Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-08-26
CUTS
DOWN OIL PROFITS
Struggle for Business Has
Become Intense Among
Leaders in Industry.
RY PREsTON 5. KRECKER.

Special Dispatch to The Star.
NEW YORK, August 26.-Recent
omission Of dividends by two oil COM
panies-Shell Union and Warner
Quinlan-and reports by others indi-
cate that all is not smooth shedding
for the petroleum industry this year.
That some Of the largest oil corpora
tons, including nationwide organiza-
tons, should not be able to earn their
DIVIDENDS comes rather as a shock to
shareholders II has been widely broad
cast that the industry had made COM
mendable progress in curtailing pro-
duction OF crude OIL that it is reducing
its surplus stocks of gasoline, and that
sales Of oil products this year are likely
to surpaSs the record breaking totals OF
last year.
Distribution Problem.
All of those statements are correct.
Production of crude oil has been cut
to a level which brings 1t into balance
with consumption. The gasoline sur
plus has been cut almost $4,000 900
barrels, or approximately 100000 900
gallons in six months, and the Nations
automobile drivers are consuming gaso-
line at a rate more than per cent
above last year.
What then is the matter with the oil
industry?
E. B. ReeSer, able president of the
American Petroleum Institutes, today
put his finger on the sore spot in the
industry when he asserted that the
business Of distributing oil products
had become such highly competitive
one that it has fallen into a chaotic
condition. There are too many gas
stations, too much duplication of service
and too much price cutting by dealers
to leave a reasonable margin of profit.
Oil executives also point to another
handicap which many regard as an
even worse evil than excessive COMPETE
ton, and that is overtaxation. It is an
astonishing fact that the tax on gaso-
line in some States is larger per gallon
than the price that product brings in
the wholesale markets. At least three
States tax gasoline 6 cents a gallon.
They are Florida, South Carolina and
Georgia. Eight others levy tax of
cents, while no fewer than 10 tax it
cents.
In contrast with those tax levels
gasoline today is bringing only 51a
cents a gallon in the wholesale market
in Oklahoma, one of the biggest refin-
Ing States. 1t is evident then that three
State governments receive q larger in
come from gasoline than the man who
ref1nes it after investing his capital, his
Va dAAlo d4IA AID III anu
marketing it. Taxes levied by 81 other
States all are so large as to leave q mar
row margin between the market price
and the tax. Moreover, the various
state governments place the burden
of collection upon distributors.
In sellers market the tax would be
added to the price of the product, but
in q buyers market, such as now exists,
the tax really comes out of the pockets
of the producers, because, by reason OF
competition, they are forced to lower
their own price to include the tax.
The outcome is that upwards Of half
a billion dollars tax Is being levied on
the oil companies and distributors. The
annual tax on gasoline last year netted
q total Of $449, 731 900. That was Al
per cent above the year previous and it
will be larger this year.
1t would require the consolidated net
profits of o good many companies to
equal that huge sum, yet oil executives
do not seek the abolition of the gaso-
line tax. They realize its benefits In
good highways, rendering autonohiling
safe and easy and increasing consufnp-
ton indirectly. 1t is a question, how
ever, whether some States do not oyerdo
the tax.
tCopyright, lsso)