Petroleum as an Example of a Developing Mining has recently been the greatest American gamble. The people who have oil certificates tucked away waiting for the "oil to come in" are strong witnesses of this. An average production of about 4r1 barrels per day for each oil well in the United States does not sound large. But a rise in total production from 40 barrels per day in 1859 to over a million at present sounds enormous. In the United States alone 30,000 miles of pipe-line are used to take care of the supply. Formerly, kerosene was the chief product and the gasoline, as well as the heavy parts of the oil, was a nuisance. Now the gasoline is the most important part, but there is plenty of use for the kerosene, and the 300 or more by-products made from the other parts are utilized in hundreds of industries. In the old days uncertainty as to the future, and the difficulties of trans portation made capital slow to invest in oil. Now, in spite of the approaching exhaustion of the supplies, a five-fold advance in price in a decade (1910-1920) makes oil a most alluring investment. Even Wall Street, which is used to big things, was amazed at the way in which 300 million dollars of new capital was said to have been into oil during the first four months of 1919.
How Oil is Prospected for and us see what happens before Wall Street hears of a new oil center. Two or three men spend several weeks unobtrusively studying the geology of a region, locating anticlines or monoclines where invisible layers of porous rock lie between less porous layers and are tilted at such angles that oil may rise into them as into reservoirs. A little later other men quietly lease the right to drill for oil at perhaps a dollar an acre on as many farms as pos sible, with the provision that if oil is struck the farmer will get one eighth of it. This is called " wild-catting." The promoters may sell out to a big company or drill themselves. In the latter case they per haps sell two-thirds of their leases to eastern brokers at $8 per acre and thus assure themselves a profit above the expenses of drilling even if no oil is found. The brokers in turn capitalize their purchase at perhaps $5 an acre, and sell stock so that if any one loses, it will be the public. A single producing well in a region often causes enormous speculation. Cases are not rare where a farmer has sold a quarter of his eighth for $10,000 and the promoter who made the purchase has capitalized this one thirty-second of a 160-acre farm at $100,000 and sold the stock. But the chances of getting oil are very elusive. One farmer may make two or three thousand dollars per month while his next neighbor makes nothing. In 1918, about 6000 of the 29,000 wells drilled in the United States were dry. One large oil concern bought 40 wells one year and
only 3 proved of value. A small oil company in Texas was getting about 1500 barrels of oil per day, but wanted to make money faster. It drilled some more wells on the same general tract where the producing wells were located. Not only were the new wells of little value, but they so changed the conditions of pressure underground that the flow of the old wells fell to only 50 barrels per day. In one Oklahoma region in 1918, only one dollar's worth of oil was produced for every $555 of investment.
The Change from to is a typical example of what happens in an oil boom. Some wildcat drillers bought in a well in the peaceful little township of Desdeinona (Texas), where fifty to a hundred people were raising pigs, 10 miles from the railroad. There was no hotel, no telegraph line, and only poor excuses for roads. But crowds of people poured in, rents soared, wells were rapidly dug, tanks and dams of earth were built to save the oil that poured out, pipe lines w ere laid down in a rush, stores were started in shacks. Soon the little hog-raising town had a thousand derricks; ten thousand people were living in tents, and walking on plank walks; not enough of them had resided there six months to incorporate a town. Trucks were still crawling in with loads of pipe and machinery; nothing except the cemetery was sacred from the oil driller. Both the Federal and State governments have tried to prevent waste in such cases by a system of fines. But when people are making $12,000 for each $100 invested, as happened in one case, they do not care how much is wasted. In a Texas town 10,000 barrels per day were recently wasted.
The Business of an Oil rapid development stimulates business. There is a demand for expensive machinery; the oil workers, the storekeepers, the extortionate jitney drivers, and everyone else in the town must be supplied with food, shelter, and clothing. Money is so abundant that prices rise to astonishing levels. The people who make fortunes are so extravagant that automobile makers say that such districts are among the best in the country for the sale of high-priced cars. But the business stimulated by an oil boom or any other mining boom is not permanently valuable. It introduces wild speculation, a sudden demand along various lines, and a sudden change in the supply along other lines. One of the worst features of business life, especially in the United States, is the great fluctuations to which it is subject. Any condition that brings a sharp fluctuation is harmful, whether it be drought, a great storm or flood, or an oil boom.