New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-09-17
To the Editor OF The Tribune.

Sir: There has been considerable discuss
sion OF late regarding the oil situation, par
ticularly as to gasolene, but none Of the
published statements I have seen has con-
sidered In sufficient detail tho conditions
surrounding the production OF crude petro-
leum, upon which production the entire
er solene supply depends The public as
whole is not familiar with this most I'M
portant branch Of the oil industry, which
is essentially different in most respects from
any other business, and it Is perhaps desr-
able that the viewpoint OF the independents
producer be set forth.
The Producers Difficulties
The production Of crude petroleum Is
unioue for two reasons--first, because OF
the peculiar nature of the commodity itself,
and, second, because Of the conditions under
which it IS marketed after being brought TO
the surface Crude petroleum differs from
any other mineral in that it has no hXed or
determinable location beneath the surface
Of the earth. In prospecting for sofia
mineral the surface indications are generally
such AS TO show with reasonable degree
and after a certain amount Of Development
work the extent Of the body Of ore can be
accurately determined II the vein IS, IN
fact, found This is, unfortunately, not true
in respect to petroleum. Although geology
has in recent years discounted the initial
chance Of failure in prospecting operations
TO some extent, nevertheless there are many
dry holes drilled in localities which seem
favorable, and even if a given well is pro-
ductive this is by no means an indication
that future adjoining wells will produce OIL
They may be and often are entirely barren
II will readily be seen, therefore, no"
totally different this fugitive product IS from
coal, iron, copper or the other solid minerals,
the extent OF which can be easily deter
mined after discovery. The oil man never
knows until he strikes the oil sand whether
he has been successful, and the average sue
cessful producer has drilled large number
Of dry holes and found himself in debt be-
fore finally obtaining sufficient production to
put his property on a paying basis. Or
course, the great majority of prospectors are
not successful.
There can be no profit from an oil well
until il has produced enough oil to pay for
its cost. inasmuch as its production may
cease at any time; and naturally the oil
produced from the paying wells must make
up for the expense of the dry holes which
have been drilled, for these latter arc a
total loss. The productive wells must also
pay sufficiently TO make. possible the equip
ment of a property with pumping powers,
engines, boilers and the many other eX-
pensive appliances which are essential IL
Is evident therefore, what a great amount
of financial hazard there is in this branch
of the business.
Methods of Marketing
But even after the producer has by con-
tinuous effort and large financial outlay Oh
tanned fair production he encounters con-
ditions which are entirely different from
those confronting the producer of any other
raw material. Crude oil is to-day trans
ported by large systems of pipe lines, which
by reason of their economy and convenience
have practically superseded every other
means of transportation. The large pipe
line companies, which are the principal pur-
chasers of crude OIL run branch lines to
the various producing properties, and these
branch lines in turn take the oil to the
trunk lines, whence IT is pumped to large
storage tanks or to various Tetinerles.
The vast majority of producers cannot at
ford TO install pipe lines which require an
enormous investment, and therefore The
growth and extension of these pipe lines
have resulted in the procedure of the pro-
Queer selling his oil at the well to the COM
panies operating them. This is simple
and convenient method of marketing, and
due credit should be given to those who
have been responsible for its progress and
development, but there are clements con-
nected with it which have been and are
wholly TO the disadvantage of the producer
Most of these large pipe line companies are
either affiliated or work in cooperation with
large refining and marketing companies, and
have very naturally pursued 4 uniform pol
icy Of obtaining the largest possible supply
Of raw material consistent with their needs
at the lowest possible price. Let us see
hcw this affects the producer
First Of all, he has nothing to say as to
the price he shall receive, for the pipe line
company fixes a price at which 1t offers TO
buy his oil If the producer does not con-
slider this price high enough, and decides
not to dispose of his oil, ne has but two
ternatives-ether TO erect tankage in
which to store his oil in the hope of rise
in price, or else to shut in his wells and
stop producing. The cost Of tankage is so
high that the average producer cannot incur
the necessary expense. II he shuts in his
wells they are permanently damaged for
owing to changes which take place beneath
the surface the production is impaired to
a considerable degree by this procedure.
Consequently the producer finds it to his
financial advantage TO sell at the price Of
fered him by the.pipe line companies, even
though this price is generally inadequate.
As an example of this inadequacy one
need only refer to the average price which