Drilling equipment alone accounts for a little more than half of the petroleum industry's annual bill. Deep drilling practices and technological progress have revealed greater petroleum re serves and have produced more oil, but also have increased in Crude oil is transported by means of special facilities created by the industry. The two principal types of conveyances used are the pipe line and the oil tanker. Only a small fraction of the crude oil produced is carried by the railroads because pipe lines and tankers offer superior efficiency and lower transporta tion costs.
For liquids available in sufficient volume with a concentrated market the pipe line affords the most efficient form of overland transportation. While capital costs are substantial, rights of way are not expensive, the operation of the system is automatic to a high degree, movement is continuous and there is no problem of two-way traffic or return movement of empty facilities. Be cause of these advantages and the technical efficiency of the modern pumping systems, the average cost of pipe line transporta tion probably does not exceed 4 mills per ton mile, which con trasts with an average cost of movement by rail of approximately 8 mills per ton mile. Thus, no natural competition can persist between oil pipe lines and the railroads.
The oil pipe lines of the United States constitute a far-flung system connecting the oil fields with the principal consuming centres and water terminals. The aggregate length of lines is approximately 115,000mi., of which 6o,000mi. are trunk lines and 55,000mi. are gathering lines—almost one-half of the combined length of all railroad mileage. The pipe lines are in 24 States, but as the equipment is largely below-ground and only marked by an occasional pumping station, its magnitude and importance are not commonly realized. The system consists of trunk lines and what are known as gathering lines, which connect with the flow tanks of individual oil wells. The pipe line, therefore, forms a link between the oil wells and the refineries and the flow of oil is practically continuous from lease to plant.
*A11 tankers i,000 gross tons and over. Does not include sailing vessels and barges. tAll vessels coo gross tons and over. Does not include sailing vessels and barges. Authority: U.S. Maritime Commission, from Lloyd's Register.
Pipe lines are by nature large-scale enterprises. The Inter state Commerce Commission in its report on interstate pipe line operation for 1937 listed only 58 companies, which represented about 84% of the pipe line mileage of the country, the remainder being intrastate systems not subject to regulation by the commis sion. The 58 companies represented a total investment of $890, 000,000; transported 948,000,000bbl. of oil originating on the lines or 1,288.000,000bbl. including duplications; and employed 24,168 men, with an annual payroll of $45,000,000.
The interstate systems, as well as the lines operating within a single State, are for the most part subsidiaries of integrated oil companies. Of the 58 units listed, only 14 were not affiliated with refining companies and these independent lines represented only io% of the total trunk line mileage of all interstate lines.
Pipe lines have almost invariably been constructed by refining interests which looked upon them as an adjunct to the manufactur ing enterprise necessary to insure a continuity of raw material, a partial offset to the variable and shifting nature of crude oil production ; they have rarely been built by producing interests or by promoters not already engaged in the oil business. With the evolution of proration the presence of refinery-affiliated pipe lines and a posted market at the well greatly facilitated the practical operation of the mechanism of control.
Pipe lines function as common carriers in cases where demand for this service exists. Although the bulk of the oil is still moved for the account of affiliated refineries, there has been a tendency for two or more companies to unite in the construction of joint facilities. Pipe lines charge specified rates for the movement of oil, and these tariffs for interstate movements are under the supervision of the Interstate Commerce Commission. Pressure has grown for legislation to divorce integrated pipe lines from refining companies on the ground that they tend toward monopoly and unfair practices. The principal objective of this pressure is to make pipe lines common carriers in actual fact, but the owners stress the relationship of the pipe line as a plant facility.
Pipe line transportation has been successfully applied to gaso line, but the volume moved through pipe lines is only about io% of the quantity of crude oil transported in this way, and around 15% of the total motor fuel produced. The aggregate length of the gasoline pipe lines of the United States is around 8,000 miles. While this system has not attained its full development, the gasoline pipe line is economically applicable to special situa tions where transportation by water is impractical. The pipe line movement of gasoline is feasible where there is a supply in excess of nearby requirements and concentrated markets exist into which this supply can be moved. The longest lines have been de veloped in the central States as a relief to the large manufacturing capacity plants in the Mid-Continent area.
The oil industry also has provided its own facilities for the movement of oil by water. The industry maintains a fleet of 75o tank ships for use on the ocean, the Great Lakes, and rivers and canals, representing an estimated investment of $530,000,000. Over half the traffic is refined products, and nearly one-third of the crude oil traffic moved is on coastwise, intercoastal, and inland waterways. In 1938 approximately 75% of the domestic crude oil was delivered to refineries by trunk line, 22% by boats, and the re maining 3% by tank car and truck.
Petroleum products are largely shipped by rail or by tank truck, and the petroleum industry is the largest shipper of manufactured products by rail. The industry owns and operates 130,000 motor trucks, of which 40,000 are tank trucks. The petroleum industry has provided the bulk of its own tank cars for rail movement.