PETROLEUM IN THE FUTURE
In these chapters an effort has been made to place before the reader
the story of the development of petroleum from a negligible and
unappreciated product to its present basic and essential position
in the world’s industrial and economic structure. Having attempted
to portray the part it plays in the arts of war and peace, and its
intimate relation to civilization as now organized, it is fitting that
something should be said as to the future of petroleum.
To those who have read the preceding chapters--particularly those
relating to shipping and all other classes of transportation--it
will be clear that this constitutes an international as well as a
national problem. The course of events in connection with the world
industry may even be said to have a paradoxical aspect. American
petroleum became an international institution when, shortly after the
Pennsylvania discoveries, the eagerness of other nations to secure it
was evinced. The increase of production was so rapid that for years
the supply far exceeded the domestic demand, and made the creation of
foreign markets necessary to the American oil interests. These foreign
markets have contributed materially to American national wealth and
are now an important factor in the country’s favourable trade balance;
exports of petroleum products from the United States for the year 1919
representing a value of $343,776,385, and ranking fourth in order of
importance of the country’s exports.
Our oil companies have been international traders for several decades,
but their operations have been entirely based on private initiative
and have rarely benefitted by official coöperation. The phenomenal
growth of inventions and manufactures pivoting on the products of
petroleum, which has transpired during the twentieth century, has,
however, entirely reversed the situation that existed in the year 1900.
Though the United States provides almost seventy per cent. of the
world’s production from wells on her own soil, she is to-day actually
an importer of crude oil to meet the needs of the domestic market,
combined with those of the foreign market for the manufactured products
of petroleum, which yield vast revenues to American wage-earners
engaged in their creation.
To the American people, who use six times as much petroleum per capita
as the citizens of any other country, and who own ninety per cent. of
the motor vehicles in operation in the world to-day, the question of
future supplies is vital. In the face of an ever-increasing demand
for petroleum and its products--through the many channels that have
been described in this book--the ratio of production to consumption
has become so altered that it is apparent that the United States must
in a steadily expanding degree look to other lands for its future
requirements. Statisticians and scientists differ as to how long the
stores of petroleum still lying untapped in our own soil may last,
but are agreed that at the present rate of consumption the American
fields will have been practically exhausted before the dawn of another
century and that adequate foreign reserves to supplement them must be
made available by American enterprise. Petroleum is therefore a problem
about which the man on the street and not merely the oil merchant must
perforce think internationally. The people of other countries are
to-day wide awake to the necessity of securing petroleum reserves
for themselves in regions of potential oil-bearing character; and in
some instances they have shown themselves very active.
[Illustration: Steam stills at a modern refinery]
[Illustration: Storage tank at Cushing, Oklahoma, struck by
lightning--not an infrequent occurrence. 55,000 barrels of crude oil
being consumed]
In an exceedingly able paper presented by Mr. David White, Chief of the
United States Geological Survey, to the Society of Automotive Engineers
in February, 1919, that authority drew attention to “the widening
angle between the flattening curve of production and the rising curve
of consumption,” and announced that after a most exhaustive survey of
American oil potentialities, in which many experts coöperated, the
conclusions had been reached that the available oil in the ground
at the end of 1918 approximated 6,740,000,000 barrels. The total
production of crude from the United States wells from 1858 to the end
of 1918 was approximately 4,598,000,000 barrels, more than two-thirds
as much as the total remaining in the ground according to the estimates
of the Mineral Resources Division of the Geological Survey. To
understand fully the significance of these figures it must be realized
that the rate of production has enormously increased during the past
decade. Mr. White’s figures placed the oil produced from United States
wells in 1918 at 345,500,000 barrels. Production, if continued on like
scale annually, would exhaust the estimated supply in America in less
than twenty years. Moreover, despite its vast extent, the curve of
actual production in that year fell so far short of the requirements of
domestic consumption that the amount of oil in storage was reduced to
the extent of 27,000,000 barrels, and it was necessary to supplement
the home supply with a net importation of 31,000,000 barrels, chiefly
from Mexico. The year 1918 was a war year but in 1919, despite peace,
production in the United States rose to 377,000,000 barrels. Thus
an ever-increasing demand--especially for gasoline--is producing a
pressure on crude supplies greater than in war time.
It does not follow that all the estimated available crude reserves in
American territory can be reached in even the near future. American
oil wells will undoubtedly be producing at least seventy-five years
hence, for the very good reason that all the hidden pools cannot be
discovered forthwith or immediately made productive, even when located.
But the condition the American nation must face in connection with its
own wells is the probability of a gradual decline after the peak of
production has been reached, an event that may transpire this year or
next, or may be delayed for a decade.
Mr. White’s paper, which had the effect of enlightening many as to the
changing phases of the oil industry, also emphasized the possibilities
of the development of shale oil, a potential resource which might
prove a suitable substitute. But since this product is still in the
experimental stage, and since it has never been claimed for it that
it could develop the manifold richness and varied utility of crude
petroleum, it is not necessary to discuss its possibilities in a book
devoted to the latter product. Whatever the future of shale oil, it
cannot alter the plain circumstance that if it is to be maintained at
its present level for any extended period, the American oil industry
must look for reserves abroad.
A glance at the world’s production for the year 1917 proves that the
United States has more at stake in this matter than all the other
nations combined. The production was distributed as follows:
United States 66.2 per cent.
Russia 13.6 ” ”
Mexico 10.9 ” ”
Dutch East Indies 2.6 ” ”
Other countries 6.7 ” ”
Since then the proportion has been altered, Russia dropping to third
place and Mexico rising to second, the relation of the United States to
total production remaining probably unchanged.
The predominating importance of the petroleum industry to the American
people was indicated in a speech delivered by Sir Auckland Geddes,
British Ambassador to the United States, at New York in May of the
present year (1920) when he said that this country controlled 82 per
cent of the present visible world supply.
This estimate of course embraces not only domestic fields but foreign
fields developed by American private enterprise. It demonstrated
completely the claim of the United States to leadership in dealing with
so vital an international question as the world’s petroleum supply--not
only as the chief consumers but to all intents and purposes, the
founders of the industry.
As has been set forth elsewhere in this book, the importance of
petroleum to countries of maritime aspirations, either naval or
commercial, is inestimable, and it is on that phase of the question
that the minds of British statesmen have, within the past five years,
become concentrated. So far as Great Britain is concerned, this is
a new development, born of the great war. Sir John Cowans, G. C. B.,
Quartermaster General of the British Army throughout the decisive
period of the conflict, has said “Great Britain was, when the war broke
out, between twenty and thirty years behind the American and Dutch
nations in its knowledge of oil.” He and other eminent Englishmen have
emphasized the difficulty of making up that leeway, one obstacle being
that at least eight or ten years was required for the education of
an oil expert. In seeking a trained personnel to handle the problem,
Great Britain, like most other countries, must for the time being at
any rate look to the United States. But though the awakening of the
British to the importance of petroleum was belated, it is real. Not
only their Admiralty, but their Army authorities are insisting on the
importance of adequate reserves. Controlling as they do the destinies
of a vast maritime Empire, the growing dominance of oil-burning
ships, and the necessity of providing for their fuelling, has become
an ever-present thought in the minds of British public men at a
time when the American Government, relying perhaps on a factitious
belief in the inexhaustibility of our native oil resources, remained
indifferent. There is no reason to doubt that the aim of Great Britain
is her own national and Imperial security, rather than aggression.
The British Ambassador, in the address referred to, gave the most
absolute assurance on that point, but the fact is patent that, through
governmental coöperation, British oil men have secured distinctive
advantages in foreign fields, advantages which, with similar
coöperation, might have been available to American oil interests--whose
leaders may be accepted as equal to foreign business men in foresight,
courage and enterprise.
The relation of the foreign petroleum situation to the re-born American
ambition to possess a merchant marine that shall carry American wares
in American ships must be clear to every reader. Just as Great Britain
owes her far-famed sea power to her policy of maintaining coaling
stations at the best available locations on the seven seas, she now
aims to preserve that prestige by oil bunkering stations advantageously
placed. The situation might conceivably arise whereby (despite our vast
home production), the American merchant marine when at sea would find
itself dependent on the bunkering stations of foreign powers. No one
will question the right of Great Britain to protect and maintain her
trade routes by reserves of the new maritime fuel, and her Government
deserves praise rather than censure for backing British enterprise in
measures directed to that end. The point to be borne in mind is that
American oil men, the real creators of the industry, have accomplished
what they have in the foreign field virtually _without_ governmental
support or co-operation. It is hardly overstating the facts to add
that they have been harassed and interfered with in their efforts to
maintain the future security of their industry and of their nation
in this matter of petroleum reserves. Thus, there has lately arisen
a demand for constructive legislation which will permit governmental
coöperation and diplomatic action that will place American oil
interests on something like an equal footing with those of Britain
and other countries in securing a necessary augmentation of the home
supply. Disinterested public men who have made a study of the problem
are of the opinion that in the national interest, and entirely without
reference to the advantages that might or might not accrue to this or
that individual, American petroleum companies should be encouraged by
all the power and influence their Government can exert to acquire
foreign sources of supply wherever available.
A glimpse at the facts with regard to the oil bunkering situation shows
how closely petroleum and national aspiration are allied. The estimated
requirements for the U. S. Navy for the fiscal year of 1919–20 were
about six million barrels. In the undesired event of war this estimate
would be vastly increased. With regard to the American merchant marine,
it is worth noting that about one half of the vessels constructed in
1919, representing approximately three million deadweight tons, were of
oil-burning design. On the Pacific Ocean, where satisfactory grades of
steam coal are not so generally available as on the Atlantic, oil has
come into general use as fuel. American companies furnish most of the
fuel oil which is supplied at ports outside the United States and the
United Kingdom, the total number of such foreign bunker installations,
owned by American companies, being 88 in a total of 114. But the
possession of such foreign facilities for American shipping will prove
of little value unless Americans have sufficient oil, from either
home or foreign fields, to furnish adequate supplies at competitive
prices. With an increasing shortage of oil for domestic consumption,
bunker fuel oil supplies can only be maintained through the control of
production in advantageously located foreign fields.
Among the rivals to American enterprise which have arisen, the most
important is the Royal Dutch Shell combination, which, though of
Holland registration, has been a partner with the British Government in
petroleum enterprises, and is to-day the leading factor in the Far East
and in Australia in this vital matter of bunker supply. It is acquiring
potential petroleum fields in Mexico, South America and the United
States itself. The British Ambassador’s statements tend to allay fears
that there is any deliberate attempt to discriminate against the United
States in any part of the world; yet it is a fact that this country
is likely to be seriously handicapped in its efforts to obtain its
share of the world’s carrying trade if its ships abroad are eventually
compelled to rely on foreign companies for fuel.
In order that the reader may clearly visualize the situation with
regard to the prospects of augmenting home supplies, it is necessary to
speak once more of certain foreign fields mentioned in the geographical
survey that constituted an earlier chapter. The nearest field and the
one to which Americans must naturally look, because for an indefinite
period it will continue to produce oil far in excess of the needs of
its own people, is Mexico. Unbacked by governmental coöperation in
any form, American private enterprise has done much in an endeavour
to develop permanent supplies in that country, and has paid its way
generously. Fortunately, the internecine warfare which has paralyzed
the maintenance of law and order in many parts of that country has
been less serious in the oil regions than in some other provinces, but
precious lives have been lost, and considerable property destroyed
without redress. Still more serious is the fact that in the face of
the activities of foreign powers anxious to secure American holdings
of great potential value the American Government has been inert in a
field where, for geographical reasons alone, it has a claim to first
consideration. The patriotism of an American citizen, Mr. E. L. Doheny,
controlling owner of the Mexican Petroleum Company, has been more
potent than that of the public authorities in safeguarding the future
of our interests in that country. Mr. Doheny received a handsome offer
from the Royal Dutch Shell Company for his interests; but he refused
it on the ground that for the future welfare of the United States, his
properties should remain under an American control. Undeniably the lot
of the American capitalist in the Mexican oil fields has been rendered
so difficult that any man might be tempted to sell to the first bidder.
While a recent Mexican administration proposed to “nationalize”
petroleum there have been many attacks in other forms upon the rights
of American oil companies, but so far these companies have escaped
absolute confiscation of their properties. Here is obviously a field
in which American interests must have the same sort of diplomatic
assistance which Great Britain extends to its nationals if the future
is to be secure.
The next closest field to which Americans must naturally look is the
Caribbean Region--the Central American and West Indian Republics,
Colombia and Venezuela. Their importance lies almost wholly in their
future possibilities, but they undoubtedly have oil potentialities of
considerable value. Therefore, the control of concessions is of very
grave importance in view of the need for acquiring extra territorial
oil reserves. Fortunately, Americans are here first in the field,
though enterprise has not gone very far beyond the securing of
concessions. Such privileges obtained in Colombia, Panama, Nicaragua,
Honduras, and Costa Rica are held by various American syndicates. A
Venezuelan concession originally American-owned is at this writing in
British hands, and British capital is also interested in Honduras oil
development. It is obvious that the sympathetic coöperation of the
authorities at Washington, is necessary in the Caribbean area if the
United States is to render secure an ascendancy there.
In South America the rivals of the United States interests are also
active but have not outstripped them, and with a progressive policy on
the part of their government Americans may hopefully look for reserve
supplies from that vast continent, though their development, owing to
the mechanical and speculative conditions of modern oil production,
cannot be rapid. Argentina, which already has two producing fields,
operates them as state enterprises and has as yet granted no foreign
concessions. Peru is already a large producer of crude petroleum and
has opened her gates to American oil interests, but here, as elsewhere,
the need of diplomatic backing is present. Generally speaking,
though the real potentialities of South America are unknown, it is a
territory in which the United States, if it is to safeguard its future
interests, cannot afford to remain indifferent.
The world-wide British Empire includes many countries containing oil
potentialities, though the total production is inconsiderable in
comparison with that of a single American state like California or
Texas. According to the statistics put forth by Sir Auckland Geddes,
production under the British flag in 1919 represented but five per
cent. of the world’s petroleum output. But there is no certainty as to
what the future may bring forth and the general policy in all parts
of the Empire seems to be to keep oil development in the hands of
British nationals and to restrict operations by foreign capital. In
the important oil territory at Burma these restrictions are absolute;
though in self-governing Dominions, like Canada, they do not obtain.
In all Crown colonies the British Government retains the right of
pre-emption at need. Quite as severe are the laws covering oil deposits
or potential oil deposits in French colonial possessions. The Dutch
East Indies, a comparatively promising field, are closed to all but
subjects of Holland, or to companies which have a majority of Dutch
subjects on their directorate; under the latter provision British
capital dominates the oil production of Borneo.
Outside the Western hemisphere the only fields where the United
States may look for reserves, (which, as has been explained, are of
especial importance in connection with bunkering stations,) lie in
what are respectively known as the Near East and the Far East. China
has undoubtedly oil potentialities, though data on the subject is
vague, and it is presumed that the Chinese government, which holds a
monopoly of them, will one day admit foreigners into partnership in the
working of them under some sort of special contract. Japan already has
a somewhat similar arrangement. In demonstrated possibilities the Near
East is of much more promise. The importance of the Roumanian field has
been spoken of elsewhere and prior to the war American interests were
established there. Later in its reconstruction policies Roumania is
contemplating changes in its petroleum program not formulated at this
writing. It is reported that French and British interests, supported
by their respective governments, are making every effort to secure
important holdings in the Galician oil fields, formerly situated in
Austria, but now coming within the boundaries of the new Republic
of Poland. The future administration of the Russian fields is still
problematical. At the moment they are occupied by the Bolsheviki. The
Persian field, by an arrangement dating back to 1901, is operated by
British interests. The potential fields of Mesopotamia and Palestine
are under control of Britain by mandate of the League of Nations; but
that country expressly disclaims any special authority to exclude
other nations from participation in petroleum development in these
territories. It must be plain to the most inexperienced reader that
in the case of Asiatic and East-European fields, however, American
oil interests are powerless to achieve influence and obtain due
recognition without the diplomatic assistance and coöperation of their
home government. It is necessary, if they are to secure equal rights
under international law that will serve not merely as a check upon any
possible unfair discrimination, but enable them to secure workable
international arrangements. These should redound to the interest of
all countries for the United States is the motherland of the science
of oil production. The prestige of this country is such that in many
cases a mere diplomatic protest would be sufficient to rectify many
disabilities under which the American oil company seeking foreign
reserves at present labours, without creating serious disputes or
international entanglements. In the words of Thomas A. O’Donnell,
President of the American Petroleum Institute, with which most of the
leading petroleum producing and manufacturing companies of the country
are associated:
The American oil industry asks only the support of the nation in
giving it an equal status, putting it upon an equal footing with
the nationals of other countries in the development of the world’s
petroleum resources--and it asks this in the interest of the nation.
With the Government at their back to secure for them fair play,
American oil interests could face the future with confidence, if not
with certainty; lacking such coöperation, the future is fraught with
hazard to an industry that stands as a monument to American organizing
genius.
THE END
THE COUNTRY LIFE PRESS, GARDEN CITY, NEW YORK
Transcriber’s Note
Some inconsistencies in spelling, hyphenation, and punctuation have
been retained.
This file uses _underscores_ to indicate italic text. Small capitals
changed to all capitals.
p. xv: changed “Rumania” to “Roumania” (Moreni Field, Roumania)
p. 50: changed “Egpyt” to “Egypt” (Egypt has also a future)
p. 69: changed “fish-tale” to “fish-tail” (the delicate fish-tail bit)
p. 74: changed “rythmical” to “rhythmical” (the rhythmical “chug-chug”)
p. 83: changed “Samual” to “Samuel” (Samuel Van Syckel of Titusville)
On pp. 35, 37, and 57 appears “Edwin Laurencine Drake.” Modern sources
differ in spelling (Laurentine). This name was left as originally
printed.