Oil Ethics

To the U. S. oil industry there came last week a code of ethics. Concerning only the marketing of oil, the code consisted of 19 articles, most of which dealt with relations between "refiner, wholesaler, distributor and jobber" and the "retailer." As gasoline is by far the most important petroleum product, particularly for U. S. consumption, the "retailer" is usually the filling station owner and the code deals chiefly with unfair methods of securing filling station distribution. It says that the wholesaler should not lease pumps, tanks or other equipment; should not pay the retailer's rent, put up his buildings, lease him land at nominal rentals, or loan him money. He shall not give the retailer credit concessions or rebates. In brief, the wholesaler is forbidden to make with the retailer any arrangement by which this wholesaler may put himself on a different footing from any of his competitors.

Some of the code provisions are striking indications of the competitive aspects of the oil business. There is a rule that "lotteries, prizes, wheels of fortune or other games of chance shall not be used in connection with the sales of gas and motor oils." And it is expressly stipulated that no oil company shall indulge in the practice of painting out the signs and colors of a competitor.

The code requests that violations of its provisions be taken up with the proper "regional committee" of the American Petroleum Institute and should also be referred to the Federal Trade Commission. Thus the oil companies, though establishing their own board of arbitration, are attempting to cooperate with, rather than to take the place of the Federal board.

Long-planned, muchdiscussed, the code was adopted at the ninth annual meeting of the American Petroleum Institute in Chicago. Much of it might seem to consist of regulations which have become standard practices in most industries. It should be remembered, however, that the oil industry today suffers from overproduction, with its attendant fierceness of competition among more than 3,000 established oil companies. There are in this country about 320,000 oil wells with a potential daily production of about 3,000,000 barrels of oil. During 1926 the average daily domestic demand for crude oil was slightly over 2,000,000 barrels. Total 1926 production of about 770,000,000 barrels left a surplus of about 25,000,000 barrels. Inasmuch as the oil industry had been overproducing every year since 1918, there were on hand large surplus stocks of oil. During 1927, production increased to about 900,000,000 barrels. Furthermore, new wells are being constantly discovered. Only last week a new Kansas well began flowing at the rate of 7,000 barrels a day; an Oklahoma well "came in" at 2,500 barrels a day.

At the beginning of the Petroleum Institute sessions there was talk of choosing for president a famed person outside the industry. General John Pershing, Charles Evans Hughes and President Coolidge were mentioned for the position. It was finally concluded, however, that in the present unsettled condition of the industry it would be better to forego the glory of a great name and select a man well acquainted with petroleum problems. So Edwin Benjamin Reeser, of Oklahoma, president of the Barnsdall Corp., was elected.* Mr. Reeser lives in Tulsa; whenever he visits his Manhattan offices he shakes the hand of every member of his staff.

*Ill health prevented retiring president E. W. Clark from standing for re-election.