No Oil Compromise

(See front cover)

"These are harsh words, Sir Henri," said, last week, the U. S. petroleum industry.

Not publicly, however, was this sentiment expressed, for both last week and this week oil men were gathered in convention at Chicago's Stevens Hotel, where they discussed production, restricted production, overproduction and other topics conventional to oil conventions. They also discussed prospects of appointing some outstanding personage as Oil Tsar. One such personage, for example, would be Calvin Coolidge, onetime (1923-29) U. S. President, now occupationless.

It was thought that the little oil men were not too eager for the appointment of a Great Man as Tsar, inasmuch as Great Man's influence, presumably exerted in sympathy with the program of the large oil companies, might give production restriction an irresistible impetus. But where-ever discussion was unofficial and unpublished, delegates to the tenth annual meeting of the American Petroleum Institute talked of Sir Henri Wilhelm August Deterding, of Royal Dutch, of price wars and of invaded territory.

For, last week, pausing in Manhattan en route to Chicago, Sir Henri had said to newsgatherers: "We will continue to sell and meet competition in the States or wherever it arises. We never have compromised and we never will. . . . We create no price wars but we are able to, and will, meet all price competition. Our companies fear no one, not even American competition, and there will be no compromise."

Sir Henri Deterding is, as everyone knows, head of the Royal Dutch-Shell petroleum interests, largest crude oil producing company in the world. Old in the oil business, veteran of many oil wars, Sir Henri at one time battled, not unsuccessfully, with Standard of New Jersey in its pre-dissolution period. In more recent years he has (despite his non-compromise statement) preferred peace to war, as witness his agreement (in March) with U. S. oil interests concerning the marketing of Russian oil. In April he sat in on an American Petroleum Institute oil restriction program, gave tacit approval to U. S. attempts at oil rationalization. But the restriction program, in its nation-wide aspect at least, fell through, and in August Sir Henri suddenly shocked U. S. oilmen, particularly the Standard Oil Company of New York, with an invasion of Socony's own territory. Throughout New England, and in and around New York, appeared filling stations selling Shell gasoline. Marketed by Shell Union Oil Corp., which, although a Royal-Dutch-Shell subsidiary, is third largest U. S. oil producer, Shell Gasoline represented foreign competition in a particularly acute form. Most of the Shell Gasoline has been imported from Venezuela whence it can be sold in the U. S. at prices difficult for U. S. oilmen to duplicate.

Having arrived at the convention, Sir Henri made what is reputed to be his first formal speech, talked on "Common Sense in the Oil Industry," said no more about his "no compromise" position. Said he: "The idea that it might be possible that the 'collecting department' [that which supplies the public] could be some Government or combination of buyers who will dictate to the producer the minimum with which he ought to be content so that he may be kept alive, is bound to be shortlived because it is entirely illogical. . . . Do not be led away by the noise of publications about Trusts. . . . What is to be done? . . . My advice is: Let us create 'an association of cooperation' on the basis of possibility of permanent production with the assistance of such distributing organizations as are willing to cooperate, and do not let us worry about those who will not do so." U. S. oilmen, pondering this last pearl of wisdom from the Shell, wondered how much of Sir Henri's U. S. activity was designed to strengthen his international position.

Production. Aside from Sir Henri and the Shell-Socony war, oilmen were chiefly interested in the perennial problem of overproduction. When 1929 began, there were in storage 625,000,000 barrels of crude oil, representing excess of production over consumption. Production during 1929 totaled about 200,000 barrels a day over consumption, so that at the end of the third quarter the 600,000,000 barrel excess had increased to 675,000,000 barrels, or about enough for eight months consumption. During 1928 oil wells produced about 900,000,000 barrels; during 1929 the production will reach an even billion.

On the other hand, although the government failed to endorse the American Petroleum Institute's national program of oil restriction, oilmen have made marked progress through state-by-state restriction agreements. There is no overproduction problem in Pennsylvania fields; Texas oilmen have on the whole cooperated enthusiastically with the restriction plan; encouraging progress has been made in the Mid-Continent (Oklahoma) fields. California, however, is the crucial point. California increased its production 40% in 1929 and now produces 30% of the U. S. output. Last summer the California legislature passed the Lyon Act, a measure ostensibly designed to prevent wastage of natural gas but really meant to limit oil production.* Small producers have questioned the legality of the Lyon Act, but big oilmen maintain that the courts will uphold the validity of the measure and that the law will reduce California's present production of 870,000 barrels a day by at least 200,000 barrels. Stabilization of oil production for 1930 depends largely upon the outcome of the Lyon Act.

Oil Companies. There are at least half a hundred oil companies large enough to be definite factors in the industry, plus a great many more independents. Thus the corridors of the Stevens Hotel are this week well filled with many representatives of many corporations. There is R. H. Holmes's Texas Corp., largest of all independents, which last year showed a net income of $45,000,000 and whose Texaco gasoline is the only gasoline sold in all 48 states. There is K. R. Kingsbury's Standard Oil of California, largest U. S. producer of crude petroleum, and Edward G. Seubert's Standard of Indiana, largest U. S. producer of gasoline. William Larimer Mellon's Gulf Oil Corp., 90% controlled by the Mellon family, is interesting as the potential nucleus of a giant holding company. Herbert L. Pratt's Standard of New York (last year chief Deterding opponent in Russia, now chiefly affected by Sir Henri's invasion) was still linked with George P. Whaley's Vacuum Oil in an old and endless merger rumor. There is unique Henry L. Doherty Cities Service Company, with its Greek Delta trademark and a 1928 production of nearly 20,000,000 barrels of crude oil plus the sale of nearly a billion and a half kilowatts of electric power. There is Sinclair Consolidated and Prairie Oil, still generally supposed to be contemplating merger activities.

Greatest of all U. S. companies, however, is Walter Clark Teagle's Standard Oil of New Jersey, which has never passed a dividend since its incorporation in 1882. Last year its gross revenue totaled $1,302,779,090, its net income $108,485,700. In 1928 the company produced between 9% and 10% of the total U. S. output of crude petroleum, production being about equally-divided between U. S. and foreign properties. The company has a half interest (with General Motors) in Ethyl Gasoline Corp. In September 1927, Standard of New Jersey and I. G. Farbenindustrie (German Dye Trust) concluded a joint patent and development agreement on the production of gasoline, by a hydrogenation process, from crude oils with a high asphalt or sulphur content. A closer contact with I. G. Farbenindustrie was made in April, 1929, when President Teagle became a director of a U. S. subsidiary formed by the German Trust (TIME, May 6). Mr. Teagle at this time denied that Standard of New Jersey owned stock in the German subsidiary, or that the company contemplated any expansion into the general chemical field. Important current activity is Standard of New Jersey's prospective reunion with Anglo-American Oil Co., Ltd., England's largest distributor of petroleum products. This company was split off from Standard of New Jersey when the old trust was dissolved in 1911-12, and the reunion (which appears more than likely) will be first instance of the oil Humpty Dumpty being put together again.

New Jersey's Teagle. Huge is the Standard of New Jersey organization, but not too huge for the personal domination of Walter Clark Teagle. Mr. Teagle is 6 feet, 2 inches tall and weighs 230 pounds. When he opens the door of the company's offices, his presence is instantly felt throughout the premises. He seldom leaves the office without a briefcase; usually works at home from dinner time to bed time; goes to sleep as soon as his head hits the pillow. His only outside interest is hunting and fishing. He is an active member of a Canadian fishing camp and a hunt club in Georgia. Of his champion setter, Mary Blue, he is particularly proud. Mr. Teagle is one of the few Standard Oil men of whom Sir Henri Deterding approves and the two have hunted together on Sir Henri's estate in Scotland.

Mr. Teagle's maternal grandfather, Morris Clark, was first partner of John Davison Rockefeller, in the days before Mr. Rockefeller began the formation of Standard Oil. His father, John Teagle, was an early oilman. It was to drive a tank car in his father's firm (Scofield, Schurmer & Teagle) that young Walter Teagle in 1900 refused an instructorship at Cornell University, from which he had just been graduated. Then the Republic Oil Company absorbed Scofield, Schurmer & Teagle and Walter Teagle, at 23, became Republic's vice president. In 1903 he went to Standard of New Jersey, as member of its export department, was an important factor in building up the company's tremendous export field. When Standard was dissolved in 1911, Mr. Teagle (a vice president and a director at 33) became president of Imperial Oil, Ltd., then and now Standard's Canadian subsidiary. With the outbreak of the War, the tremendously increased demand for petrol enabled Mr. Teagle to develop Imperial Oil from a small company to the second largest corporation in the Dominion. Then, in 1917, when the U. S. entered the War, Mr. Teagle was made president of Standard of New Jersey (A. C. Bedford was moved up to the board chairmanship) to repeat his successes in Wartime expansion. In 1927 he supervised the reorganization of Standard of New Jersey from an operating company to its present holding company status. He was one of the first oilmen to foresee the necessity of restricting the oil output and was a pioneer exponent of the present conservation program.

*It is the natural gas in the earth which forces the petroleum out when wells are driven. The Lyon Act stipulates that natural gas shall be conserved, lest all the natural gas be exhausted and gushers therefore cease to gush. Oil operators have fqond that recycling the gas into the ground is the only practical form of natural gas conservation. Small operators, lacking the capital to construct recycling works, maintain that the measure is discriminatory, invidious.

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