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

have been high enough to induce pro- ducers to continue prospecting new areas and drilling new wells in the old fields, both of which are necessary to keep the supply abreast of the de- mand.
 The petroleum business is highly complex, and the study of price move ments requires the consideration of very numerous factors. There are a number of kinds of crude oil, each com manding 8 different price and yield ing different products. From every kind of CT lde at least several products are derive, and from some the num- ber is very great. The products are sold by different methods, and the prices which they bear differ greatly in different localities. Nevertheless, substantially correct conclusions with regard to price movements can be gain- ed from consideration of the principal factors, excluding the numerous minor factors which have even in the ag- gregate, comparatively little influence. Recent Increase of Margins Between
 Price of Crude and Proees of Prod
 ucts.
 Recent Increase of Margins Between
 Price of Crude and Prices of Prod
 ucts.
 The movement of prices of illuminat- ing oil, gasoline, lubricating oil, and prafin wax, respectively, are compared with the movement of the prices of Pennsylvania crude oil in the table be- low A combined average price for the four products is also presented, to- gether with the margin above the crude price. This combined average price is made up by weighting the prices of the several products according to the re spective proportions of the different products derived, on the average, from Pennsylvania crude. The proportions used are as follows: Sixty-seyen per cent. of Illuminating, F per cent. Of naphtha and gasoline, 12 1-2 per cent. of lubribat1ng oil, and per cent. of parafix wax, giving total of 9S 1~2 per cent, some minor products not be- ing included.
 It should be understood that this weighted price of the four principal products does not represent exactly the true average price received for all do- mestic sales of petroleum products de- rived from Pennsylvania crude, such as would be ascertained by the divid- ing the total proceeds by the total quantity sold. Certain minor products are not taken into account, and, as stated above, some of the prices, espe- daily gasoline and lubricating oil, though showing the movement correct- ly, may differ somewhat from the true average price for the entire country at any given period of time, The weight ed average. however, does show with substantial correctness the movement for the price of all the principal prod ucts combined, and the minor prod- ucts are not of sufficient importance to affect the total movement appreclahly, The fact that each of the four princi- pal products shows approximately the same general price movement, move over, prevents any significant distor- tion in the average moement, in con- sequence of imperfections in the meth ods of weightfng or disparities between the prices used and the true average prices of the several products. It should be noted also that the average prices of the most important product, Illuminating oil, show not merely the correct movements, but also precisely, the true average price for the country as a whole at any given time.
 In ali comparisons between the prlc- es of crude oil and the prices of its t1n- ished products the absolute amount of changes in price per gallon must be considered and not the percentage of change. If, when the price of crude doubled the average price of all its pro- ducts combined had also doubled, there would have been an enormous increase in the rate of profit on the business; it would have become at least several times as great as before. The invest ment in the business is not increased in anything like the same proportion by
  ing costs of pipeline transportation, refining, and marketing are not increas- ed at all. It is true that If there were a heavy loss of crude oil in the process of refining it would be necessary when crude advanced in price to advance the price of its products by decidedly more than the same absolute amount per gallon in order to cover the increased value of the loss of crude. As a mat ter of fact, however, there Is very little loss; it averages not more than per cent. If the investment remained un- changed, practically the same rate of profit would be maintained when the price of crude advanced 1 cent per gal lon by advancing the price of all the products only 1 cent per gallon.
 The table covers the years 1897 te 1905, but data for some of the commodi- ties are not available for all of 1897 or all of 1905, It shows the figures by years and by half years, and also com bined averages for three periods, name ly, from 1897 to 1899, 1900 to 1909, and 1903 to 1905.
 The margin between the price of Pennsylvania crude oil and the price Of each of its four principal products, in- creased greatly from 1897 or 1898 to 1903 and 1904. The average margin be- tween crude and Illuminating oil was 5.3 cents in 1898 and Fl cents in 1903 an increase of Is cents. The gasoline margin increased from 5,2 cents in 1898 to 9.2 cents in 1903 The lubricatlng oil margin increased between the same years from 10,7 to 13.7 cents and for parasn wax from 969 to 31.9 cents. The margin in each case, except parafin wax, was highest in 1903.
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