San Antonio light. [volume] (San Antonio, Tex.) 1911-1993, 1923-01-01

from 1 $50 900 barrels daily the first Of
the wear to upwards of 1,650,OOO bar
rels at the close, is noteworthy. This
increase of 80 per cent in twelve
months is the result Of improved tech
nology-better and more extended use
of geology, deeper drilling, and faster
drilling. A few years .:go 5000 feet
marked the limit. of commercial oil pro-
duction; now 3.O00-4.000 feet is COM
monty penetrated by the drill, and even
the zone between 1000 and 5000 feet
is Welding an appreciable portion oil
Our output. Few wells are now To-
Gated without the aid afforded by geol-
ogy; the number of accredited protes-
sional biologists has grown, from a few
dozen to over a thousand in the space
of a very few years, anG the effective
ness of geological methods has been
greatly enhanced through the rapid de-
yelopment of the science. In sense
the geologist has dope his work too
we'll. for oil seems for the moment too
easy TO find. These factors have been
of the utmost Importance during the
past year and bid fair to continue TO
influence production in a substantial
though unpredctable, degree.
Also the ability TO convert crude pc
troleum into gasolene has gone steadily
forward-so much so, indeed, that the
proportion of crude petroleum convert
cd into gasolene during the third quarter
of 1922 was 26.4 per cent, as compared
with 20.7 per cent for the third quarter
Of 1915 and $40 per cent for the third
quarter of 1921. This rapid advance IN
refinery effectiveness is most impor-
tant: thus in the past four years the
Casolene producing capacity OF our
crude oil supply has been increased
over % per cent aside from an increase
in the volume of crude. Thus growing
technical efficiency is contributing to
the net supply Of gasolene, reducing
the. relative volume of crude petroleum
required for this purpose. Perhaps
we have here au important element IN
the explanation why gasolene is being
over-produced in spite of the remark
able rate Of increase in its consumption.
The same consideration points to the
necessity for discounting the volume of
crude needed next year to provide for
the increased gasolene requirements oil
the country. The question, indeed, may
be asked whether the industry has not
lost sight of this factor when counting
on the increase of gross demand that
is hoped for rs an early corrective to
present overproduction.
New Buying Method.
To add to the uncertainty existing
in the petroleum situation, the major
crude oil purchasing agencies in the
Mid Continent field have recently SUI
perseded their plan of buying all crude
oil offered, irrespective of quality, at
n fixed price of S125 by a graded
price ranging from 90 cents to $50,
according to the gravity (Which means
the gasoline contcnt) of the oil. This
new graded price means in one sense
an increase in price offered, although
heretofore much of the high quality
oil was taken by local refiners, who
paid a premium over the price posted
by the purchasing agencies in order to
get this superior oil and assure them
selves of a sustained supply; and II
premiums are taken into consideration
| the new prices represent substantially
no change in realization.
The establishment of graduated
scale in the Mid-COntinent arose out
of a peculiar and anomalous situation
obtaining in that part of the country
| The Local refiners, who run to stills
nearly a quarter Of all the crude oil
refined in the United States have been
for months exercising the keenest
competition in bidding for high-gravity
crude, in spite of the fact that they
we're overproducing gasoline and II
general creating an artificial excess de-
mand for crude petroleum. The i'm
mediate effect of these competitive eff
forts was that the local refiners were
getting most of the quality crude and
the large purchasing agencies were
getting oils with low gasoline content
The new scale Of graduated prices
was obviously designed to attract
better grade of oil to the pipe lines
and tank farms of the larger inter
ests. This change in buying policy il
generally interpreted as reflecting
relative shortage of high-grade crude'
rim the face of an Oversupply OF crud
; oils with n low content of gasoline
but one might feel surer of such
conclusion if he did not realize tina
the local refiner for some time ha
been Cutting the market with gasoline
and depressing the price Of gasoline t.
levels approximating the lows of 1872,
and in consequence was representative
of an uneconomic and unhealthy de
mand that was anyhow headed for it
own destruction.
Big Profits or Trouble?
The ultimate effectSof the graduated
price. of course, will be to cause tn
local refiner to curtail his runs an
in some cases go out Of business, leav
ing the purchasing agencies with am
ple opportunity to accumulate their sun
= ply undisturbed by competitive bid
: based upon hopes rather than the sprea
between cost and realization.
: But in spite of all the difficultie
. and uncertainties that beset the petrC
y'Ileum industry at the present time it !
not improbable that 1923 may see tn
; crossing Of the lines of supply and de
: mand and n consequent era Of risin
prices and expanding nrofits. IL III
= industry is lucky this will happen: Blu
S what if production goes on increasin
= or il the present business cycle turn
s out TO be a short one? In such even
+ the petroleum industry NAV well hes
tate to face the sequel.
b Conyriellt. 1922.