World Oil Glut

October 26, 1960

Report Outline
Production and Price Situation in Oil
Impact of Oil Glut on United States
Political Aspects of Commerce in Oil

Production and Price Situation in Oil

Discovery of vast new petroleum deposits and continued existence of developed production capacity in excess of consumption demand have created a condition of actual and potential oversupply in the oil industry that is unprecedented. The worldwide ratio of proved reserves to annual production has widened from about 20 to 1 before World War II to nearly 43 to 1 today. At the end of 1959 the industry had a “spare capacity at the wellhead” approximating eight million barrels a day—one-half in the United States and Canada and the remainder in Venezuela and the Middle East. The excess production capacity “intensified competition for outlets and was a major cause of weak prices in the international markets.”

The oil surplus has produced dissatisfaction among both producing and consuming countries. A British petroleum expert pointed out recently: “The basic structure of the international oil business has become economically impossible and politically dangerous. Producer countries are growing restless with falling prices and insufficient sales, while consumer countries complain that oil prices are far too high and no longer reflect actual market conditions.”

Cuts in posted prices of Middle Eastern oil last August were vigorously protested by the producing countries in that region. They were joined recently by Venezuela, South America's largest oil producer, in formation of an organization which is considering an international compact to limit production as a means of holding up prices, and additional action to sustain revenues paid into government exchequers by the international oil companies holding concessions in the respective countries.

ISSUE TRACKER for Related Reports
Oil and Gasoline Prices
Jun. 22, 2012  U.S. Oil Dependence
Nov. 01, 2011  Future of the Gulf States
Jan. 04, 2008  Oil Jitters Updated
Jul. 2007  Energy Nationalism
Sep. 30, 2005  Domestic Energy Development
Jan. 24, 2003  Oil Diplomacy
Aug. 07, 1998  Oil Production in the 21st Century
Aug. 23, 1991  Oil Imports
Oct. 30, 1987  Persian Gulf Oil
Apr. 04, 1986  Oil Prices
Dec. 23, 1983  Quest for Energy Independence
Sep. 23, 1983  OPEC: 10 Years After the Arab Oil Boycott
May 29, 1981  Western Oil Boom
Aug. 25, 1978  Oil Imports
Feb. 10, 1978  Oil Antitrust Action
Dec. 17, 1976  Alaskan Development
May 17, 1974  Arab Oil Money
Mar. 15, 1974  Oil Taxation
Jul. 18, 1973  Offshore Oil Search
Mar. 28, 1973  Persian Gulf Oil
Nov. 01, 1972  Gasoline Prices
Oct. 14, 1970  Fuel Shortages
Nov. 12, 1969  Alaskan Oil Boom
Dec. 11, 1968  Oil Shale Development
Oct. 26, 1960  World Oil Glut
Sep. 10, 1958  Middle East Oil
Oct. 30, 1951  Oil Nationalization
Aug. 11, 1950  Oil Imports
Apr. 23, 1947  Oil of the Middle East
Jan. 22, 1946  Offshore Oil
Mar. 09, 1944  Oil Supply
Dec. 24, 1935  Oil in World Politics
May 07, 1931  Control of Production in the Oil Industry
Mar. 27, 1929  The Oil Leasing Policy of the New Administration
Jun. 08, 1927  Oil Conservation and Stabilization
Feb. 08, 1926  The Mexican Land and Petroleum Laws
Apr. 18, 1925  The Price of Gasoline
Feb. 11, 1924  Background of the Oil Lease Cases
Sep. 01, 1923  Gasoline
Exports and Imports
Oil and Natural Gas