The daily morning journal and courier., 1907-08-05

high level Of prices. The average mar
 gin for illuminating oil during the first
 half of 1904 was nearly as high as dur
 ing the first half of 1903. Toward the
 middle of 1904, however, prices began
 to fall This was probably due largely to the Standards s fear that the contin- ! uation of such extortionate prices
 would tempt new competitors into the l field The development of the new oil l fields of Kansas, Texas, and Californ-
 ia at this time offered greater possibil- | ities to competitors than had existed before
 Notwithstanding the decline In prices
 during the latter part of 1904, which
 continued into 1905, the margin between
 the price of crude oil and the prices of
 it's products was higher during 1905 l than it had been in the earlier years covered by the statistics. Thus the
 margin between Pennsylvania crude
 and Illuminating oil for 1905 was 5.9
 cents as compared with 5.3 cents in 1898
 and $.2 cents in 1899. The margin be-
 tween the price of Pennsylvania crude
 oil and the weighted average price of it's principal products for the first half of 1905 was TT cents as compared with
 6.5 cents for the year 1898.
 The policy of the Standard Oil com
 pany in increasing prices during recent
 years is shown not merely by the com ] parison of the extreme years, 1898 and l 1903, but by comparison of groups of
 years, The average margin between i Pennsylvania crude and Illuminating 1 oil from September 1887, to the end
 of 1899 was 5,3 cents per gallon from
 1900 to 1902, inclusive, cents per gallon,
 and from 1903 to 1905, 66 cents, or an increase of Is cents over the first per- iod. The average margin for all the
 products combined for the years 1898
 and 1899 was 6.6 cents; for 1900 to 1902, TT cents; for 1903 to June, 1905, 84
 cents, or 1.8 cents higher than in 1898
 and 1899.
 Substantially the same conclusions as
 to the movement of prices may be
 drawn from a comparison of the price
 of Lima crude oil with the prices of it's products.
 The margins between the Lima crude oil price and the prices of most 1 of the products show movements sim liar to margins based on Pennsylvania | crude, though their increase is even l more conspicuous. The margin be- i tween Lima crude and gas oil, unlike | the margins for the other products, reached a maximum in 1900 and 1901.
 The weighted average margin of all the products increased from 5,7 cents | in 1898 to 79 cents in 1903 and 1904. | The average margin for all products | combined for the two years 1898 and 1899 was 6.l cents; for the years 1900 to 1902, inclusive, II cents; and from l January, 1903, to June, 1905, 7.S cents, 1 or 1,7 cents higher than for the first
 group of two years.
 Relation of Increase to Margins of Profit.
 l The marked advance in the margin | between the price of crude oil and the l price of It's products in the domestic 1 market, as thus shown, has very 1 greatly increased the profits of the Standard Oil company on it's domestic l business. As shown below, the profits | of the Standard on it's total business have increased greatly since 1897- reaching, however, their maximum in | l90S-but the rate of increase on the total business has been less than on 1 the American business, because the l prices of products sold abroad by the 1 Standard have advanced much less I than the domestic prices. It is possi- ble that some part of the increase in l the margin between the price of crude
 oil and the prices of it's products has 1 been due to increased cost of pipeline transportation refining and marketing. | The possible increase in costs, how ever, since 1897 is only very small
 amount per gallon
 1 The estimated operating expense of
 the local gathering of crude oil by the l Standard pipe lines Is only about 5
 cents per barrel, and the estimated op- l erating expense of trunk pipe-lIne transportation from the Appalachian
 oil field to the seaboard about 3 Ia
 cents per barrel giving a total of about 1-3 cents per barrel, or about 1 0.2 cent per gallon The operating | expense of refining averages probably about three-fourths cent per gallon.
 The operating expense of tank-wagon
 marketing of Illuminating oil and gas l oline averages about 1 1-2 cents per 1 gallon, and this is probably some what greater than the average expense l Of marketing all classes of petroleum 1 products. Adding these three ele- ments of expense (pipe-line transport
 atlon, refining and marketlng) gives a
 total of less than 1-2 cents per gall | Ion. It is highly probable that the 1 increase in operating expenses from | 1897 to the present time has not ex- Iceeded 10 per cent Nevertheless, even
 1T the increase from 1897 or 1898 to 1903 and 1904 had been 25 per cent
 It would amount to only about one 1 halt cent per gallon Even an in-
 crease in costs of one-half cent per l gallon is very much less than the ac-
 tual increase in the margins as above shown.
 The importance of the increase in margins can be appreciated only bv l consideration of the enormous oIitnut
 of the Standard. The average margin
 between the price of Pennsvlvania
 crude and the relative average price
 or its principal products combined in
 1898 was 6.5 cents, and in 1904, 8.4, or
 an increase of 1.9 cents. If one-half
 cent of this be attributed to increase 1 or costs, the increase of profit on the products of Pennsylvania crude sold
 Tn the United States would still be 4
 cents per gallon. The corresponding l IhaFgln based on Lima crude increased
 rom 5,7 cents in 1898 to 7.9 cents in
 1904, or by 2.2 cents; If one-haif cent 1 or this was due to advanced costs. the
 increase in profits would still be I
 cents. The average increase in profit
 on the products of both Pennsylvania
 shd Lima crude from 1898 to 1904
 would thus be at least 1.5 cents Der
 gallon. If the same increase in profit
 applied to the Standards entire sales l or all kinds of petroleum products in
 the United States--about i, ,4O0. .O00. 000
 gallons in 1904-the profit in that wear l would be ahnllt S21 nN0 nnn rao,o tA -.