California and Wyoming have given striking examples of geological efficiency, and OklahOma, Kansas and North Texas have in the past five years seen notable developments due to geological work.
The development of petroleum geology has been rapid, for its use insures the minimum of risk in drilling for oil.
The location of tests without competent geological advice is much more general in the Eastern and Mid-Continent States, however, and the method of haphazard location must be considered.
It is safe to say that competent geological advice will give successful results one in five tests, and that haphazard drilling will more fairly be represented by one in 300.
The study of geological methods will not, however, be treated in this book.
Scope of the Industry.—It is a common belief that all one has to do is to drill a well and then receive dividend checks. This is far from the true condition. The discovery of oil is important, but the proper handling of oil properties, after discovery, requires skilled management and workmen. Oil may be found in quantity but if improperly handled good properties may be total failures.
The storage of oil necessitates great reservoirs or tanks.
Some of the crude oil produced is burned directly, as fuel, some of it is refined by "topping" (a simple distillation process), or by more careful refining methods calling for large and expensive plants and equipment.
The extraction of casing-head gasoline from natural gas has become an important part of the oil industry.
The transportation of oil to the refineries requires expensive equipment, and the investment of many millions of dollars. The pumping of several hundred millions of barrels of oil yearly through pipe-lines is a large business. Consideration of the many thousands of tank cars on our railroads shows that this part of the business has also assumed important proportions.
The marketing and distributing of petroleum products is distinct from other branches and is an important industry.
In any study of an industry, its various branches and ramifica tions are important. However, there are a number of other subjects that must be given consideration. Investors, or men
choosing a life work desire to know about the permanency of the industry they are considering. Has it a long or a short life before it? Will prices continue high? Is it under the control of a monopoly? What are the chances for new capital? Are there any serious labor problems? All these questions are of importance.
Life of the oil industry is 62 years old and more active than ever before. Its future life is difficult to predict but one can figure safely on an active life for at least 50 years. Whether it can maintain an active life for that time in the United States is very questionable. However, there is the world to draw upon, and its resources are very vast.
Future Price of prices in 1921 furnish an interesting study. On Jan. 1, 1921, the quoted price of oil in the main Oklahoma field was $3.50 per bbl. In July, 1921, the price was $1.00 per bbl. Prices in the Eastern and the Gulf Coast fields were cut in two. Prices in the California fields were cut only 25 cents. This condition is purely temporary, due largely to the business depression during the latter part of 1920 and the first part of 1921. The decrease in the buying power of the public checked the use of motor vehicles with the result that less gasoline was used.
The light oils of the Mid-Continent field felt this decrease in consumption quickly and reacted with lower prices. Another contributing factor to lower prices in the Mid-Continent fields was the very heavy production from deeper sands in the old fields which caused a local glut for the time being. * Oil prices in 1922 should, however, be higher than in 1921, as the general business depression caused by the reaction to the war period will be largely over by that time. An improvement in general business conditions means increased oil consumption. The supply of oil is limited however and the increased consump tion is bound to force prices higher than before. Stocks of oil on hand in storage May 1921 were 155,000,000 bbl., a four months supply only. This is a small margin on which to work.