(2 of 4)
Having arrived at the convention, Sir Henri made what is reputed to be his first formal speech, talked on "Common Sense in the Oil Industry," said no more about his "no compromise" position. Said he: "The idea that it might be possible that the 'collecting department' [that which supplies the public] could be some Government or combination of buyers who will dictate to the producer the minimum with which he ought to be content so that he may be kept alive, is bound to be shortlived because it is entirely illogical. . . . Do not be led away by the noise of publications about Trusts. . . . What is to be done? . . . My advice is: Let us create 'an association of cooperation' on the basis of possibility of permanent production with the assistance of such distributing organizations as are willing to cooperate, and do not let us worry about those who will not do so." U. S. oilmen, pondering this last pearl of wisdom from the Shell, wondered how much of Sir Henri's U. S. activity was designed to strengthen his international position.
Production. Aside from Sir Henri and the Shell-Socony war, oilmen were chiefly interested in the perennial problem of overproduction. When 1929 began, there were in storage 625,000,000 barrels of crude oil, representing excess of production over consumption. Production during 1929 totaled about 200,000 barrels a day over consumption, so that at the end of the third quarter the 600,000,000 barrel excess had increased to 675,000,000 barrels, or about enough for eight months consumption. During 1928 oil wells produced about 900,000,000 barrels; during 1929 the production will reach an even billion.
On the other hand, although the government failed to endorse the American Petroleum Institute's national program of oil restriction, oilmen have made marked progress through state-by-state restriction agreements. There is no overproduction problem in Pennsylvania fields; Texas oilmen have on the whole cooperated enthusiastically with the restriction plan; encouraging progress has been made in the Mid-Continent (Oklahoma) fields. California, however, is the crucial point. California increased its production 40% in 1929 and now produces 30% of the U. S. output. Last summer the California legislature passed the Lyon Act, a measure ostensibly designed to prevent wastage of natural gas but really meant to limit oil production.* Small producers have questioned the legality of the Lyon Act, but big oilmen maintain that the courts will uphold the validity of the measure and that the law will reduce California's present production of 870,000 barrels a day by at least 200,000 barrels. Stabilization of oil production for 1930 depends largely upon the outcome of the Lyon Act.