Stabilization - Stabilizing Influences for the Petroleum Industry

This paper is based on the formula that the petroleum industry is sick—find the cause, eliminate it, and the industry will get well. There is perhaps no difference of opinion that the cause is overproduction, actual or potential. But that, again, is a result rather than a cause. The problem is to study the influences that serve to keep production and consumption out of balance. Production control is a popular theme and a natural one at this time when the whole world is unstable; but production control in its popular sense means little more than the application of emergency measures while danger threatens. Economists differ as to the effectiveness of these, most of which are designed to alleviate and not to cure, but we assume there are none who question the wisdom of promoting conditions under which economic forces are permitted to operate freely in bringing about stable conditions. The petroleum industry suffers from two classes of economic ills that serve to promote overproduction; namely, those which are common to all industries and those which are peculiar to this industry. It is of the latter I wish to speak. Strange to say, government is responsible in large part for this latter class of ills that affect the petroleum industry and we are coming to recognize that only through the assistance of government can they be corrected. Instability of the petroleunl industry, in so far as human agency was involved, had its inception in 1875 when a Pennsylvania jurist, called upon to make a decision for which there was no precedent and fancying he noted some resemblance between the so-called fugitive nature of oil and gas and that of wild game, made mention of that resemblance. Other courts being impressed by the analogy enlarged upon it, and gradually fixed upon oil and gas a legal status in certain important respects similar to that of wild game. Although later the courts abandoned this analogy, certain practices that developed out of that early concept have continued to this day and are largely responsible for the industry's present plight. Thus, instead of ownership in place that is characteristic of private property generally, the law of capture was applied to oil and gas. Now, the rapid and wasteful depletion of game