Evening star., 1941-06-01
Oil Firms Face
Best Earnings
Since 1887
Advance in Prices
And Big Demand
Improve Outlook
ST.ecial Dispatch to The Star.

SItClal DlSpdtCN 70 Inc OldE
NEW YORK, May 31.-A new high
level of demand for oil is indicated
for the current year despite con-
tinued restriction of the export
market, according to a survey by
the Standard q Poor's Corp.
The cycical trend of petroleum
products consumption is upward
and, furthermore, a sharp stimulus
to general business activity has been
provided by the national defense
program. In addition, prices for
most of the major products have
risen to levels above those of a year
ago and this rise has brought about
improved profit margins in the face
of advancing crude oil costs. Earn
ing prospects for the industry cur
rently are the best since 1887.
"T'he oil industry is undergoing a
broader improvement than any
witnessed since its recovery from
the depression of the early 1930s.
The gains being recorded on
virtually all fronts reflect record
demand and strong statistical
position. The old problem of chronic
oversupply; particularly of gasoline
and crude oil, which was intensified
by the loss of important export
markets in 1910. has given way to
one of potential, if not actual,
shortage.
Tanker Shortage Studied
The threatening tanker shortage
is of far-reaching significance. To
the Atlantic Coast market it doubt
less means higher prices, while to the
Gulf it means disruption of normal
trade and the necessity for a re-
alignment of operations and market
ing outlets
Even the lubricating oil market,
hard hit by the loss of much of its
important export demand, is on the
uptrend in most sections of the
country. This improvement re-
fleets the stepping up of domestic
demand for defense industries to
the point where it approximately
offsets the loss in exports.
Considering all of these trends as
a whole, it is apparent that refining
margins are widening steadily,
whereas they were declining steadily
last year. The indicated profit
margin on May l was higher than
at any time since December. 1899
when prices were booming in antici-
patton of war oil demand which
failed to materialize.
With Illinois crude oil produc-
ton stabilized at level we'll below
indicated demand for oil from that
source and with output throughout
the remainder of the midcontinent
and Southwest under close control.
a tight situation also exists in the
raw material. Additional increases
in prices. are. therefore. a distinct
near-term probability, dependent, of
course, on price-flXing action which
the authorities in Washington now
have under consideration.
Earnings TO Rise.
Earnings comparisons of most oil
companies in the first quarter of
l94l were considerably better than
had been anticipated, largely be-
cause of the high level of demand
In subsequent quarters. however,
the industry will be favored also by
far better price comparisons.
There will be some increase in
costs. but the better operating con-
ditions will completely overshadow
both the cost increase and the
prospective increase in corporate
taxes.
Moreover, the oil industry is in
relatively favorable position with
respect to excess profits taxes, be-
cause of its large capital investment
and its liberal depreciation and de-
pletion allowances for Government
tax purposes. Oil companies. there
fore, appear destined to show better
earnings for 194l as a whole than
in any year since 1887"