New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-09-17
Oil Producers Punched
Prices Paid 10 Them by Pipe Line Companies Inadequate but
ov Lock Capt Enough Market Their Product elsewhere

prevailed Tor the nlRDer srnuo VI =,
in the Mid-Continent field (whlcn mas tne
largest production Of high grade crude IN
the worldD during the period l9Oa-lo, DOM
wears inclusive. IL was 80 cents pafrei
of forty-two gallons. This oil, moreover,
was but slightly inferior to the higne'N
grade OF Pennsylvania crude, and when the
;ntrin,ic value OF the product is considered
this price Of less than | l-3 cents gaiioh
was wofully inadequate.
Tho nine line companies maintain that
the price Of crude oil Is regulated oy the
law Of supply and demand. This contention
/, properly qualified however, by the state
ment that it is tho Interpretation OF the
law Of supply and demand by the pipe line
companies, rather than its free and unham-
pered operation, which determines the price
II the farmer and the stock raiser are ais
satisfied with the price offered for their
rcspectiye commodities they are able to oher
these commodities TO other prospective pur'
chasers. There is naturally market level
determined by supply and demand beyond
which they cannot proceed, but the COM
bined barter Of a number Of purchasers on
the one hand and sellers on the other IS
what finally determines the price. NO such
element is present in the oil producing ousl-
ness except that offered by the common car
rier status Of the pipe lines, which has up
to the present had practically no effect on
the marketing methods which have become
established.
The principal purchasing companies serv-
ing that part Of the Mid-Contincnt field
which produces the high grade oil arc the
Prairie Oil and Gas Company the Gulf Pipe
Line Company and the Texas Company.
Lately the Sinclair Oil Company has en-
tered certain parts Of the field. Since the
beginning Of development the Prairie vi
and Gas Company has, with perhaps two or
three exceptions, determined every huctua-
ton in price, and the Gulf and Texas COM
panies, although Independent of this organ-
cation, have Immediately posted an identical
price This has, of course, resulted in no
benefit to the producer. The Sinclair OH
Company has recently on two occasions
posted higher price than the Prairie OH
and Gas Company. which the latter has SUBJ
sequeutly met, but these are practically the
only Instances where an independent com
pany has forced an increase.
Status OF Pipe Line Companies
Referring to the status Of the pipe lines
as common carriers, Congress by an act of
June 20, 1906, in an amendment to the
alton of that act to pipe line companies and
declared them to be common carriers. The
validity and consttutioHality of this amend
ment were upheld b. the United States Su-
preme Court in the case of United States
ct al! VS.. Ohio Oil Company, and the other
cases disposed of at the same time, all re-
ported in 234 L. s., 54S ga Sup. Ct, 956).
This amendment was designed to remedy
the very conditions above referred TO. IL
was hoped that the producer and the indie
pendent refner nearer the larger markets
would contract together and that this would
result in freer condition of competition.
SO far as the average producer is concerned,
however, the law might as we'll not be on
the statute books. In the first place, the
rates and charges are so high that the oil
cannot be transported to the distant refner
III competition with the pipe line companies
own OIL and, secondly the number Of barrels
required to be rendered in one shipment
varies from $4,000 to 100000. The expense
of tankage and the risk Of storing these
amounts Of oil are so great that they are suf-
ficient to eat up the margin of profit for the
average producer. He cannot sell his crude
TO the Independent reiiner, under these con-
ditions, in competition with the pipe line
company.
An Insufficient Supply
Possibly a modification of the rates and
specifications might help this situation, but
this is question which can only be deter
mined by future experience. Just at pres
ent, however, the country is confronted with
a condition, not theory. The supply of
crude petroleum is not holding its own in
the face of the demand for its products, and
stocks above ground are being drawn on to
an alarming extent. Hence it is essential
that every reasonable incentive be given the
producer to explore and develop new fields.
If a production of crude petroleum COM
mensurste with our war needs is to be
obtained, the transporting and marketing
companies must see to il that fair price
is assured to the producer, so that he may
be assured of sufficient capital for extensive
exploration and development. 1t has already
been indicated that, on account of the risk
which Is incurred in the production OF crude
oil, this capital must be relatively greater
than that required by other industries. The
market during the past year has been much
more favorable throughout the entire coun-
try, but, nevertheless, the producer is only
beginning to see daylight ahead During all
the period of low prices he received in most
instances barely enough to permit him to
continue operations, while during this same
period the average transporting, marketing
end refining companies paid substantial divi-
dends Moreover, the materials used in pro-
duction have risen in price during the last
eight or nine months from 100 per cent to
800 per cent, and the wages Of employees
have advanced in many instances from %
per cent to 80 per cent during that period,
thus cutting down the producers return
even at the present time.
WALTER +. KELLEY.
New York, Sept. 10, 1917.