The daily morning journal and courier., 1907-08-05
THE KNOX REPORT Summary of Sensational Revelations Against Standard Oil.

F
 THE KNOX REPORT
 Summary of Sensational Revelations
 Against Standard Oil.
 Washington, Aug. 4.-Commissioner of Corporations Herbert Knox Smith has submitted the most important part of his report on the oil industry. The facts contained in the report are high ly interesting to the public and deal with the prices and profits. The re- port is well supmarized by MT. Smith in his letter of submittal to the presi- dent. His report in part follows.
 The study of prices and profits of the petroleum industry is necessarily chiefly a study of the policy of the Standard Oil company. It has already been shown in part I of this report that the Standard Oil does nearly nine- tenths of the business of refining petro- leum in the United States, and that by means of its control of the pipe line system in the leading oil fields, has become the purchaser of at least that proportion of the crude oil suitable for refining purposes. It is evident that a concern. doing such a proportion of the business Is substantially able to dictate prices both of crude oil and it's prod ucts. Moreover, it was shown in part that by reason of the system of direct marketing the Standard oil company has, in large parts of the country, all most a complete monopoly of the sale Df petroleum products, and in those parts it's ability to fix prices is corre- spondingly greater
 The investigation of prices of pretro- leum in the United States shows two conspicuous facts:
 l. There has been very marked in- crease in the margin between the price of crude oil and the prices of its lead ing finished products In the United States during the past ten years. This increase in margin is only in small part attributed to increase in costs of conducting the business. Although since the time when the Standard Oil company first secured a large propor- tion of the bus.Aess, about 1874, there has been a material decrease in the margin between the price of crude oil and the price of Illuminating oil, the Standard Oil company can claim no creit for this decrease. The margin in the domestic trade ds greater to-day than 1t would be under free competi- tion.
 2 The profits of the Standard oil pany, particularly on it's domestic bus mess, are altogether excessive, and they have been higher during recent years than formerly.
 The representatives and defenders of the Standard Oil company have admit ted that its profits are large, but have claimed that its efficiency is so great that 1t has been at the same time a benefit to the public; that it has either increased the price paid to producers of crude oil or reduced the prices to con- sumers, or both. These claims are not we'll founded. The argument of the Standard has generally been based on a comparison between the price of crude oil and the price of Illuminating oil for export. Such comparison is in the highest degree misleading, at least with respect to recent years, during WHICH IIle ItlON6HiCtl Ol ltAC GApVA ! prices has been entirely different from that of domestic prices Moreover, the argument based on illuminating oil prices alone takes no account of the great increase in the value of the by products of refining gasoline, lubricat- ing oil, paraffn wax, and others of less importance. The present report con- tains an elaborate discussion of the true movement of prices, both in the domestic and foreign trade, and for both illuminating oil and other prod ucts The conclusion that the Stand- ard has increased the margin between the price of crude and the price of it's products, in the domestic trade during recent years is indisputable. With re- { gard to the movement of prices in earlier years, less precise information is available, but it is shown in this re- port that the Standard has not reduced margins below what they would have been under conditions of normal com petition.
 Price Movements in the Domestic Trade
 -Signifcance of Margins.
 l1lG slllliuGIlNC OA lilC A1kebAlhNAA SAl company on prices must be judged, not by the absolute prices of the finished products of petroleum, but by compar- ison of such prices with the price of crude oil. The Standard buys much the greater part of its crude, and therefore the margin between crude and its fin ished products affords the proper crl- terion of its policy.
 In considering such margins the Standards price policy may conven- iently be considered as though it af- fected principally or only the consumer of the finished products. It is true that the Standard is substantially able to fix the prlce of crude oil in most of the great oil fields The unduly great margin between the price of crude and the price of finished products might therefore be attributed either to the es- tablishment of unduly low prices for crude, or to the establishment of un- duly high prices for finished products, or to both combined. It is impossible, however, to determine precisely how far the producer and the consumer re- spectively are affected. There is no data by which to determine with cer- tainty what constitutes a fair price to producers; to do so would require com plete evidence concerning the average profits of crude oil producers. There is little doubt. however that in general the excessive margins extorted by the Standard have been chiefly an explolta- ton of the consumer
 The business of crude oil production