Hot Oil; Hot Orders

Crude oil prices have held steady around $1 per barrel for eight months. Big companies are lifting distress gasoline stocks from the market. Gasoline prices have lately been upped over wide areas. The month-long strike of service station operators and tank-wagon drivers in Cleveland has been settled. There was talk of a fuel oil shortage. The industry's earnings for 1933 soared above those for 1932. At the American Petroleum Institute's semi-annual convention in Pittsburgh last week Consolidated. Oil's J. E. Dyer key-noted: "The oil industry under the code has made definite, unmistakable progress in the past year." There was still a deal of pother about overproduction but John Investor would have gathered from last week's financial pages that Oil on the whole was doing pretty well.

But from the front page where his President's words are recorded, John Investor got a far different impression. "I have received a disturbing letter from the Administrator for the Petroleum Industry, Hon. Harold L. Ickes, informing me of the continued daily production of oil in excess of the maximum amount determined on by the Administrator," President Roosevelt wrote last week to interested House and Senate committees. "Records of the Bureau of Mines during the first three months of this year show a daily average production of 'illegal' oil of 149,000 barrels. Technically speaking, this may not all have been 'hot' oil. but in the real sense it is. ... Excess production in the East Texas field alone is running at 60,000 to 75,000 barrels per clay. . . . The Oil & Gas Journal recently estimated that there was illegal production in the country as a whole of 198,475 barrels per day during the week ending May 12."

Urging prompt passage of a pending legislation authorizing Administrator Ickes to regulate intrastate as well as interstate oil traffic, the President warned: "I am frankly fearful that if the law is not strengthened, illegal production will continue and grow in volume and result in a collapse of the whole structure."

President Roosevelt had good reason for being fearful. Three months ago a Federal court in Sherman, Tex. granted two independent oil groups injunctions restraining government agents from investigating their production records and from bringing suits. That decision, which seemed to render the Oil Code unconstitutional, hamstrung Administrator Ickes' efforts to enforce proration. New legislation was needed immediately. President Roosevelt had no sooner sent his gloomy oil letter to the Capitol last week than help came unexpectedly from the U. S. Circuit Court of Appeals in New Orleans. That tribunal reversed the lower court's Oil Code ruling. Granting that the code was "a novelty in legislation," the Circuit Court could see no reason to "upset laws and regulations which are generally useful and necessary in the public business." Almost delirious with joy Administrator Ickes promptly dispatched by airplane to the seething East Texas fields his chief investigator, Louis G. Glavis, bearing orders for all Federal agents "to prosecute relentlessly every producer and shipper of 'hot oil.' " To reporters Mr. Ickes fairly sizzled: "We have ample evidence of repeated and continuous violations ... by various gentlemen of East Texas. . . . Happily as a result of the Circuit Court of Appeals decision we are now in a position to bring these law-breakers to book. ... It is my intention that these men shall feel the lash of the law which they have so long and so brazenly flouted.'' Only a few independent oil operators are now "dead set" against proration. Nothing can persuade them that in the long run it is wiser to produce 40 bbl. per day at $1 per bbl. than 1,000 bbl. at 10-c-. Self-styled spokesman of these independents is J. Edward Jones, world's largest dealer in oil royalties. Mr. Jones's first name is a trade secret but his interest in unrestricted production is known to all who will listen. When a landowner leases his mineral rights, he retains the right to royalties--generally one barrel out of every eight. Mr. Jones buys up these royalties, sells them to the public. Because he & his clients always receive one-eighth of the total production. Mr. Jones's promised land is a flush field of gushers. He worked his way through the University of Kansas as a soda-jerker, now lives swankily in Scarsdale, N. Y.. bombards Congress with memorials, denounces the Oil Administration, publishes "Messages from J. Edward Jones about Facts." His favorite theme is that overproduction is a myth, a notion which he supports statistically by ignoring the 341,000,000 barrels of crude in storage. His favorite bugaboo is imported oil. now a mere trickle compared to exports. Last week J. Edward Jones was insisting that Administrator Ickes was making a straw man out of hot oil. "Instead of hot oil." boomed J. Edward Jones, "we have had hot orders."

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