Tulsa daily world. [volume] (Tulsa, Indian Territory [Okla.]) 1905-1919, 1918-10-03
OIL SUPPLY IN DANGER.


Oh men have cause TO feel
alarmed over the effect tho war rev.
enue bill Is going to have on that
industry--an industry which the mil
itary board has regarded as Of great
importance in the prosecution OF the
war. The men most familiar with
the oil business and therefore who
speak with authority on the subject.
are OF the opinion that the bill will
result In 4 decrease In the supply OF
crude oil TO an alarming exent, The
tax imposed will rather tend TO re-
tsrd than encourage development.
Government officials have from
time TO time stated that more devel-
opment was necessary, as the supply
Of oil. no essential In the conduct Of
military operations, was too limited.
oil men naturally hesitate to APP
pear to be opposing any feature of
O war revenue measure, and yet
they feel they would be derelict In
their duties should they fail TO give
a reasonable warning to both gov
eminent and the public Of the disas-
trous results which this form and
character OF taxation may cause.
y In the last analysis the entire pro-
tuction OF petroleum oil is dependent
upon wildcatting. The wells and
fields we now have will sooner or
later be exhausted and the ever-in-
creaslng needs for petroleum and Its
products must be supplied by the
discovery OF new pools. In the pros
pecting for oil the operation Is apt
to be q loss of 100 per cent. and the
lucky strikes which bring in huge
profits are much fewer than the
failures.
The government now proposes TO
levy q heavy tax on all companies
having large earnings in relation to
their actual Invested capital" Ac-
cording to tho bill invested capl-
tai" cannot exceed the actual cash
put into the business. The pros
pector who has been lucky enough
to strike OIL will be allowed to earn
10 per cent on his actual cash invest
ment and then the government pro-
poses to take 80 per cent OF all the
remainder as a war profits tax, and
OF what still remains to take IL per
cent II It Is paid out in dividends,
and IS per cent IL not in dividends.
In most cases no earnings can be
paid out as the money viii have to
be used for development.
I'm addition to this the bill is
retroactive in effect and as consc-
quence the. disbursement OF wild
eating has been widespread, and 1t
looks as though practically all wild
cat operations win cease. Tts not
only is serious from the standpoint
Of future supplies OF crude oil. but
IL already playing havoc with the
supply OF natural gas.
It seems obvious that the theory
on which the proposed revenue bill
Is based cannot be applied to the oil
production business. The fundamen-
tai idea is that all earnings in ex-
cess OF s per cent are abnormal and
represent an excessive profit which
can be Justly taxed. The normal
conditions OF the oil production bust
ness Is losses and profits which
would be abnormal in other kinds OF
business. Again the bill assumes
that all earnings in excess OF the
pre-war period are due to the war
This is not the case. The sale price
OF crude oil has not advanced
enough to offset the increased cost
Of drilling and operating, and many
of the present producing properties
represent discoveries made since the
date OF the pre-war period specified
in the bill.
The crude oil is OF vastly more inn
portance to the government and to
the public than the money which
will accrue to the government by
this drastic tax In fact, the very
nature OF the tax is one which will
automatically bring about its own
reduction.
Prospectors and producers cannot
continue development 1t IS not a
case OF won't, but case of can't.
They are not going to sulk, for they