OIL: Less for More

The oil pinch was on. The first to sound the alarm last week was Socony-Vacuum Oil Co.’s A. L. Nickerson, who warned that fuel oil might be so short this winter that it would have to be rationed in the East. Said Nickerson: “The consuming public [should realize] that a new oil-burner installation does not carry with it an assured supply of fuel.” Monroe Jackson Rathbone, president of Standard Oil Co. of New Jersey, subsidiary of Standard Oil Co. (N.J.), “Big Jersey,” went even further. He suggested that all U.S. refineries allocate the supply of oil to retailers; in effect, a form of voluntary rationing for the U.S.

Even with oil production at slightly better than 5,000,000 barrels a day, up 12% over 1945, demand this winter is expected to outstrip supply by as much as 10%. This shortage made news; oil also took a spurt in price.

The increase was set off by Phillips Petroleum Co. Short of crude, it offered producers 20¢ a barrel above the current price. Within a few days, scores of other U.S. refineries had been forced to follow Phillips’ lead or lose out on their oil. But no oilman thought that the increased price would mean more oil. Four months ago, Big Jersey’s President Eugene Holman had talked down a price rise as a production incentive. By holding the line then, Jersey had temporarily forced the entire industry to hold the price line (TIME, June 16).

This time, even Jersey had to go along with the increase and had raised the price it was willing to pay for crude. The industry talked of a possible increase in the retail price of ½¢ a gallon on fuel oil and gasoline.

An increase would not win any friends for the oil industry. So far this year, crude oil producers’ earnings are up 100% over last year. Refinery companies are well up also. With profits at these levels, many an oilman thought that the smart thing for the industry to do was to absorb the crude increase and hold the retail line.