San Antonio light. [volume] (San Antonio, Tex.) 1911-1993, 1923-01-01
FOIL INDUSTRY
!, HAS A PROBLEM
IN BIC SURPLUS
Must Work Off the Burden
VI Of Top-heavy Stocks
! During 1923.
! USE is ON INCREASE
I This With Slowing Down Of
Production May Cor
rect Situation.
USE IS ON INCREASE
BY JOSEPH e. POGUE.

Author of the Economics of Petroleum.
The petroleum industry has just clos
ed a second year of over-production.
Does 1923 promise relief from this IN
happy condition or will the industry
continue a victim Of its own momen-
tum? Should future depression en-
train the industry before 1t succeeds
in working off the burden Of its top
heavy stocks the results will be disas-
trous in the extreme. Yet optimism in
the industry looks to an early shortage
10 correct the excuses Of an over
supply that, in the face Of vigorous de-
mands has built up inventories with
value in excess of three-quarters OF
billion dollars, reckoned at deprecated
prices now current.
The supply Of crude petroleum at
present writing is approximately 1,9OO,-
900 barrels a day. OF this volume,
about 1,6J0,OO0 barrels come from the
oil fields of the United States, while
about 100000 barrels are imported
from Mexico. Consumption is run
ming between 100000 and 100000
barrels daily. This gives surplus,
for the moment, Of 100000 barrels or
more per day. During most OF the
wear the surplus ran higher, but In
October and November the over-supply
narrowed almost to the vanishing point,
because the refineries were running
more oil than they could market; since
then the margin has enlarged to some
extent.
The consumptive requirements for all
the products Of petroleum are increas-
ing and increasing rapidly. Obviously,
then. the situation is in the way OF
correcting itself, given time and grant
ed a slowing down in the rate at which
crude petroleum is brought upon the
market. But right here is the great
risk the industry is running-the IN
certainty as to the lengtD of the pres
ent period Of business activity and the
possibility that the momentum Of tht
industry may lead to continued in
crease in oil field production instead
Of slowing down in output.
Big Stocks a roblenl
The status Of the entire petroleum
industry, from the largest integratec
company down TO the smallest pro
Queer or refiner, is intimately involved
in the magnitude of the crude oil stocks
held by the principal crude oil purchas
ing agencies. These stocks, it will b.
recalled, are close to 300,00O,OOO bar
rels in aggregate volume; were IN
creased from 100 900 barrels to thei
present figure during the past twt
wears; represent an average first cos
of perhaps as much as $3.50 a barrel
entail a storage expense Of upward 0
30 cents a barrel a year, and are still
being added to. The accumulation 0
this enormous volume OF oil was under
taken in the belief that the encrOach
ment of salt water in he light OF
fields of Mexico would so curtail on
imports of Mexican petroleum as I
create a shortage and afford prOfitabl
outlet for this reserve. Now that tn
decline in Mexican shipments, thong
coming according to schedule, has bee
offset BY a concomitant increase in dc
nestle production Of crude oil, the pres
ence of this vast storage reserve intel
jects an artificial element into the situ5
ton that may be hard 10 reckon will
The accumulation of this supply, largel
at relatively high prices, stimulate
production in excess of consumption
and far from stabilizing the industr.
as was its purpose, these stocks no
stand as a danger point which ma
either preeipitate ruinously low price
in the event Of continued Overprodu
ton or else lead to premature advance
in price to levels that cannot be su
tanned.
The increase in domestic productic