Wildcatters Wanted

The U.S. does not have so much oil as most people think.

This alarming news came out of the 22nd annual American Petroleum Institute meeting held last week in San Francisco's Palace and St. Francis hotels. For five days the 3,000 attending oilmen attended round tables, listened to technical lecturers (and a slam-bang harangue by Oil Tsar Ickes), played golf at Del Monte, cavorted with Chinese-costumed information girls. The hotel's 40-ft. bar was so jammed that thirsty newsmen had to fight for a drink.

Up rose Ickes' deputy Ralph K. Davies. He warned oilmen that for three years they had been depleting oil reserves faster than they had replaced them--"the margin of safety is fast narrowing." If burned up at the present rate (1,450,000,000 bbl. a year) proven U.S. oil reserves would last less than 14 years.

This is a familiar scare. Time & again U.S. oil reserves have fallen sharply, only to be replenished by a big new discovery. But previous discoveries were also preceded by a phenomenon not now present: rising prices for crude oil.

Catch the Wildcat. Best answer to depleted oil reserves is more wildcatters--the devil-may-care independent operators whose only business is finding oil. Last year wildcatters drilled 72% of all new U.S. wells, discovered 75% of all new fields.

It is a risky business; only one well in five is successful. An operator can drop $100,000 in a single dry hole.

In the past three years, moreover, the cost of locating and drilling for oil has increased enormously. Prices of derrick steel, heavy machinery, pumps, well casing and labor are higher--and wells are deeper. The average investment in all wells drilled in the U.S. last year was $40,928 against $27.824 in 1937.

Whether these increased risks are the reason or not, wildcatters are not finding as much oil as they used to. Geologist Wallace E. Pratt of Standard Oil of NJ. figures that brand-new oil discoveries in 1938-40 were only 2.6 billion bbl. against 5.15 billion in 1934-36. In 1928-30, when east Texas came in, the figure topped 10 billion. Demand, meanwhile, rose from 2.9 billion in 1928-30 to 4.3 billion in 1938-40. The lines are going in opposite directions, are leaving an oilless gap which may some day burn out the gears of U.S. industry.

As catnip for the wildcats, oilmen have a standard recipe: higher oil prices. In San Francisco last week Cities Service Oil President William Alton Jones asserted: "Unquestionably a higher price would increase exploration ... 25-c- tacked on to the current $1.20 price (midcontinent crude) would stimulate a 20% expansion."

But oilmen spoke of higher prices with partly crossed fingers. Leon Henderson has warned them to keep the lid on. When four north Texas producers last week posted prices 7-c- a bbl. higher (ostensibly to offset a differential with Oklahoma-Kansas prices), Leon stopped warning, "invited" the price lifters to Washington for a showdown.

This week oilmen were on bits & derricks awaiting the showdown's results. Meanwhile, two other factors confounded the problem. Some experts said the U.S. was already stimulating wildcatting in a backhanded way through the excess-profits tax--many a man would rather dig holes than pay taxes. But the Treasury is mulling over regulations that would stop this "tax leak." It wants to cut depletion write-offs for income-tax purposes--the very reserves that have permitted oilmen to spend money freely on exploration.

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