A New Kind of Gusher

OIL & GAS

Any young man who signs up for a job with an oil company nowadays may find himself involved in the business of making toothbrushes, running a motel, selling houses or dredging for diamonds. Oil companies got their start by striking oil, but they are now striking out into a wide-ranging diversification program that often takes them far from the oilfields. Says Vice President S. G. Walters of Socony-Mobil's Mobil Centers division: "We'll find money to in vest in any proposal that shows promise of a substantial return."

The big oil companies, of course, intend to stick basically to refining and selling petroleum products. But since the early 1950s, the $48 billion oil industry, suffering from a profit squeeze, has gone questing for new sources of earnings. The industry got tangled in excess refining capacity built up during the Korean war. Its foreign operations have sometimes suffered from such cut-price competitors as the Russians, and intense competitiveness at home has brought on gasoline price wars in some areas. Compact cars drink less gasoline, and have helped to reduce the annual rise in gasoline sales from 5% to 3%.

Instant Meals. The first wave of oil company diversification grew out of the companies' own products, as oilmen turned to producing petrochemicals from oil and gas. When that field became glutted, they began buying companies that made consumer products out of petrochemicals. Standard Oil of Ohio now owns the Prophylactic Brush Co. (toothbrushes), Phillips Petroleum makes plastic film for the packaging industry, and Continental Oil is preparing to market a detergent that does not clog sewers with foam.

Oil companies now realize that their thousands of service stations offer ideal retail locations for one-stop shopping and tourist centers. Sohio and Jersey Standard are setting up roadside restaurants that cook instant meals in microwave ovens. Pure Oil plans a chain of 80 "TOURest" centers that will include a motel, an Aunt Jemima pancake house (for which it owns the franchise) and filling stations. Gulf Oil plans to invest $40 million in the Holiday Inns motel chain, and American Oil is installing automatic dry cleaners on its properties. Atlantic Refining is putting up garden-supply centers and shops that sell gifts and repair lawnmowers.

Marinas & Uranium. In search of diversification, Socony has in the past year investigated 123 projects, from oil-fired air conditioners to marinas and country clubs. Last week Socony bought nine plants producing paints and industrial coatings from Martin Marietta Corp. Some other companies wander farther afield: Kerr-McGee bought a railroad tie producer, Tidewater a uranium mine in Wyoming and the exploration rights for diamonds in Hottentot Bay, South West Africa. Kern County Land Co., a California oil producer, gets more than half its gross revenues from turning out auto parts.

Oil companies have such vast land holdings that it was natural for them to turn to housing developments. Jersey Standard's Humble Oil subsidiary is building a community for 180,000 near the new Houston space center, and Beverly Hills' Sunset International Petroleum now gets most of its revenue from housing developments. Standard Oil of California is so eager to get in on the land bonanza that next year it plans to begin building on 1,500 acres it owns south of Los Angeles. One slight problem: what to do with the 850 oil wells producing on the property.

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