Evening star., 1942-05-17
Loss Of Oil Sales
Only Partly Offset
By War Demand
Earnings Of Eastern
Firms Expected to
Suffer Most
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, May 16.-Rationing
of gasoline to civilians, restrictions
on tire sales and stoppage of new
car production are cutting into sales
volume of the oil industry, according
to a survey of the Oil Producing and
Refining Industries released by
Standard e. Poor's Corp. this week.
The loss is being only partially
offset by increased demand for other
petroleum products and rapidly ex-
panding shipments to the armed
forces.
All indications are that sales in
the coming half year will be below
those of a year ago.
In addition, operating margins are
narrowing under the pressure of
increased refining costs, resulting
from the necessity for varying prod
ucts yields, and from the higher
costs incident to use of substitute
forms of transportation.
With reserve stocks Of petroleum
products on the East Coast sharply
reduced and a critical deficiency
existing in transportation facilities
serving this market, the o. P. A. has
started to ration gasoline.
Concurrently. reduction Of 50
per cent in deliveries of gasoline and
light fuel oils has been ordered.
The present rationing program
covers TIE period from May Is to
July l, when it is planned to insti-
tute more elaborate and compre-
hensive coupon rationing system.
The rationed area normally ac-
counts for some IS per cent Of the
total Of domestic motor fuel con-
sumption. Normally, the II Eastern
States and the District of Columbia
use about 100000 barrels of petro-
leum and petroleum products daily,
Of which about $4,000 barrels are
brought in by tank ship, principally
from the Gulf Coast.
Since the war, however, a substan-
tial number of tankers has been
diverted to the war service and many
others have been sunk. In conse-
quence, the amount of petroleum
and products transported by tankers
has been reduced to about 450000
barrels daily in recent weeks.
Transportation Costs More.
To meet this deficiency, the oil
industry has been forced to use
higher-cost forms of transportation.
Tank car movement of crude oil has
reached the total of about 100000
barrels per day, and movement by
pipe line and barge is between 100,-
900 and 100000 barrels daily. Never
theless, deficiency of between ESQ.,
600 and 350,OO0 barrels per day re-
mains.
Emphasizing the seriousness of
the situation is the fact that present
transportation facilities are insuffi-
cient to supply even essential demand
for petroleum products on the East
Coast, estimated at an average of
100000 barrels a day for the last
nine months of this year.
This estimate allows for a cut of
25 per cent in consumption of gaso-
line (the equivalent of 40 to so per
cent for many passenger cars, a 10
per cent reduction in light heating
oils and assumes the conversion of
many heavy fuel Oil installations to
coal. Moreover, Sinklngs continue
and there is no assurance that the
recent rate of shipments by tanker
will be maintained. Accordingly, an
extensive program of pipe line con-
struction, expansion and relocation
is being studied by the Office of
Petroleum Co-ordinator.
While the fndustry's sales outlook
is complicated by the institution OF
rationing in certain areas, and for
the country as a whole by restric-
tions on sales of tires and virtual
stoppage of new-car production,
TRANSPORTATION obviously is the key
to the consumption outlook.
So far as the current year is con-
cerned, 1t does not appear that the
rubber shortage will have too serious
an effect on total gasoline usage.
Thus, it has been estimated that
gasoline gallonage used by passenger
cars would not drop much more
than Is per cent on this account.
Moreover, it is believed that in
creased gasoline consumption by
trucks, together with larger exports
and the rapidly expanding aviation
gasoline requirements, will go long
way toward offsetting the reduction
in passenger car consumption occa-
stoned by rubber restrictions.
The most important war products
manufactured by the oil industry
are 100-octane gasoline, synthetic
rubber ingredients, toluene, and
military lubricants. More than 40
projects for the manufacture of
1o0-octane gasoline have either been
approved or are in the process of
approval, providing for production
of approximately 100000 barrels of
this product daily. 1t is expected
that output will be at the rate Of
about $50 900 barrels per day by the
year end, as compared with about
A,000 barrels daily at the close OF
1941.
Earnings to Vary.
With few exceptions, oil company
earnings in the first quarter of the
current year compared favorably
with those of the same months OF
1941. Accounting for the better
showing were larger sales of refined
products, increased production OF
crude oil, and higher average prices
received.
Current quarter comparisons will
be less favorable, as indicated by the
declining trend of gasoline con-
sumption and the fact that profit
margins have been narrowing under
various influences, but with the aid
of the initial quarter gain, earnings
for the first half of the year should
be close to those of a year ago.
There is no doubt but that the
profits in the coming half year will
drop measurably below those OF the
final six months of year ago.
The outlook for individual COM
panies varies widely. Those operat-
ing principally on the East Coast
will bear the brunt of the reduction
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