Mr. Boggs's Ultimatum

In 1929, with a billion barrels of oil being produced in the U. S., the price was $1.27 a barrel, high enough to give a company like Gulf Oil $44,000,000 in profits. Then a wildcatter named Dad Joiner brought in a well in East Texas and. within a year crude was selling for 10-c-.

It took martial law in two States and the best efforts of Secretary Ickes and the NRA to get the price up again. When NRA went out, oilmen relied on proration: no well in the East Texas field was allowed to run off more than a fixed amount (now an average of 20 barrels a day), and an Interstate Oil Compact, promoted by Oklahoma's Governor Ernest Marland, spread production control to six States--Texas, Oklahoma, Kansas, New Mexico, Colorado, Illinois. Carefully the price was built back to $1.27.

Last week President C. M. Boggs of Kanotex Refining Co. in Arkansas City, Kans. notified the producers who supply his refinery with crude that henceforth he would pay them 25-c- less. Kanotex Refining is an obscure factor in the industry; without the present psychological state of crude oil producers, Mr. Boggs's ultimatum would have attracted no attention. But oil is the only important U. S. business which in the last year has withstood Depression, and producers felt it was too good to last. More important still--despite increasing demand, proration figures have unquestionably been too high. The Petroleum Institute in April stated that 2,600,000 barrels a day (except for California, which has no proration laws) would be about right. The States east of California have actually been producing almost 2,700,000 barrels. As a result, refineries have built up immense inventories-- 92,000,000 barrels of gasoline in March.

For five months the Texas Railroad Commission, which fixes Texas oil allowables, has been whittling away at the figures, in January began requiring all wells in Texas to shut down Sundays. Last week fearing that Mr. Boggs might be only the first firecracker in a package, the Texas Railroad Commission ordered all wells to shut down on both Saturdays and Sundays during the rest of May, which automatically cut proration figures 16%. Simultaneously the Oklahoma Corporation Commission issued an emergency order cutting allowables for the rest of May 81,000 barrels daily to 405,000. Kansas set May daily allowables at 160,000 barrels though at the week end the other States in the Interstate Compact had not yet followed suit.

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