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Published online by Cambridge University Press: 26 March 2020
The oil industry has grown more rapidly and more regularly in this century than almost any other major industry. Its growth continues unchecked; but lately, a growing world surplus of oil has become noticeable. This is not a new problem. There has more often than not been a surplus of oil in time of peace—in the sense that the big companies could at short notice have increased their output of crude oil substantially. What changes, partly in response to the size of the surplus, are the methods by which supply is regulated and prices are determined. This article examines the present position in the industry.
The authors are indebted to D. C. Thompson of Petroleum Economics Limited for his help in preparing the statistics for this article.
The summary B and the conclusion are on pages 24 and 25.
page 17 note (1) There are some exceptions. Canada has substantial oil resources but is still a net importer; Argentina is moving towards self-sufficiency; Austria covers most, Western Germany a sizeable part, of its requirements by indigenous oil; Indonesia supplies some oil to adjacent areas.
page 17 note (2) In the United States oil import regulations are in the Federal domain but domestic production is regulated by the various states; thus within the United States there is also a problem of coordination which is only imperfectly solved by the Interstate Oil Compact.
page 18 note (1) The per capita consumption of energy in 1958 in terms of coal equivalent was in the United States 7.5 tons, in the OEEC countries 2.5 tons, and in the Soviet Union 2.8 tons. The corresponding figures for oil were 3.1 tons, 0.6 tons and 0.7 tons respectively.
page 18 note (2) Quality of crude oils is determined by two main criteria : (a) the yields of finished products and (b) ease of refining (for instance, absence of sulphur). In markets where petrol requirements are comparatively large light crudes are in greatest demand, whereas in markets with a high fuel oil demand, heavier crudes are more readily saleable.
page 20 note (1) The value of a company's business cannot be deduced from the size of its proven reserves alone. A great deal depends on where the reserves are, and whether they are concentrated in one area or not. Further, the standing of a company in refining and marketing affects the realisation of the potential assets which these reserves represent.
page 22 note (1) Spot charter rates, which the independents would have had to pay, were then much higher than the average rates for the tonnage available to major companies.
page 23 note (1) There is also a tax problem : with crude oil prices more effectively controlled than prices of petroleum products, profits of the oil companies' affiliates in the consumer countries are now small, if indeed there are any at all. Under the present arrangements even in the countries where the parent companies are domiciled (the United States, Britain, the Netherlands and France), tax revenue from the oil companies is relatively small.
page 24 note (1) They are the British Petroleum Company and the Shell Group; the latter incorporates substantial Dutch interests, but that does not invalidate the argument put forward; indeed the considerations relevant to British interests apply similarly to those of the Netherlands.