Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-09-28

story of reduced
Az1 sales, smaller net
Walter C. Teasle. earnings and some
what widespread
contraction In the number of workers
These reports express the view, how
ever, that we have reached the low level
or business and that any change which
comes IN the next few months Should
be on the side Of improvement.
such conditions as exist are always
part of the aftermath of a period of
extraordinary activity. It is human
nature always to shoot at new high rec
ordS. Every industry wants to show a
substantial gain each month over cor
responding periods of previous years,
and when these gains fail to material
lie there Immediately springs up talk
of depression.
Previous Period Abnormal.
Now If we remember that the first
10 months of 1929 was a period of I'M
usual prosperity, and compare condi-
tons tocay with what we might con-
slider q normal amount of business. the
fact is that the volume of trade and
employment today is fairly satisfactory.
In many lines it is better than nor
NAL average taken over any recent
period Of years. The fact that we are
not up to the totals reported a year
ago Is not TO my mind evidence of any
serious disruption of our business
progress.
The petroleum industry has Jared
relatively better than most other lines,
In TACT, for the first six months of 1880
there was an increase of more than 9
per cent in the consumption of gasoline.
as compared with the first half of 1929,
when prosperity was running high.
While profits in the oil business have
declined this year because of the low
level of prices prevailing, there has
been practically no reduction in the
number of men employed or in wages
paid. The volume of business lately has
been about the same as a year ago.
without the customary. gains. but the
oversupply OF petroleum products has
brought about such extreme compete
ton as to make retail prices much too
low.
It is generally true today that the
public Is buying motor fuel at the cost
OF raw material plus transportation, re-
inning and marketing expense. At
prices now quoted even the most skill
fW and economical management found
It difficult to make profit. In fact,
the average refiner viii do well If he
gets back 100 cents for every dollar he
is paying out for material and services.
Oil Business Sound.
Consequently, If we look at the oil
business from the standpoint of the
stock market Spectator concerned al
most exclusively with immediate re-
turns, we find it disappointing. No
one would invest his capital in an en-
terpFise that little more than breaks
even when 1t does the largest volume
of business in its history.
Nevertheless and Notwithstanding
this present unsatisfactory situation,
the economics of the petroleum indus
try To-Day are sounder than q year ago,
when it was earning substantial profits.
This simply means that what was fore
seen year ago has now come to pass,
and with corrective measures at work
We are that much nearer the return
to sound basis.
culties as other lines when it seeks to
market its products. 1t offers a field
wide open for competitive capital and
competitive sales effort. As is true In
so many other fields now, the petro-
leum industry has increased facilities
Of production more rapidly than war
ranted for the demand for the manu-
featured product. It has therefore
been engaged for some time in accu-
mulating q surplus after satisfying all
current demands. This surplus, though
euphoniously referred to as a reserve,
Is, in fact, a worrisome liability.
While each yearly accumulation has
amounted to but small percentage OF
the years consumption, the total has
now reached proportions where it ex-
erts great deal of pressure on the
machinery Of price making. Instead
OF being q servant to the industry, as
true oil reserve should, this surplus
has turned master and dictated terms
to the industry responsible for its Gre
alton.
Multiplicity Of Stations.
This competition has brought about
facilities for distributing petroleum
products far in excess Of true require
ments. Each service station built on
good trafflc corner has seemed to act
as a challenge to a competing COM
pany to match it with another station
across the street. It is evident to any
one that where there are 10 service
stations in town that supplies bust
ness enough to keep only reasonably
busy, the total expense of stations Il
uneconomic, and with the division Of
business the result Is insufficient earn
| ings for all ten.
| Another angle of this unfortunate
competition is that when company
| installs a new station In field where
it cannot increase total consumption
+. by as much as gallon, it must take
| its business from the trade already
/ handled by the companies earlier ir
| the field. This situation tempts the
newcomer to 60 after his share of the
trade by cutting prices. When ont
station out of ten makes cut In price,
to attract attention to its arrival and
| get business this always results In
bringing down prices in the same de.
| gree at the nine other stations.
That, In brief, Is the marketing sit.
uation existing today over much of thu
| United States. Such conditions coulC
not have been brought about but fol
the pressure of excessive refinery out
put seeking q market. To go back still
further, the refinery oversupply woult
not be what it is today were 1t not TO
the cumulative surplus Of crude oil
pressing upon the manufacturer ant
inviting him to increase his plant runs
It viii be apparent from this tina
the hope for relief lies almost entirel
with the producer of crude oil. If ray
material were brought to the surface o.