In 1938 the Mid-Continent and California fields produced more oil than all the rest of the world outside of the United States. The relative production position of the main areas is shown in Table III.
The trend of United States production by areas is shown in Tables IV. and V.
The total crude oil production of the United States by years is shown in Table VI.
Expropriation of Foreign Oil Properties.—An event of great significance not alone as affecting Mexico's oil production, present and future, but also as bearing potential threat to inter national investment in Latin America generally, occurred with the signing on March 18, 1938, by President Cardenas of Mexico of an executive decree expropriating foreign oil properties valued at about $450,000,000 in Mexico. The properties and business of 16 important British-Dutch and American oil companies, some of which had pioneered in the discovery and development of the petroleum resources of Mexico, were taken over for Government operation.
The action was the most severe in political import since the confiscation of foreign oil properties by Soviet Russia 20 years previously. It instantly became the subject of diplomatic corre spondence and negotiation between the governments whose na tionals were affected and the Mexican Government, still in prog ress late in 1939, with the properties remaining under Government operation and control and with no payment for the expropriated properties made. Following protest of the action, the British min ister was withdrawn from Mexico and Mexico retaliated in kind. The negotiations on behalf of all foreign interests were in the hands of a committee of the foreign oil operating companies.
In all the long history of controversy over oil in Mexico no such radical action as expropriation previously had been taken. The trouble over oil has turned on the Carranza Constitution of 1917 which stipulates, in Article 27, that all mineral products, including petroleum, are the property of the state. The inclusion of this provision in Mexican organic law precipitated a prolonged dispute over the status of leases made by foreign oil companies before the adoption of the new Constitution. The main points at issue were whether Article 27 was retroactive, and whether it impaired the obligations of existing contracts.
After ten years of controversy a satisfactory solution was reached through the Morrow-Calles agreement of 1928. Under
this agreement oil companies operating under leases made before 1917 could obtain "confirmatory concessions," subject only to the rentals and taxes in the original agreement. This was done. Nine years of comparative quiet followed this settlement. Upon com ing into office, Dec. 1, President Cardenas began to put into effect the "Mexicanization" of the industries dominated by for eign capital, this embracing practically the whole of Mexican in dustry. He announced a six-year program of "nationalization" and economic reform. In Nov. 1936, the Mexican Congress passed an expropriation law, the Government having a short time previ ously decreed the nationalization of 35o,000ac. of land leased to the Standard Oil Company of California, and also the national ization of oil and mineral rights on 50o,000ac. leased to a land development company in the State of Tabasco.
Still further troubles were encountered by the foreign oil com panies. Near the end of May 1937, there began a series of labour strikes in the oil fields which hampered production and transporta tion and created widespread uneasiness because of the radical nature of the syndicalist movement. Meantime, the Board of Con ciliation and Arbitration under Mexico's labour law of 1931 had appointed a commission of experts to investigate conditions in the oil industry. Its findings recommended a yearly increase in the com panies' payrolls of 26 million pesos (about $7,288,000). On Dec. 18, 1937, the board announced its award, practically confirming the experts' report. The award stipulated conditions which the companies felt they could not accept, inasmuch as the industry was paying top wages and had provided housing, sick, and other benefits for their workers. They submitted their case to the Mexi can Supreme Court, and the Federal Labor Board, asking that the award be set aside. The Labor Board denied the suspension, and on March I, 1938 the Supreme Court upheld its decision. Compromises were offered by the companies but rejected. The Labor Syndicate petitioned the Labor Board to void all contracts with the companies, which it did on March 18, following which action, on the same day, President Cardenas issued his expropria tion. decree.