Stormy Petrol

Puffing pensively on his pipe, Shell Oil President Monroe Edward Spaght summed up the state of the U.S. oil business: "A few years ago, we were the glamour girls of industry. Now Wall Street thinks we're a bunch of tramps--we have lost our virtue."

To reinforce his wry description of the oil industry today, Spaght could point to trouble signs as numerous as gas stations on Route 66. Common stocks of the 20 biggest U.S. oil companies have tumbled an average 25% in the past five years, and retail gasoline prices are down to a nine-year low. Last week, as Midwestern refiners cut wholesale prices for the fifth time in two months, gas wars flared from Fort Worth, Texas, to Charlotte, N.C., where drivers were tanking up for as little as 21.9-c- per gallon.

In an attempt to offset a national oil glut, and thus firm up prices, the Texas Railroad Commission fortnight ago ordered the state's 200,000 wells--which produce 36% of the U.S. output--to pump on a spare eight-day schedule for the eighth straight month.* Despite the hold-down, Petroleum Outlook, an authoritative industry journal, predicts that U.S. oil companies' third-quarter profits this year will be 7% below year-ago levels.

Soar, Search, Slump. "We're not in a depression but on a high plateau," says American Petroleum Institute President Frank M. Porter. "But even a plateau can be a discouraging place when you are used to soaring." Yesterday's soar in the oil business is largely responsible for today's slide. The Korean war and the Suez crisis triggered oil shortages in world markets, sent prospectors scurrying for fresh supplies. With breakthroughs in geoohysics simplifying the job, discoveries during the past decade have tripled the number of oilfields in Texas alone. But the natural growth of gasoline demand was stunted by the rise of the compact cars, and the market for fuel oil has been steadily eroded by the rise of natural gas.

Yet oilmen continue to press their compulsive search for new sources, lest competitors get there first. Jersey Standard is still prospecting from Colombia to Greece, expects to start shipping crude from Libya this month, and is hopefully exploring in England (Jersey's current daily output there: 6 bbl.).

New free world sources plus an inflow of cut-rate Soviet oil have contributed to a general oversupply. And a little surplus can cause big dumping trouble because refiners like to process all the crude on hand in order to keep their expensive gear humming. Complaining about the high refinery runs and low gasoline prices, Cities Service Chairman Burl Stevens Watson grumps, "We would not have this situation if a few nuts got some sense into their heads."

Gold in the Snow. As usual, challenge has spurred creativity--in production, marketing and operating methods. Plant modernization and fat-trimming have helped Standard of Indiana to cut its work force by 10,000 people since 1956--and still ring up more sales. Hoping to win a round in the gasoline war, Gulf Oil is test-marketing a lower-cost and lower-octane gasoline, while Sunray in Tulsa has opened a circular-shaped gas station where comely hostesses pass out lollipops for children and coffee for Mom and Dad. All the companies are spending heavily to develop "squeal-of-the-pig" petrochemicals that are salvaged from the residues of refining. Among the broad spectrum of products currently under development by oil scientists: an asphalt earth cover that may enable crops to flourish in arid lands, a blast-furnace fuel to speed ironmaking, a wax to plug seepage in irrigation canals.

For all their present troubles, oilmen are long-range optimists. Though they expect demand to rise only 2% to 3% a year in the U.S. and 6% to 7% abroad in the early 19605, they foresee a big surge thereafter, as the jump in U.S. adult population and the spreading affluence in foreign lands boom the market for cars and oil-powered equipment. "The petroleum industry will have to find at least 75 billion barrels of oil in the U.S. in the next 15 years to meet expected demand," says President John E. Swearingen of Indiana Standard. "That is almost twice as much as our current proven reserves." But for the immediate future, most oilmen agree that nothing could help them more than a long, cold winter.

* Since 1956, Texas has trimmed its yearly output by 174 million bbl., which is more than all of Western Europe produces.

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