An Example of the Political Effect of Petroleum.—The high value and limited distribution of petroleum make all the great nations eager to secure new supplies. This is especially true of countries like Eng land and Germany, which have little or none within their own terri tories. Even if countries have an abundance at home, however, their business men are eager to find new supplies, for the development of new fields is extremely profitable. Hence when a wonderfully pro ductive oil region was discovered on the northeast coast of Mexico near Tampico, Americans, British, Germans, Dutch, and other foreigners all hastened to get control of as much land as possible. The production of oil increased so rapidly that although it was negli gible in 1910, Mexico to-day stands next to the United States as an oil producer, and the Tampico region produces more oil than any other area of equal extent.
The oil fields of Mexico are highly important for that country itself as well as for the foreigners who use the oil or who make fortunes by exploiting it. Since Mexico has little coal, the oil is by far her greatest fuel. It is used not only for some of the factories, street car lines and lighting systems, but for about half the railways. Still more important from the Mexican standpoint is the fact that taxes on oil lands and on exported oil are one of the main sources of the government's revenue.
Because of these facts there has been much conflict between three sets of people, each wishing to get as much as possible from the oil fields: (1) the foreign exploiters who have acquired title to the lands and have invested much money; (2) the Mexican government, which feels that it must impose heavy taxes in order that Mexico may get its fair share of the great wealth that keeps flowing out of the ground; and (3) Mexican bandits and rebels, who also want a share in this wealth and sometimes terrorize the workers at the oil fields, rob and even kill the paymasters and others, and thus compel the oil com panies to pay large sums for protection. The Mexican government has sometimes been unable to prevent this or to punish the offenders. Such complications lead some people to say that people from-the United States have no right to exploit the resources of their more backward and less competent neighbor, while others say that this country ought to intervene and give Mexico a good government.
In certain respects the relation of Japan to the coal mines of China is like that of the United States to the oil of Mexico. In such cases the fact that a backward country contains wonderfully rich supplies of a valuable source of power gives rise to one of the most complex of the political problems that confront the League of Nations. •
The Standard Oil Company.—Petroleum occurs in such a way that a few people can easily obtain control of a large part of the product. When this happens, great economies can be practiced and prices can be kept up so that enormous fortunes are made. The history of the Standard Oil Company illustrates the matter. That Company, though now broken up into a number of supposedly independent con cerns, holds its place as one of the largest industrial organizations in the world. In this country only the United States Steel Corpor ation exceeds it. Time and again it has driven rivals out of the market. It has done this largely because it could produce oil more cheaply than its rivals and could utilize every possible by-product, such as vaseline, paraffine, benzine, and a hundred others. More over, in the early days it obtained special railroad rates or entered the territory where a competitor made its sales and put the prices so low that the other company had to go out of business. Then prices were raised and the great Standard Oil Company got back what it had lost during the period of competition. Being protected from competition in the United States by peculiar tariff regulations, the company kept prices at a high country and sold much cheaper abroad than at home." to meet competition in for eign markets the company also acquired interests in other countries. In these various ways and also by wise management it acquired 85 or 90 per cent of all the oil business in the United States. Thus since about 1880 it has distributed more than a billion dollars in dividends and has also acquired a vast amount of property which has been paid for out of profits.
The reason why the Standard Oil Company has become so strong is not that it owns all the oil wells, for it owns much less than half, but because it controls transportation. Almost everywhere it has succeeded in preventing the construction of any pipe lines except its own. Since transportation by pipe lines is far cheaper than by rail, independent producers can rarely make a profit unless they can use pipe-lines. Therefore they have had to sell their product to the great company which dominated the business and would not serve them otherwise. Fortunately some of the leading men not only in the Standard Oil Company but in other lines of business feel that at least part of the wealth derived from great natural resources and from the growth of population belongs to the community and not to them selves. Therefore considerable sums of Standard Oil profits have gone back to the public in the form of endowments to such institu tions as Chicago University, the International Healtfi Commission, and the great Rockefeller Foundation.