New-York tribune., 1907-08-05

which II sells These margins" Of course, are
Tho really significant facts. representing that part
of che price which the Standard Is respoIlSibie
Prices of oil products may rise or fan sIeh'iy
without affecting the profits Of the Standard he
cause Of a change in the price Of the crude oil
although the Standard also fixes within certain
lir,.ts even the price Of crude. But the margin
difference between the price Of crude ano the
price pf the finished products is always a true H.
dication OF price policy and profits
There two varieties OF raw material of essen
tIal importance Pennsylvania crude Oh and Lima
crude oii. The crude oils of the other fields 32th
reason of marked difference in quality. do not af-
feet in any significant way the prices herein con-
sdered.
INCREASE OF MARGINS.
The average margin between PENNSYLVANIA crude
ril and the Illuminating oil sold by the Standard
Throughout The country. after deduCting fre'sht
costs. from September, 1881, 20 the end of lASS was
53 cents gallon. from 1879 10 l+i- inclusive
cents gallon; and from 1853 10 June, ISF'' 90
cents OF increase Of l3 cents during these elshI
years. When j. Is remembered that from % cent
70 cent gallon constitutes a good proht on 'ne
business. the meaning of increase of I5 cents IN
the last eight years covered by this report Is eNi-
dent. even as applied To. illuminating oil alone
But il must te emphasized that a much greater
INCREASE in total margin has taken place III the
case Of the by-TToducts than in Illuminating OIL the
most important OF which are 0n the case OF Penn
svlVara crudoD casolcne- luhricating on ana ParAi-
An wax. Including the margins for these hy-prod-
uctS with the margins for Illuminating oil 50 as
10 give p series OF average margins Tor the COM
bined four products weighted according to the re-
spectye quantities. produced the iiciehSe ~ @ &c
gins for this recent period IS still conspicuous
Thus the relative margin Ter lile l'AI
products combined for the years IhSe ana lHT% va"
6S cents fer 1eo2. - cents. ard from l$ 10
June. 1865 So cents OF 2n increase oi j. cents
Substantially the same conclusions as 10 the N
crease OF pricpS appear the margins for Lima
rle It's margins Is fullN as con
s1ic1;ous IS for PENNSYLVANIA crude The relative
average marin for the combined products of Lima
crude for the years 1898 and 1899 was 81 cents ior
1870 1852. Il cents; from 1875 to June 300 ~
cents of Il cents for the eight years
The tremendous importance Of the increase III
margins be fully appreciated only Dy 1 ooISLI-
Grafton os the enormous output OF me S'1ndatI-
The average increase in the margin for the pfod-
ucts of both Pennsylvania and Lima crude Oh con-
t.,lca takinG single years and not aS above sT"uls
OF years.. from 1S9s 10 l@'i Was over Genus go 80
Ion and. allowing a liberal estimate ol one
half cent a gallon 90 PEI cent? ioT - lie
costs Of production and marketing Nu.ii'S - ~.
perfod the ret average increase IN proht DURING
these seven years would thus be Il least 10 cel' S
go s+an5aT.s.s entire enles Of all kinds Of pc
trole,7n products in the United states IN l''4 ~ he
motifs fer that year would be about S-LW"V iLoie
-, ~ would have been on the basis OF the
T,ri-es and costs in 1898. AS matter OF facj me
known Increase Of profits on its whole business a.
s-s+.d hereinafter. was more than TINS
similarly for ?s8 when the Prices p,s "a
-, +aar5ed 1heir maximum. these prices would
,er,~nsenr an increase IN the Standard prohJS "I
sales in tn United States that year "i heail9
81 ea,.e over prices and costs in lsss - .,
these figures show conclusively the effect OF .h
6oTn.nation Of the Standard the amount that
the public pays for its OIL =,
Naturally an increase kas also taken piare ~
.la profits OF the Standard by reason OF TINS l.'.e
-olicy The increase annual profits from 1870 IL
1ee Sc7-e"es'.
HIGH RATE OF PROFIT.
The total dividends paid by the Standard rom rom
1Ss2 10 1905 S55l .92-,94 % averaging hus -
ne cent a year. The dividends. however W.
80, ,ass -i,s the total earnings Exact nforna-
1g,n As 20 these earnings * available only for lle
years 1852 1895 and for the years 1879 TO iN; ~
elusive an aggregate for these years .!
.7s . aso. alIt fro: these figures the earnings lo'
the other six years may he estimated WIZ. sum
cacr-a Of correctness. and il Is sIostahuallS c.
~n nj
f~arp 1852 "a 1875 were at least s1s'7'''' ana t
:Ihly rluch more.
s,,-estrlert worth the time of its original ac-
o-1ieistnn not more than z75641"F' ~
furthermore. the rate az profit on the cai.i''na
ION as Increased greatly. From 1882 TO 1894 the
,,ef earnings averaged about % per cent on 'ii'
capital stock or trust certificates outstandins WLle
the average ret earnings for the perlod ll'ih 100
to lqfs We're about SIS peT cent yearly
These rates Of profit and their great increase are
stri<isleiy confirmed by the known profits OF one
.--T-Tr+a,t s-s-sar1 concern the Waters-Pierce oil
CoYraanv The lowest rate of profit on its invest
r,er7t Was IN 7Se5-2Ss per It increased IN
rcarr every year thereafter until IN the nrsl SIN
months of Ieli tire profits were at 'Ae Tale o, a.
T.er cent szcas. Moreover The rat Of proht "I
7,,fr cr17rpass has increased not only in propori"
- its Investment. bu; also Per unit Of products
gold The average profit on Illuminating Oh ior I'e
Years 1sss to 1919 vas IS cents q hsrrei' ~ :, ~
15a, june 1ee4. the average pT"hl vas q . a
barrel with similar Of profits on the I'M
JeorJart 1l-rroducts-
4 further verIhca,ion of the profits Of the otani-
sr9 vas afforded bv computation of the pTohts oi
e--7+~ % irs in6xidu9 refneries- In l~4 tn" rate
profit investment in these re'lnef1es ana ~
.he marketing concerns distributing their proaucfs
was as -CI10g-S- Refinery at Lima, ONO. - PEI
cent, within Ind. - per cent; Sugar Creek. Mo"
95 rrr cent: rIeodesha. Kan. % per cent Florence
Col ~ Ger cent? Weighted average Of y I'er
cent. about 2S cents gallon OF cru"" haidt"d
This excludes the profit. pipe line business
Tho foregoing facts 20 the profits will thus
explain vividly what has become Of the increase
IN -,rfoes and margins on petroleum products dur
Ing soe regime of the Stardari since Iseo.
HAS NOT CAUSED REDUCTIONS.
,-erz valuable additional Information is also
piorvn the report bT the figures gong stll fur-
tber ,ack and taking up the course OF prices Stree
IN. beginning of the industry Available prices for
-te period preceding 1897 much less complete
,ban for the later period, and conclusions here
must lie based largely on the course OF export
pricez. which. a matter OF fact nav" never rep
resented Exactly the course of prices in this coun
sr1 hui which probably CoEresponded 10 domestic
prices much more closely in the earlier periods
.ha7 in 4fa later ones. Making due allowance for
,f-nsa considerations however. these longer series
or r,-.cns are interesting because they cover ooth
the earlier competitive period ana the iater non
.,,retitive or raonopols5tic period. ana allow a
corona-iso;2 between the two They demonstrate
tbe faisity the historic claim Of the Standard
on C,,,,nar7, that by reason Of its extraordinary
.ffciencv il has brought prices to a point lower
Than would have been reached had business re
ra;ned under normal competitive conditions ana
sn INC hands of a number OF comparatively stnalieF
concerns >,
T'te industry may said have been normally
.-onF,eitive from 1856 1874 and during that tle
1bere was A fall in margin between the price OF
e-no-t oil in barrels and the price OF Pennsylvania
cr-,dn OF from % a. cents 1866 to 500 cents In
1874 This decline much greater than tiiai
-vlch taken place since II is conclusive .eNi
fenco that further reduction would have peef ilue
s. 4I,a absence Of any general combination. More
over a part 81 the reduction which took place
from 1874 TO 1879 under the Standard regime vas
6,,a "a decrease in transportation costs and in rail-
av -ares tf7e rate on iluTuira tine oil from Penn
eylranfa fields 20 New York in 1874 being cents