Control of Production in the Oil Industry

May 7, 1931

Report Outline
World Production of Crude Petroleum
Trend of Oil and Gasoline Prices
Voluntary Measures of Control
State Regulation of the Oil Industry
Federal Aid to the Oil Industry
Special Focus

Five years of mounting production in the oil industry, of supply outrunning demand, and of declining prices have brought this basic industry to a condition which excites grave concern and has evoked widespread public and private activity. Severe competition, the discovery of new oil fields and pools and of new pools in old fields, and refinements in technology have combined since 1926 to cause a heavy overproduction of petroleum which has led in turn to a series of price reductions. This condition is held to be detrimental both to the rights of the public in a natural resource that is being rapidly depleted and to the economic interests of the industry. In these circumstances the producers have taken a number of steps to limit production, but have been hampered in such action by state and federal antitrust laws. State regulatory bodies in Texas, Oklahoma, and California—the three largest oil-producing states—have brought production under a measure of control by the adoption and enforcement of provisions against waste, proration, unit operation, and other regulation.

At Washington the Federal Oil Conservation Board, created by President Coolidge in 1924, the Bureau of Mines, the conservation bureau of the Geological Survey, the minerals division in the Department of Commerce, and the voluntary committee on petroleum economics have been coöperating with the oil industry in the investigation of means of control. President Hoover's oil conservation policy went into effect on March 12, 1929, and subsequently Congress granted the federal government authority to participate in unit operation and development of single oil pools involving public lands and to extend prospecting permits, in the discretion of the Secretary of the Interior.

On April 4, 1931, the Circuit Court of Appeals at St. Louis approved the proposed merger of the Standard Oil Company of New York and the Vacuum Oil Company, a decision which, if upheld by the Supreme Court, may encourage other oil-company consolidations in the effort to reduce domestic competition. And on April 13, 1931, the United States Supreme Court held that no monopoly existed as a result of cross-licensing agreements between numerous oil companies for the manufacture of gasoline by the cracking process. Meanwhile, proposals to relieve oil operators from the prohibitions of the federal antitrust acts in certain contingencies, with proper safeguards in the public interest, and for uniform state legislation to permit or compel coöperative or unit development and operation of oil and gas pools, with the purpose of preventing waste, have been made by committees of the Federal Oil Board and the American Bar Association, respectively.

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
International Energy Trade and Cooperation
Oil and Natural Gas