Evening star., 1923-05-07
LOWER OIL PRICES
ALARM PRODUCERS
Amazing California Output
Shakes Whole Industry.
Will Check Supply.
BY j. c. ROYLE.
Speria Dispatch 10 TIE Star.

SPECIAL Dispatch to The Star.
NEW YORK, May THE steady
' climb of the daily average of oil pro-
ouction in the California and mid
continent fields is held responsible
Tor the almost universal cuts in the
prices of crude oil and gasoline which
nave been feature of the markets
III late weeks. Overproduction in
The new California fields has
swamped storage tanks, transporta-
ton lines and refineries with crude
petroleum. The executives of prac-
1ically every big oil company on the
coast and authorities in other pro-
AucinS sections agree on this view
The new California fields have been
among the most remarkable in the
history of oil. In the last year pro-
duction has jumped from Sl46lS
barrels a month to nearly 100000
barrels This vast quantity has over
taxed transportation and storage
facilities and has resulted in vast
surplus of gasoline.
Drilling at Furious Pace.
Efforts to turn black gold. as crude
Oil is called. into yellow gold without
stelay has resulted i'll = tremendous
amount of town lot" drilling by
small independent producers and the
sinking OF offset" wells. SO active
have these operations become IN
rhe Huntington Beach Santa Fe
in the Huntington Beach. Santa Fe
Springs and Signal Hill fields that
the derrickS almost touch each other,
although experience has shown that
one we'll to every ten acres is the
limit uf economic operations. AS IL
we'll is drilled i.cAi TO one property
and strikes oil the owner of that
property is compelled to put down a
casing of his own to keep the lake or
'. ..4, Ia a
drained through the first opening.
Will Limit Output.
Agreement has been arrived at
among some owners TO check pro-
duction in California and this has
. been furthered by announcement by
the large companies that they Will
buy crude only on contracts already
existing with II maximum amount nix
ed This already has cut down the
number of wells started in the last
week by nearly one-third.
Two price cuts have been put into
effect in California crude since the
first OF the year. These have reduced
the quotations from 81 to SO cents a
barrel. The Standard Oil of Cali
fornia. the She'll, Union, Associated
and other large companies in Cali
ttornia are now expendinE more than
$30,000,000 on pipe lines and tanks
adequate to handle the tremendous
production. The Standard is building
one concrete-lined earthen reservoir
near San Pedro which holds :, 100000
barrels. two others with a capacity
Of 100000 barrels each and three
which will accommodate d million bar
rels apiece, in addition to hundreds
of steel tanks.
s6OOO,OOO Pipe Line.
The Shell Company's pipe line and
tankage program will cost S6,000.00O,
while the extensions of the Union
>Company will cost double that The
California Petroleum Company is
building eighty tanks holding 10000
barrels each. Every available tanker
is being pressed into service to carry
oil through the Panama canal. the
shipments eastward now exceeding
100000 barrels Il month.
The average daily production in
the midcontinent field is increasing
steadily, with no corresponding in
crease in demand. and crude prices
have dropped rapidly. Production in
Oklahoma approached the 100000 bar
rel mark daily in the last week and
Kansas is averaging nearly 10000
barrels. Gasoline has dropped in
many sections, but the fall in Kansas
City has brought prices to 15la cents
at filling stations and 1872 from tank
wagons.
The price trend in the Wyoming
and Montana fields usually follows
that of the midcontinent oil and this
has been the case recently. However,
:. Denver is paying 22 cents Tor gaso-
line. authough much closer to supply
than Kansas City.
Five Months supply Ahead.
In Pennsylvania oil men feel that
there is something artificial in the sit
uation, although the oil supply above
ground today is equivalent to nearly
five months consumption. They be-
lieve that there viii be an adjustment
in Il few months that will justify con-
finno6 field tinnC and lnVplOn-
ments. They are. therefore, not per-
mitting price cuts in crude to inter-
rupt field work Some of the pro-
.ducers are of the opinion the price
cuts are the result of recent investi-
cations at Washington. Others point
TO the special state tax heaped on
gasoline and still others hold the
opinion that refiners do not want to
put their product up to prices SO high
that consumption will be reduced.