Anarchy in Oil

For two weeks Ralph Clinton Holmes was very busy. As president of Texas Co. he called newshawks to his office, told them that illegal production of oil was ruining the oil business, served notice in no uncertain terms that unless States enforced their oil proration laws the industry would do it, that if the industry would not do it, Texas Co. would. A few days later the Texas Railroad Commission upped the production allowance of the vast East Texas oil field from 400,000 bbl. to approximately twice as much. A prompt wire from Mr. Holmes reduced oil prices in that field from 50-c- to 10-c- per bbl., producing anger and consternation in Texas. Presently Mr. Holmes told his stockholders at their annual meeting that ''we have never been losing more money than now." Presently he was succeeded as president by William Starling Sullivant Rodgers, and made chairman of Texas Co. And last week, without .explanation, he resigned that job having held it a little over a week. In place of downright Mr. Holmes was elected a kindly old gentleman, Charles Bismark Ames, formerly vice president and counsel of Texas Co., since last autumn president of the American Petroleum Institute at $50,000 a year.

Typical of the confusion reigning in the oil business were these rapid overturns in Texas Co. Oil's great bugaboo has been the unbelievably prolific East Texas oil field. It was discovered in 1930, a huge underground lake of oil, 32 miles long and three miles wide. Wildcatters and great oil companies had soon planted 10.000 derricks over it, drilled 10,000 shafts 3,600 ft. deep to tap the subterranean flood. As the oil spouted through 10,000 pinholes in the earth's crust it greased the skids of oil prices. Tighter & tighter the industry drew its proration rules but prices fell to 10-c-. Then the Governors of Oklahoma and Texas shut down the wells with State troops until new and stronger prorationing measures should be put in effect. The U. S. consumes 2,000,000 to 2,500,000 bbl. a day. With Oklahoma producing around 400,000 bbl. a day, California around 500,000 bbl. and a scattering of other States 400,000 bbl., less than 1,000,000 bbl. a day was left for Texas with its nine fields, of which one. East Texas, was easily able to turn out the whole quota. To make supply balance demand East Texas had to be scaled down to around 400,000 bbl.--40 bbl. for each of its 10,000 wells.

Into that tight waistband the Texas oil industry tried to squeeze last winter. Eager as most producers were to cut production enough to save prices, some refused to be constricted. Some went to law, got injunction after injunction against the proration orders of the Texas Railroad Commission. While the courts were voiding orders and the Commission making new ones, the rough & tumble crowd in East Texas took other means. They constructed secret pipe connections, they enlarged valves, to ''steal their own oil." Mr. Holmes estimated that 75,000,000 bbl. of "hot" oil were taken out illegally in 15 months--nearly half of it in Texas. Early in April the output of the East Texas field, supposedly around 400,000 bbl., was estimated at twice that. The new proration belt simply did not hold. So three weeks ago the Texas Railroad Commission made another, easier belt, a proration order that allowed East Texas upwards of 750,000 bbl. a day. It was then that Mr. Holmes of Texas Co. cut the price of crude oil to 10-c- a bbl. in East Texas. Some of the independent producers who own 5,000 of the 10,000 wells in East Texas shut down, others turned on their wells full blast. Last week East Texas production was estimated at from 500,000 to 700,000 bbl. a day, the possible market for its oil at 400,000 bbl.

The agitated state of the oil business was otherwise illustrated last week: P: Socony-Vacuum omitted its 10-c- quarterly dividend, cut salaries 10%. P: Standard Oil of California cut its 30-c- quarterly dividend in half and cut salaries. P: Oil prices in the East Texas field were upped by some companies from the 10-c- a bbl. of the week before to 25-c- a bbl., but at the same time they cut prices in other fields of Texas and neighboring States from around 50-c- to 25-c-.

When President Roosevelt was inaugurated the country's oilmen hastened at his call to assemble in Washington, make a report to him favoring strict proration. They expected to receive commands from the new chief. Instead the President sent telegrams to the Governors of oil States saying it was up to them to act. Result: anticlimax, nothing done. Last week with the oil industry worse off than in March, oilmen again looked to Washington. With chaos, caused by Texas, looming, Governors Murray of Oklahoma and Landon of Kansas met in Oklahoma City and sent emissaries to Washington to help draft a bill which would make Secretary of the Interior Ickes virtual dictator over their industry with power to bring the East Texas or any other field into line. Wirt Franklin, president of the Independent Petroleum Association, turned up in Washington from Oklahoma and declared that "not only every oil State but every element in the oil industry, including factions which have rarely agreed on anything" were willing to hand the President power if only he would agree to restore order.

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