REFINING The United States petroleum industry's investment in refineries has been estimated at $3,700,000,000 in 1937. Petroleum refineries are located in 32 States, but about 90% of the total refining capacity of the country is concentrated in io States, with Texas in the lead with 29.5%. The seaboard area along the Atlantic and Gulf coast accounts for 41.4% of the country's total capacity ; the interior, for 33% ; and California, for 20.6%.
On Jan. I, 1938, there were 561 refining establishments in the United States, of which 431, representing 77% of the total capac ity, were operating, were idle, and io were under construction. Of the operating plants 24.9% of their total capacity was repre sented by units with capacity of ioo,000bbl. per day or over; 12.9% by units with capacity of 50,000-99,000bbl. daily; 15.3% by units of 25,000-49,00obbl. daily ; 25.6% by units of 10,000– 24,00obbl. daily, and 21.3% by units below i 0,00obbl. daily capac ity. Thus, 104 plants represented 78.7% of the operating capacity of the country, while 327 plants accounted for 21.3%. The natural economic advantage of large-scale operation in areas con tributary to concentrated markets has tended to develop refining on a mass production basis.
A basic economic problem faced by any manufacturing activity is the maintenance of equilibrium between supply and demand, and this problem presents specialized features in the case of an enter prise involving the production of a range of products from a single raw material. Not only must the supply of the main product be kept in balance with its demand, but sufficient flexibility in processing and pricing must be developed so that the joint product will be carried off in trade in the proportions in which they are manufactured. In the case of petroleum, gasoline con stitutes the main product, and kerosene, distillate, fuel oil, and lubricating oils are the principal joint products. With the demand for each of these products influenced by different economic fac tors it is apparent that the refining industry constantly faces the necessity of avoiding shortages or overages of one product or the other. It faces an additional problem in balancing its overall operations with the requirements of the market.
The refining industry was practically rebuilt to provide crack ing facilities so that the increased demand for gasoline could be met. The result is that cracking plant capacity doubled in ten years, and cracking in 1938 led all production methods, as shown in Table XXVI.
Development of new uses of liquefied gases, recovered at refin eries and natural gasoline plants, has built up the use of so-called "bottled gas" in homes, industries, and transportation.
The integration of large oil corporations has been less success ful in its inclusion of the marketing division—that is, the retail marketing of gasoline—than the other divisions of operation. To recount their excursion into this field and their retreat there from, is to tell the story of mammoth competitive struggle affect ing the whole industry and the hundreds of thousands who man the gasoline pumps in the United States, as well as of the estab lishment of a service to the motorist that in its universality and thoroughness surpasses credibility.
By modern standards of American "Big Business," the old Standard Oil monopoly was in incomplete organization. Prior to the dissolution in 1911, it had gone quite a distance in harmoniz ing crude oil storage and transportation with refining, but it pro duced little oil and had not developed controlled outlets for its products. At the one end it relied upon independent producers; at the other, upon independent jobbers and retailers. But gaso line had not yet come into the picture; gasoline still largely was a waste by-product. After 1911, however, the motor car took hold rapidly and as rapidly gasoline became the principal, or "money" product of the industry. On that tidal wave, large oil corporations other than Standard Oil came into being. In almost every instance, these were born in the oil fields; that is, they were launched primarily on their huge production sources. The next step was for them to build and operate their own refineries to give their crude oil an assured manufacturing outlet. They built their own pipe lines to transport their own crude oil to these refineries. The final step was for them to establish their own dealer outlets for gasoline.