The New York herald., 1922-01-08
Crude Prices Drop to Almost
Third of Former Level, but
Partially Recover.
MANY OPERATORS RUINED
New DevelOpmentDiscOuraged,
but Industry Not Seriously
Hurt by Less Demand.
BY j. w. SMALLWOOD.

4" HE petroleum industry had in 1921
a year of sharp readjustment
which came with n suddenness
characteristic of the oil business. AL
though continuing its prosperity long
after most other Industries had begun
to suffer from worldwide depression, the
oil industry finally was affected. Prices
Of crude oil within few months dropped
to less than third of their former level
and prices of the refined products
showed a corresponding decline. That
violent reaction in prices spelled ruin for
many operators and naturally discour-
aged new development work in the oil
fields. whereas for several years previ-
GUS every incentive had been given to
the producer and wildcatter to increase
production. the sharpness Of the decline
made possible an early recovery in
prices Consequently before the close of
the year there was a recovery of 100 per
cent. from the low figures.
The beginning Of the new year finds
uncertainty in the trade as to the prob
able course of prices in 1922, and the
price question is looked on as being
closely linked with success or adversely
in the industry. Domestic production
and imports of oil are running at a
sumption is not as large as it has been.
there seems to be room for doubt as to
a continuance of the present price level
It seems reasonable to look for consump-
tion at least equal to the 1921 mark. and
the consensus of opinion is that it should
increase. The principal consideration.
therefore, is whether or not the supply OF
oil will increase or decline. Reduced
prices in the last year resulted In
large curtailment of drilling activity and
caused q falling off in production in
many older fields. in which continued
drilling was necessary to maintain out
put, but near the close Of 1921 a new
field showed a sensational development
and Is producing around 125.O00 barrels
daily, which more than offsets the de-
cline in production in other districts.
Coincident with alarming reports re-
garding the future of Mexican fields,
production and shipments from that
country have risen to new high records.
1t is fact. however. that large part
of the former producing area of Mexico
has been exhausted and that salt water
has taken the place of oil. The result
is that most production is from an ex-
.remely small area, being drawn on by
the few companies controlling the acre
age apparently with the idea of getting
the remaining oil above ground as rap
idly as possible. 1t Is not believed, even
by the most optimistic, that the present
rate of production in Mexico can long
be maintained. Should Mexico and
MeXia decline simultaneously, which
does not seem unlikely. at n time when
consumption is showing some increase,
production and imports probably then
would be running behind the demand
The leading oil interests are taking no
.l.o a,,et hAtx IN
tanned and have been adding steadily to
their reserves OF oil and properties in
preparation for future requirements.
Contrary to the general belief the
petroleum industry has not been affected
to any serious extent from reduced de-
mand for its products. The readjust-
ment was brought about by the fact
that production kept climbing after the
previous steady increase in consumption
had begun to halt. The petroleum in
dustry was working on the theory that
there would be continued steady yearly
increase in demand. whereas after the
banner year of 1920 the demand began
to recede slightly.
Complete statistics for 1921 are not
available. but Indications are that do
nestle consumption and exports of pc
troleum in the past year amounted to
about 530, 900, 900 barrels, in contrast to
539.000,00 in 1920. Domestic produc-
ton in 1921 was about 466.000,000 bar
rels and imports about 125.o00, 900 bar
rels. in contrast to $4,000. 900 production
and 106.o00,000 imports in 1920. Total
production and imports last year were
100000 900 barrels. I'm contrast to $780,
100000 barrels in 1920. With some
falling Off In consumption the result was
an addition to stocks OF probably 57,-
900 barrels.