Gasoline War

The excess production of crude and refined oils in the California and Mid-Continent fields this Spring led to heavy overproduction. Prices declined, but the fall was kept orderly by the Standard Oil companies, with the view of stabilizing the situation. The farming states, devoted as they are to plans for stabilizing wheat, could see no virtue in employing similar methods in any other industry, and Governor McMaster of South Dakota gained considerable applause when he purchased with state funds some 160,000 gallons of gasoline from a hard-pressed refiner, and offered it for sale at 16¢. At once the Standard of Indiana lowered its price to 16¢ too. The price-cutting war spread to other states. Governor Charles W. Bryan of Nebraska, not to be outdone, demanded a similar cut in gasoline prices, under the curious threat, of installing government-owned gasoline stations to compete regularly in the business.

The states—Illinois, Iowa, Indiana, Michigan, Wisconsin, Minnesota, North Dakota, South Dakota, Kansas, Missouri, Oklahoma — were affected by the 6.6¢ cut made by the Standard of Indiana. In addition, the Standard of Kentucky made a cut of 1¢ in Kentucky, Florida, Mississippi, Alabama. Georgia. The Standard of Nebraska cut its retail prices to 16¼¢. Slight cuts followed in the Eastern states. W. C. Teagle (President of the Standard of New Jersey) declared that, unless crude oil prices continued to fall, further cuts in retail gasoline prices were unlikely.

The whole movement toward lower gasoline prices was caused, of course, by overproduction of crude. Governor McMaster’s action proving merely the occasion for the drop. Since crude production should pass its peak in California within three months, the present price cutting is likely to prove only a flurry in the general movement of prices. The daily average gross crude oil production in the United States, however, increased 10,350 barrels for the week ending Aug. 11, with a total of 2,251,250 barrels.

Serious harm to the larger oil companies through this sharp drop in prices is most unlikely. As far as the Standard Oil companies are concerned, their chief danger will lie in the curiously contradictory attacks made upon them in connection with it. First, they were blamed for keeping gasoline prices too high. But when they reduced prices to meet all competition, they were blamed for so doing on the grounds that they aimed to ruin the independent oil companies and thereby to establish a monopoly.

If blame is to be laid for the drop in oil prices, some of it should go to the Governors of South Dakota and Nebraska, but most of it to the ordinary citizens in the Los Angeles Valley, who last Spring discovered oil literally in their back yards and under their front lawns.