil, gasoline and lubrication.
Because Germany's ally, the I.W.W., operates in Tampico our battleships cruise in Mexican territorial waters to protect this oil basin without which the war cannot be won.
A few months before I arrived in Mexico agents of the Industrial Workers of the World organised a strike along the docks in an attempt to tie up all shipping at the port of Tampico. Money was sent from New York by German agents to Tampico to be used against the oil companies and the Allies. A special messenger carrying fourteen thousand dollars was spotted as he landed. At that time the quick intervention of United States naval officers and the co-operation of the managers of the oil companies and the Mexican authorities aborted the German plot. The strike failed and the I.W.W. leaders were temporarily discredited; but to-day the same plotters, inspired by the same foreigners and financed by the same interests, are working through the Labourers' Union and the Union of Port Mechanics—the I.W. W. in sheep's clothing. I found them preparing the workers for another lockout by urging the men to strike for higher wages, though the wages being paid were the highest in the world for this kind of labour. The I.W.W. propaganda is as lawless as the German agitation in Russia, but always one ​American man-of-war has its eyes on the city. The captain in command, the United States consul and the representatives of the American and British oil companies are watching, working and waiting.
The German-paid Industrial Workers take advantage of every event to incite the labourers, the poor peon puppets of the ruthless leaders. They are paid and inspired by German influences, as even Herr Mueller, the Austrian consul, acknowledged. When the governor of Arizona, for example, shipped several hundred disloyal miners out of his state the following appeal was printed and scattered through the streets like dirty snow;
WORKERS AND ENEMIES
The Union of Port Mechanics having knowledge that 2,000 striking mine workers of Bisbee, Arizona, U.S.A., have been deported to the Hermanas Desert, New Mexico, being thus compelled by force of rifles and machine guns to desert their families, who remain there by the lawless work of the enemies of the working class in the most frightful misery and suffering the greatest privations:
For this reason this Union, in a spirit of humanitarianism and companionship, PROTESTS and CURSES this action accomplished by the steel kings, and publishes its discontent publicly against all who act arbitrarily, restricting the right of ​
​freedom to those who with pride call themselves workmen.
For the Union of Port Mechanics.
The Committee.
AN INJURY TO ONE IS AN INJURY TO ALL
In addition to the handbill propaganda the I.W.W. publishes one daily and one weekly newspaper, and the editors and writers have all come from the United States since Congress declared war against the German Government.
But the I.W.W. is not the only lawless organisation with which the oil companies have to contend. While the Carranza Government controls the city of Tampico, General Don Manuel Pelaez, one of the rebel leaders, is the king of the oil fields. President Carranza's authority extends only eight miles from the city limits and along the railway line to Monterey, the industrial city in Northern Mexico. The direct railway line from Tampico to Mexico City is blocked. Señor Carranza's officials control the docks and the tank reservoirs near the city. On the other side of the Neutral Zone, or Mexico's No Man's Land, watch the Pelaez soldiers. General Pelaez controls the beginning. President Carranza the end, of the oil business. Pelaez taxes the production; Carranza taxes the exportation. Pelaez and his army—estimated at three thousand to twenty-seven thousand men, depending upon the authority quoted—get ​forty thousand dollars a month protection money from the oil companies. Carranza gets one hundred thousand dollars in taxes every month from the Standard Oil Company; two hundred thousand dollars a month from the Huasteca Petroleum Company, and more from the Lord Cowdray interests. The oil producers maintain Pelaez, his soldiers and his government, and they contribute more than any other foreign interest toward the revenues of the present Mexican Government.
But—and this is where the story of King Pelaez begins—the trouble at Tampico has not been in the territory controlled by the bandit, but within the city limits, dominated by the central government. There have been no strikes in the oil districts where this black, crude product gushes from the earth at the rate of nearly a million barrels a day. No American lives have been lost; no American or European property has been destroyed.
In Tampico itself strikes have occurred and may develop at any time. No one can tell what a combination of I.W.W. agitators and German intriguers may do. But the curious thing is that the oil companies are satisfied.
"We believe," remarked one of the managers, "and the United States believes, that as long as we are at war with Germany it is best to leave well enough alone. We are getting oil out of Mexico. That is our part. That is what the United States and Great Britain want. That is what the companies want." ​"But how are you going to adjust this situation finally?" I asked.
"Quien sabe?" they answered. They don't know. No one else seems to know. But of this they are certain: They don't want President Carranza to control the oil fields, especially during the war. They fear that if his generals control the wells they will submit to German influence and demand a prohibitive tax under threat of cutting the pipe lines. The oil companies are opposed to the policy of the United States Government in lifting the embargo on war material, because they maintain that if the present government begins an attack upon Pelaez the oil companies will suffer. They declare that the only thing that maintains peace is the lack of ammunition.
Time was when the oil interests were under the thumb of General Pelaez. To-day Pelaez and his chief insurgent, General Enriquez, are ruled by the companies; but the relations, at that, are very cordial, though some of the smaller oil companies do not feel this way.
I was sauntering through the hot streets en route to my hotel one day when I met the secretary of one of the small but important companies.
"I have some documents that may interest you," he said, "providing the name of our company is not used. We have just been held up for six thousand dollars."
I accompanied him to his office, where he showed ​me the correspondence he had had with General Enriqnez, the so-called brains of the Pelaez Government because he is the only educated man on the rebel leader's staff.
One of the notices in Spanish, as translated, reads:
REVOLUTIONARY ARMY
Pelaez Division Military Command
CIRCULAR
I beg to advise you gentlemen that twelve days are conceded to you, counting from this date, in order that you may please cover your debts which you have pending with this military command. It is understood that if the same are not paid within the term specified that I shall be obliged to proceed in a manner I may deem convenient.
LIBERTY, JUSTICE AND LAW
Juan Casiano, Mex., August First.
Enriquez.
The three impressive words—Liberty, Justice, Law—make up the motto of the Pelaez Government. Though one is tempted to look for practical evidences of the motto, one does not, because it might not be safe! Explorations in an oil jungle should be limited to oil. At least that is what I was advised.
It is not safe, either, to send money to Pelaez or Enriquez, except by trusted messenger. The ​danger is not so much that the money might be lost or stolen as that some government authority might hear of it and you might be arrested for giving aid and comfort to an enemy of the Mexican Government, The cautious policy is always the safest in Mexico. This company, of course, knew the rules of the game and despatched the twelve thousand pesos to Enriquez. A note thanking the general for his services in protecting the company's properties accompanied the tribute. A few days later General Enriquez acknowledged it in the following manner:
Appreciable Sir: I take note of your courteous letter of the second instant, and in reply I wish to state that I take pleasure in offering myself to your orders.
Your true and attentive servant,
Enriquez.
A few months before this when conditions were less settled—one might say less unsettled, too—King Pelaez used to require unusually large sums at irregular intervals. But this was not an approved business method in the United States, so it was explained to Pelaez, who a few years ago was an ignorant rancher, and Pelaez was convinced that he should receive his taxes regularly, as all governments do. Pelaez has a teachable mind!
dollars from one of the companies. The corporation had already paid a large sum and could not afford to meet his requirements; but Pelaez was, at the time, an unlimited monarch. He made war or peace as freely as the German Kaiser. And inasmuch as Pelaez had the army to destroy the company's wells the treasurer knew the taxes had to be paid, so he bought twenty thousand dollars in counterfeit money and gave it to Pelaez. The general did not examine the bills, and everything was satisfactory.
The next day Pelaez paid his soldiers, and when they attempted to pass it in the small villages the shopkeepers refused anything but metal coin. The general notified the treasurer and demanded real money immediately. The treasurer explained that he could not come to camp for several days but that he would adjust the matter. It was quite evident that a mistake had been made!
Three days later he appeared at Pelaez 's headquarters.
"Where is that money?" he asked.
Pelaez handed it back. The treasurer took from his pocket a rubber stamp that he had had made and, one by one, stamped each bill with the following:
Money of the Pelaez Government. Good.
"Now if you can't get your soldiers to accept this money of your own government," the ​treasurer stated, "I don't think much of your government."
Pelaez was impressed. All governments should have their own currency. Now Pelaez had his! The soldiers accepted the money, and so did the shopkeepers! The twenty thousand dollars cost the treasurer two hundred dollars.
But not even a peon king can be fooled the same way twice. Another company tried to give Pelaez counterfeit money, but this brought the following notice to all companies from General Enriquez:
REVOLUTIONARY ARMY
Pelaez DivisionMilitary Command
CIRCULAR
In view of the fact that in the circulation of the new ten-dollar gold pieces—twenty pesos—many counterfeit coins are coming out, I have to request of you gentlemen that in the future you will please make your payments in coins of prior coinage or in five-peso pieces.
LIBERTY, JUSTICE AND LAW
Enriquez.
Juan Casiano, Mexico, August 1, 1917.
These are only a few of the many interesting circulars and letters that were shown me by the oil companies. One does not wonder why the companies do not protest when one learns how ​important the protection by Pelaez and his band of bandits is. These figures, taken from the records of the United States consulate at Tampico as furnished to the State Department by Claude I. Dawson, the consul, show that during the first six months of last year 24,376,824 barrels of oil in all forms were exported.
An illuminating table follows on page 79.
This calculation, however, is far below the possible production of the Tampico fields. With the present equipment, pipe lines, pumping stations and wells the oil companies operating can produce as much as a million barrels of oil a day, but if any more oil were produced there would be no ships to carry it away. The submarine losses are felt in Tampico too.
A million barrels of oil every twenty-four hours—enough, seemingly, to fill the Hudson River, if the basin of that river off Manhattan Island ever went dry!
TOTAL OIL SHIPPED FROM TAMPICO, JANUARY TO JUNE, 1917, INCLUSIVE
Statement Prepared by Mr. Claude I. Dawson, U.S. Consul at Tampico
| BARRELS |||||
| | Crude Oil | Distillate | Reduced | Topped | Kerosene |
| January, 1917 | | | | | |
| United States | 2,018,733 | 414,100 | 105,500 | 19,000 | |
| Mexico | 176,218 | | | | |
| Foreign Countries | 234,799 | | | | |
| Total | 2,429,750 | | | | |
| February, 1917 | | | | | |
| United States | 2,081,245 | 70,000 | 357,700 | | |
| Mexico | 400,424 | | | | |
| Foreign Countries | 494,027 | | | | |
| Total | 2,975,696 | | | | |
| March, 1917 | | | | | |
| United States | 3,087,903 | 59,000 | 557,750 | 60,000 | |
| Mexico | 403,832 | | | | |
| Foreign Countries | 589,716 | | | | |
| Total | 4,081,451 | | | | |
| April, 1917 | | | | | |
| United States | 2,849,994 | 128,000 | 443,000 | 61,000 | |
| Mexico | 271,134 | | | | |
| Foreign Countries | 866,407 | | | | |
| Total | 3,987,535 | | | | |
| May, 1917 | | | | | |
| United States | 3,072,181 | 90,000 | 407,546 | 40,000 | |
| Mexico | 281,296 | | | | |
| Foreign Countries | 445,023 | | | | |
| Total | 3,798,500 | | | | |
| June, 1917 | | | | | |
| United States | 2,719,520 | 135,000 | 494,000 | 73,000-48,000 | 73,000-48,000 |
| Mexico | 298,594 | | | | |
| Foreign Countries | 523,182 | | | | |
| Total | 3,541,296 | | | | |
| Total | 20,814,228 | 896,100 | 2,365,496 | 253,000-48,000 | 253,000-48,000 |
| Grand Total | 24,376,824 | barrels | | | |
"Who is Pelaez?" I asked in Tampico.
"An ignorant Mexican rancher," was the universal reply. "He is a revolutionist, like all of us, against the Carranza Government. He has a loyal army that protects our property and workers. Pelaez is king of the police in the oil districts."
"And Enriquez?" I questioned.
"A Mexican doctor," answered the foreigners, "cultured, educated, refined, and a thorough gentleman. He had a drug store in Tuxpan— another port on the Gulf of Mexico, pronounced as if spelled T-u-s-p-a-n. When the revolution broke out the Carranza troops burned his store. He lost forty thousand pesos and joined the forces against the First Chief of the Constitutionalists. He is fighting in the field to-day, awaiting the time when a responsible government will be established in Mexico City. Then he will go back into business."
I was talking to one of the producers one day when he asked whether I would like to meet Pelaez and Enriquez.
"The oil king?" I asked. "Certainly! Long live the king!" ​
​When one is in Mexico one must do as the Mexicans do! One must shout "Long live Pelaez!" when one is in his territory.
It is a safe policy anyway always to be Mexican to a Mexican. I was lunching one day with an American official who had been sent into this country to meet the various factions. He told me the difficulties he had in being Mexican, but he said it paid him, and he cited the following instance:
He was in a small coast town, where he called to pay his respects to the governor. He desired a friendly talk and knew the best place would be about a banquet table, so he invited the general and his staff to dinner. The officer was bashful. That, indeed, was unusual. The general sent word that while he would enjoy lunching with American officers he was compelled to excuse himself because he had not been trained to dine with such high personages! The American and his staff were shocked upon finding a general who did not proclaim hourly what a great, accomplished gentleman he was even if, two years ago, he was a night watchman in Vera Cruz. The Americans urged the general to come, and he did.
Before the guests arrived the visitors held a conference and the chief said:
"General Blank, commander of the State of Blank, is coming to dinner to-night. I want every one of you gentlemen to take your table manners from him. If he eats soup with tortillas, chicken ​with his fingers and drinks out of the finger bowl, every man does the same! The guests are not to be embarrassed."
The Americans, in a cordial but not a very polished manner, welcomed the Mexicans. At the table there was a great deal of talking at first, and every one waited for the general to begin to eat. But he didn't! And they waited a little longer, until the soup was cooled. Finally the American official, who had been in Mexico long enough to know that one must do as the Mexicans do, drank his soup. Without a smile or a murmur every one did the same. When the meat was served fingers and knives were used, and at the close of the meal toothpicks instead of finger bowls were passed. The general was delighted to think that he could eat with Americans and be so contented! To this day he is pro-American!
I had been in Mexico several weeks, and when an opportunity came to see a live bandit I was enthusiastic, and I got up as early on the morning we left as I did years ago when the circus came to Richmond, Indiana.
To reach the Mexican oil fields one must travel between sixty and eighty miles south of Tampico. At the wharf one boards a fast gasoline launch at sunrise and travels through the canal and Pánuco River some twenty miles to a landing station belonging to one of the oil companies. Eight miles out of the city one meets a band of eight Carranza soldiers. They are on outpost duty to ​see that no Pelaez followers enter the city. From this point on one need not say, "This belongs to one of the oil companies," because everything below, above and on the earth belongs to some oil concern. The Lord Cowdray and the Doheny corporations have more than a million acres each.
From this small dock one rides by automobile twenty miles farther into the jungle, over the only wagon road in this part of Mexico. Another launch takes one across Lake Tamiahua to San Geronimo. As one glides through the quiet waters early in the day one sees thousands of flying fish, and at times the horizon is blackened with wild duck. There is so much game and there are so few hunters that this is an undreamed-of paradise.
As the launch swerves toward the dock one sees several hundred Mexican labourers standing about the narrow-gauge railway track, awaiting the departure of the work train for the fields.
Puffing along at eight miles an hour the dummy engine jerks and whines through the jungle to the camp at Juan Casiano. Beside the tracks one sees mahogany and oak trees, banana plants, orange groves, cornfields, and here and there the straw-thatched roof of a peon's home. Men and women are dressed in one-piece garments; many children are naked; others like one boy I saw with his mother's shirtwaist hanging loosely from his shoulders.
Spanish moss, orchids and other plants grow as ​parasites over the trees, many of which are being strangled to death by this growth. Many parts of this territory have never been explored. Wild beasts rule the forests and hills. There are wild boars and snakes. Sometimes the latter come up on the railway bed for their sun nap. There are buzzards, the prehistoric scavengers, and Alice-blue butterflies. Beautiful birds of the tropics fly from bush to bush. Some places along the line the natives have planted corn. Their cattle graze along the roadway, and frequently the train stops to give the cows time to get off the track. Fields are so fertile that the corn averages more than twelve feet in height.
The planting is as primitive as the people are. The natives punch a hole in the earth with a stick, drop a grain of corn and cover it up. In two months they can gather the ears.
After one has travelled a few miles by train one enters the oil fields. Between the hills of the rolling country one sees the derricks where wells are being drilled. When the oil begins to gush out of the hole it is diverted into pipe lines, which carry it sixty miles to Tampico.
Geologists estimate that this country for centuries has floated on oil—but less than eighteen years ago American explorers tapped the first well. At that time there was only one company in the field. To-day there are more than a score. Then the land could be purchased for less than fifty cents an acre. To-day the cheapest available ​land rents for five hundred dollars an acre per year, and the owners demand royalty on oil that may be extracted. The largest well ever discovered produced a million barrels a day, but only for five days. To-day boiling water gushes out into the lake. The next largest well is that of Cerro Azul. Its capacity is estimated at two hundred and sixty thousand barrels every twenty-four hours. It has been running steadily since 1914. The best wells produce more than sixty thousand barrels a day, and no well is considered very productive that does not give up ten thousand barrels between sunrise and sunrise. There is so much oil in Mexico that it gushes out of the ground as soon as a hole from two to three thousand feet deep has been drilled into the mud, limestone and sand. Some gushers have spouted oil six hundred and a thousand feet into the air before they were capped. One well emptied more than a million barrels into one of the valleys before it was capped.
From the railroad station we rode to the camp in a buckboard pulled by four mules. As the driver drew the reins General Enriquez saluted us. At last we were at one of the headquarters of the bandits. With Enriquez were his chief of staff, an Indian general, interpreters and soldiers. The general is short, heavily built and dark complexioned. He has long thin fingers, small feet and dark brown eyes. He wore a brown army shirt, riding breeches and tan boots. Round his ​instep were buckled heavy, hand-engraved silver spurs. From the cartridge belt hung a forty-eight-calibre revolver.
We sauntered uphill to Enriquez's headquarters. Bill, the guide, Enriquez and I sat on the general's bed. The three chairs were occupied by his staff. Pelaez had been there for a conference the night before but had left for the Cowdray camp at dawn. The conversation began with Carranza and ended with the President. But most of the talking was done by an Indian general who had just returned from a thirty-five-day hunt for Indians and others loyal to Carranza. His imagination was as unlimited as the oil fields and he gloried in having a foreign audience. His last battle was his most thrilling one.
It happened in this way: The Mexican Government sent rifles and ammunition to General Mariel, one of the Carranza leaders along the Gulf of Mexico, who immediately armed the half-civilised Teptzintla and Santa Maria Indians. These wild men started to raid the outskirts of the oil district and Enriquez's Indian general with a band of troopers was sent out to halt them. In thirty-five days of wilderness fighting two hundred Indians were accounted for, and then the general entered a small town where he found seven bandits—he called the Carranza troops bandits—terrorising the village. Five were killed in the first skirmish, but the general was shot four times in his right knee and one of his soldiers was killed. ​A Carranza soldier, he said, emptied his automatic into the side of the trooper and then shoved the pistol into the wound. When the remaining two were captured they were executed.
The general told almost unbelievable tales. He said the wild Indians in a war dance, a few days before he arrived, had thrown women into the flames as sacrifices. This is the Liberty, Justice and Law of the oil jungle!
For the benefit of the auto owner who, like myself, did not know how gasoline is produced, permit me to make this explanation: The crude oil as it comes from the earth is pumped to Tampico, where the refineries are located. Some is shipped to refineries in the United States. This oil is heated in large tanks to three hundred and fifty degrees. From these tanks it flows into cooling tanks; the heavy oil goes to the bottom and the vapour, or gasoline, flows out near the top. Gasoline is but the light ingredient of heavy mineral oil.
When the crude oil reaches Tampico the trouble begins. The Mexican Government taxes crude oil, gasoline, distillate and other by-products so heavily and the expenses of shipping it to England and the United States are so great that crude oil which costs twenty cents a barrel in Tampico must sell for sixty cents a barrel in Texas.
All the oil ships in and out of Tampico must go through the Pánuco River, which flows into the gulf seven miles from the city. The river must ​be dredged constantly to enable the ocean-going liners to reach the docks. Throughout the revolution all oil companies have been paying six cents a barrel bar tax to keep the river deep enough for their ships, but for nearly four years little dredging has been done.
A few months ago the central government notified the oil companies that an American dredging concern had been engaged to work in the river and that the oil companies would have to pay the costs, amounting to one hundred thousand dollars a month.
With conditions so unsettled and dangers lurking in every business deal the oil companies today are doing no development work. They are taking no chances. They believe that Article Twenty-seven of the Mexican Constitution permits the government to confiscate their property and they declare that they cannot afford to spend more money in Tampico until they know how the government intends to interpret this.
The companies are literally between the jungle and the sea. No one knows what move the Carranza Government may make. No one knows what steps the United States and the Allies will take to protect the oil country if the central government begins an invasion, as President Carranza announced it would do, in his speech before Congress on September 3, 1917. At the opening of Parliament he proclaimed his intention of driving the rebels out of the oil fields. "They have been ​supported by foreign oil companies," he declared. There is no doubt about the truth of this latter statement, but the companies maintain that if the fields were in the hands of the Mexican Government the government could maintain a strangle hold on the Allies—and Pelaez, they declare, is pro-Ally. The oil companies want a status quo until the war in Europe is over. Then, and perhaps sooner, the real fight about Tampico will begin. This part of the Mexican problem is not settled.
But on the surface of things in Tampico there is not a ripple. Pelaez cannot come into the city and the Carranza forces cannot go into the country without a fight. No Man's Land separates the belligerents here as it does in France.
The I.W.W. and the Germans are taking advantage of this chaotic situation, and they are preparing for eventualities. Some day there will be a clash in the oil fields or in Tampico, and when that hour comes the world will learn whether Germany's ally or the United States and her Allies control the situation.
Further trouble in Tampico or in the oil districts will benefit Germany directly because it will affect the oil supply of the United States and Great Britain.
No one seems to know the solution in Tampico, but every foreigner hopes that the ammunition which the Mexican Government has obtained from the United States will not reach the Gulf of ​Mexico. The foreigners want a status quo until Germany is defeated. Then, then indeed, something will have to be done to settle the jurisdiction over the oil territory. Tampico oil is a world necessity. Anarchy, another German ally, cannot rule forever. Where there are smouldering flames of discontent there will be smoke.
Before I went to Tampico the Chief Mexican Manager of one of the largest oil producing companies gave me a memorandum regarding the oil supplies of the Allied powers. I print this here as it contains a great deal of valuable information and shows how vital Tampico is to England and the United States in the war against Germany.
The writer is a man of very firm convictions and the interpretations of clauses in the Mexican Constitution and his opinions regarding the government are his, not mine! I present the memorandum here because it is the statement of an expert.
I
MEMORANDUM. THE ALLIES' OIL SUPPLIES
By an American Business Man
1. Petroleum and gasoline are the two most important war materials to-day. Neither aeroplanes, tanks, motor trucks, submarines, chasers, destroyers nor battleships can run one foot without one or the other.
oil, necessary for the manufacture of gasoline, Diesel oil and navy fuel:
The Dutch East Indies and Burmah: Too far away to serve as a source of supply in the present shortage of tank steamers.
Persia: Remote, and on the Mediterranean route. Submarines have destroyed many tankers on this route. Production small.
Russian Fields: Available only to the Russian Allies.
Roumania: In German hands.
Galicia: In Austrian hands.
United States: Practically the only source of crude oil and gasoline supply for our allies and our own forces.
But see annexed report of Hearing before Senate Committee, No. 1, page 32. The Department of the Interior gives the following figures:
| Year | Consumption | Percentage Increase | Production | Drawn from Stock |
| 1914 | 247,015,396 | | | |
| 1915 | 276,399,918 | 12 | 281,000,000 | None |
| 1916 | 312,000,000 | 13 | 296,000,000 | 18,500,000 |
| 1917 | 353,000,000 | 13 | 286,990,000 | 67,000,000 |
Note that the Interior Department calculates a shortage of 67,000,000 barrels of petroleum in the United States for purely peace purposes for 1917. Elsewhere in the Report of the Hearing, note statement by the Bureau of Mines that it calculates an additional shortage of 20,000,000 for war purposes. Since this estimate it has been determined to build and operate from 35,000 to ​100,000 aeroplanes. This will take an additional amount of from 3,000,000 to 9,000,000 barrels of high-grade gasoline, which production will make an additional shortage figured at from 40,000,000 to 63,000,000 barrels of crude. The total shortage, therefore, is around 137,000,000 barrels for all peace and war purposes in the United States, which, outside of Mexico, is the only practical available supply.
Mexico: Mexico to-day can produce from wells already drilled in, how largely capped or cut down, 1,059,000 barrels per day, and the field is only wild-catted. The actual production (crude oil sold or put in storage) is at present only about 50,000,000 per annum, or 137,000 barrels per day, most of which goes to the United States.
Shipments to the United States from Mexico are limited by: a. Lack of tankers. The largest producing company (Mexican Petroleum Company) has turned seven of its tank steamers into the British trade. The ships are chartered to the British Government. More tankers, however, are being completed.
b. Lack of transportation to tide water. The total potential carriage from well to tanker is now:
| To Tampico— | By river barges | 25,000 | bbl. | per | day |
| | By Huasteca pipe lines | 75,000 | " | " | " |
| | By Aguila pipe lines | 25,000 | " | " | " |
| | | 125,000 | " | " | " |
| To Tuxpam— | By Penn-Mex pipe line | 25,000 | " | " | " |
| | By Aguila pipe lines | 50,000 | " | " | " |
| Total present capacity pipe and barge | Total present capacity pipe and barge | 200,000 | " | " | " |
The Mexican Petroleum Company and probably the Aguila stand ready to increase pipe line facilities up to an additional 50,000,000 barrels per annum if they are only guaranteed protection of their governments in the construction and in their investment. See testimony of Edward L. Doheny in annexed Report of Hearing, No. 3, page 123.
The production of the United States can be increased, if at all, only slightly. The Mexican production is there already. It is in the hands of American and British companies which have taken the risk and made the great investment to get it. If their rights are respected or made respected by their governments there will be no shortage of petroleum supplies for the United States and the Allies in the war. There will actually be a plethora.
ii
But we have to count with the real hostility of the de facto government of Mexico, which is notoriously playing with the Germans. In January, 1917, a packed constituent assembly, at Querétaro (membership in which was limited to "those who had served Carranza," or less than 1 per cent, of the whole population) adopted a "constitution" ​which contains the following provisions pertinent to this subject:
Article 27. In the Nation is vested ownership of . . . petroleum and all hydrocarbons.
. . . The ownership of the Nation is inalienable and . . . concessions shall be granted by the Federal Government to private parties or . . . corporations organised under the laws of Mexico.
Article 28. There shall be no . . . exemption from taxation . . .
Article 123 (Of Labor and Social Welfare) XVIII . . . Strikes shall be considered unlawful only when the majority of the strikers shall resort to acts of violence against persons or property.
Article 27 deliberately confiscates the oil properties acquired by British and American companies. Oil in Mexico has always been the property of the owner of the fee. The companies mentioned have spent large amounts of money to acquire oil rights by purchase and lease. The effect of this "constitutional" provision, if it is recognised as legal, is to make Mexican petroleum the inalienable property of the Nation. As such, being contraband, neutral Mexico cannot allow its shipment to belligerent nations.
Legislation is now before the Mexican Congress putting this "constitutional" provision into effect.
Article 28. The principal oil-producing ​companies entered the field of oil exploration under inducement contracts providing that no special or export taxes should be levied against their products. The Mining Law of 1887, never repealed, provides that petroleum shall not be specially taxed. This article of the constitution of 1917 puts an end to this protection, violating contracts. An excessive export tax on petroleum and gasoline, amounting to from 20 per cent to 50 per cent of the value of the oil at the wells, has been "decreed," and is in effect and payable in July, 1917.
If the principle is accepted, Mexico is in a position to embargo shipments of oil to the Allies by increase of the export tax. No friendship toward the Allied cause has been manifested by the de facto government of such nature as to lead one to suspect that Mexico will fail to so embargo exports.
Art. 123. By this article, 49 per cent of a body of strikers may legally destroy properties and lives. Only when 51 per cent are so engaged is the strike illegal enough to justify the intervention of the authorities. This seems childish; but this very "constitutional" precept was invoked by the Presidente Municipal and the Jefe de Armas of Tampico during the strike in the British and American oil termini in May, 1917, to justify their refusal to interfere with the "strikers" who were carrying torches around the storage tanks. Destruction was prevented only by the ​intervention of the American gunboats in the Pánuco River. The strikers were openly and notoriously paid during this tie-up out of the office of the German Consul, Eversbusch.
The Imperial German Empire has a Minister in Mexico, Consuls in all important centres, and intelligent Germans scattered throughout the country. They are hand-picked Germans. They are most friendly with the Mexican authorities. The Mexican army has many officers of German birth and training. Fortunately for the Allies, the oil fields are in the hands of a counter-revolutionist, with a personal interest in the safety of the fields. Should he (Manuel Pelaez) be driven out by the German-officered Carranzistas, the wells now producing would be in danger; but such damage as they could do would be repaired within two weeks after the arrival of American troops in the fields.
By the "constitutional" articles quoted above, the Germans have three excellent means of blocking the oil supply of the Allies:
(1) By protesting against the shipment to belligerents of a contraband material declared to be the property of the Mexican Government.
(2) By encouraging the de facto government to increase export taxes to the prohibitive point.
(3) By fomenting strikes in terminals and in the fields and attendant legalised destruction of oil in storage. ​Assurance of the oil supply is simple: Refuse to recognise the de facto Mexican Government as a de jure government and make it plain that none of the confiscatory and retroactive provisions of the "constitution" shall be enforced.
If the "constitution" is enforced, German agents have at least three distinct means of ending the Mexican supply of crude oil, vitally needed in the war. If British and Americans in Mexico are simply protected in their legally acquired rights and properties, by austere demands and acts of the American and British Governments, There Will Be No Petroleum Shortage.
Problem: To make the American and British Governments see it.