Oil Conservation and Stabilization

June 8, 1927

Report Outline
Technical Advances in Oil Refining
Suggested Solutions of Petroleum Problems

Exhaustion of the country's oil resources has been indefinitely postponed by recent scientific advances in the production and refining of crude petroleum. The technical improvements that have been developed and put into practice during the last few years will prove of immense future advantage, to the public and to the industry as well, but for the present they are contributing to waste, and have combined with other factors to throw the petroleum industry into a state bordering on demoralization.

The most important of the scientific advances on the side of production has been the perfection of the artificial lift system, which accelerates the flow of oil from oil sands through the application of air pressure and permits the complete exploitation of fields in which it is employed. Efforts have been made for several years to rejuvenate old fields by artificial lift methods, but the Seminole field in Oklahoma is the first to which such methods have been applied at the outset. During 1926 more than $3,500,000 was expended on auxiliary machinery and the generation of air pressure to increase and accelerate the flow of oil in the Seminole field.

Economic Significance of Lift Method

The lift method of oil production has two important economic aspects. In the first place, the fact that the pressure behind the oil flowing from the well is artificial rather than natural gas pressure renders this pressure subject to greater control. This means that if producers should wish to regulate the flow of oil they are in a better position to do so than in cases where sole reliance is placed upon natural gas pressure. Secondly, every departure from the primitive method of simply driving a hole into the ground adds to the expense of the drilling enterprise and thus limits the number of those who can participate in the oil drilling business. Improvements in petroleum technique, which involve large capital outlays, tend, therefore, to lower the intensity of the competitive struggle and to strengthen the tendency toward concentration of control over the producing end of the industry in the hands of a decreasing number of large companies. This tends in turn to make for stability of the industry, for the possibility of producers coming together in a given area for the purpose of controlling production with regard to the needs of the market increases inversely with the number of producers engaged in this field. On the other hand, the increase in overhead costs renders the industry more vulnerable to the demoralizing effects of rapid supply fluctuations. Thus both the possibility of improving the stability of the industry and the need for such improved stability is greatly increased by the technical advances that have been made on the side of production.

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