Wildcat Fight

Is the U.S. being as complacent about oil today as it was over aluminum, rubber and steel before Pearl Harbor?

Wyoming's little sandy-haired Senator, Joseph C. O'Mahoney, raised that question in Washington last week--raised it big and loud during a Senate subcommittee hearing presenting evidence that shouted "yes."

The prospect of an oil shortage is based on a possibility, a probability and a fact. The possibility is that Hitler may take the Iraq-Caucasian-Iranian oilfields, leaving the United Nations totally dependent on the Western Hemisphere for oil. The probability is that gasoline and fuel oil rationing will be more than offset by a huge rise in military oil consumption--as new armadas of U.S. planes take to the sky, as new armies of U.S. tanks take to the field, as the second-ocean Navy and the seven-seas merchant marine take to the water. The fact is that U.S. oilfields are being drained and too few new ones are being discovered because wildcatters are not out losing their shirts or making millions prospecting for oil. The evidence indicates that the big reason wildcatters are idle is that the price of oil is too low.

Experts Agree. Up to testify stepped Army petroleum expert General Walter B. Pyron: "The Army expects no difficulty in 1943 although the demand will draw heavily on oil reserves . . . but we can foresee a shortage if the war lasts too long."

Up marched Navy petroleum expert Captain A. F. Carter. Said he: "Overall [Navy] oil requirements by the end of 1943 may be double the amounts needed now." He reported that there is already a shortage of some oil products on the West Coast, bluntly added "there is an urgent need for new drilling."

Oldtime oil geologist Arville Irving Levorsen said the U.S. had a 20 billion barrel oil reserve--enough to last 14 years at the current consumption rate. But even in an extreme emergency the U.S. could not get more than one-fifth this oil in the next few years. (The U.S. consumed over 1.2 billion barrels of oil for 1939's peaceable purposes.) Four other oilmen backed him up, declared a 25 to 50-c- a barrel rise over the present average $1.15 level would be necessary to revive wildcatting.

Petroleum Coordinator Harold Ickes--who is one Washington bigwig businessmen can talk sense to--agreed on this point, told committeemen, "We must take every possible measure to stimulate the search for new oil reserves. . . . The price situation might well be reviewed."

Speculators in Fortunes. Wildcatting is a bigger speculation risk than play producing. Only one well in five yields oil; an operator can lose $100,000 on a single dry hole. But they go on in hope of a million-dollar gusher. Since 1859 wildcatters have discovered more than 75% of the 45 billion barrels of oil found in the U.S.

But lately costs of drilling have gone through the roof, the price of crude has been pegged. Only 212 wells were drilled in the four major U.S. oil regions in the Oct. 4 week v. 360 a week last December. Furthermore oil found per wildcat well drilled has nose-dived--from 1,693,000 bbl. in 1937 to 621,000 bbl. last year, even less this year. With these factors operating to make wildcatting unattractive, new inducements are needed. Proof of the need is the startling relationship between oil prices and dry holes, which oilmen consider the best measure of exploratory drilling. Thus when prices were derrick-high in 1920 the wildcatters drilled like fury; when prices were well-bottom low in 1933 the wildcatter rested.

But today Leon Henderson is the only man who can boost oil prices and he is dead set against it. At last week's hearings Leon bellowed: "I cannot for the life of me see the addition of $500,000,000 or $1,000,000,000 to the cost of petroleum products ... to encourage wildcatting." But he finally admitted a bonus or subsidy scheme might be a good idea.

Snapped oil-wise Russell B. Brown, spokesman of wildcatters in the Independent Petroleum Association: "Amazing--although price-increase proposals have been pending for more than twelve months no such suggestion had been previously offered." Griped an Ickes aide: "That bunch of OPA professors cannot understand anything not in a textbook."

With Army-Navy backing, and a helpful push from Oil Coordinator Ickes, the oilmen appeared to have a better than even chance of getting the law of supply & demand re-enacted for their benefit. Meantime WPB last week released steel, copper and machinery to rebuild and rework old oil wells on the West Coast.

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