Business & Finance: Fizzling Oil

Columbus Marion (“Dad”) Joiner was in a Dallas court last week. His divorced wife was suing for a one-half interest in his $3,000,000 fortune. A 74-year-old wildcatter, “Dad” Joiner has been in courts for the better part of the last four years, not because of marital difficulties but because he was the man who brought in the first well in the second greatest oil pool in the world—the East Texas Field.* Dad Joiner has been at it since 1913. He yanked up his drilling rig 400 ft. short of oil under what later became another flush and fabulous pool, the Seminole. But he made a strike here & there, and by 1927 was drilling in East Texas in an area which geologists unanimously condemned as bone dry. On Oct. 4, 1930 he brought in a gusher. Today the Texas Railroad Commission, which attempts to control the flood, estimates that if each & every one of the 14,000 wells in the East Texas Field were opened wide for one hour, they would produce more oil than the whole U. S. could consume in five days. Dad Joiner sold part of his East Texas holdings for $1,250,000. To “one of the boys” who loaned him $1,000 to help complete his discovery well, he gave $100,000. He bought a 450,000-acre ranch in Mexico, married again, this time his secretary, now 26. East Texas made Dad Joiner rich but it nearly drove the rest of the oil industry to the poor house. It was East Texas that tumbled the price of crude oil to 10¢ per bbl. in 1931. It was East Texas that made President Roosevelt put the oil industry under the Secretary of the Interior. And it was East Texas that incited the gasoline price wars which broke out like a rash all over the land last week. They are pumping oil in East Texas now instead of just piping it off but that paradise of the little fellow is merrily producing at least 100,000 bbl. of oil daily in excess of all allotments— all “hot”‘ oil. The retail price of gasoline has been threatened for more than a year by “distress stocks”—largely gasoline refined by slimly-financed independents. As an alternative to price-fixing. Oil Administrator Ickes gave his blessings to a pool backed by major companies which took the distress gasoline off the market. Belatedly it was discovered that most of this “distress” gasoline was made from hot oil, which the independent refiners bought for as low as 30¢ per bbl. The big companies (“major” to the trade) had to pay the posted price of $1 for what legal crude they bought in the open market. As backers of the gasoline pool, the “majors” grew weary of holding the bag for every “hot” refiner from Kilgore to the Gulf of Mexico. As soon as the “majors” ceased to support the gasoline market, they turned around and declared war on the hot refiners. From the Southwest, where some independents swore they would give it away if buyers would pay the taxes, the price-cutting spread to the great Midwest area. There the majors and the independent distributors cut back at each other three times. In Springfield, Mass. the cut was 4¢ per gal. In New York City it came down ½¢. Standard of New Jersey slashed off 4.4¢ in some of its territories between the Hudson River and the Potomac. And wherever the price-cutting started each & every company in that area was helplessly drawn in.

Loud was the hoary howl from independent distributors that the majors were “attempting to destroy our very existence.” On one point, however, the industry was in perfect accord last week: Federal regulation was a colossal fizzle. The overwhelming majority of the industry was ready to cooperate with Administrator Ickes in the suppressing of the festering hot oil racket. Yet after a year under the code and despite constant thunder from the Department of the Interior, the Department of Justice and the Treasury, hot oil flowed freer than ever. The sole landmark in the oil badlands was the fact that the price of crude was still $1 per bbl. And by last week it was no longer a question of whether or not it would be cut but whether it would be cut 25¢ or 50¢.

The East Texas Field is a perfect network of secret pipe lines, bypasses and other ingenious devices of knavery. Everybody knows it. Administrator Ickes has declared that if oilmen would furnish the evidence they have in their hands he could cut off every drop of hot oil in 48 hours. Oilmen swear they have turned in enough evidence to convict half the population of Texas but nothing is done.

The last blow to the oil industry’s faith in Federal regulation came last fortnight when Government prosecutors suddenly withdrew a test case which had been carried to the U. S. Supreme Court. The reason given was a ‘”technicality”: the clause in every other copy of the Oil Code which made a violation of a State production quota a violation of the Code—the clause on which the whole case hinged — was found to be missing from the original text signed by the President. New oil legislation will probably be presented to the next Congress but oil men are now looking for relief in other directions. Just before the end of the fourth extra session of the 43rd Texas Legislature, a bill was passed giving the Railroad Commission jurisdiction over refined oil as well as crude. The swaggering individualists of East Texas have learned that heating their nonquota oil placed it in the classification of semi-refined and hence out of the Commission’s reach. The new law becomes effective Dec. 25. Hoping that this will ruin Christmas for all Texas hot oil experts, the oil industry last week was talking of pacts between the oil States to supplant ineffectual Federal control of interstate oil.

*Greatest: Russia’s Baku.