BUSINESS

Petroleum Industry a t Crossroads Issues of government regulation, import problem, natural gas legislation must be decided

T H E PETROLEUM INDUSTRY is enjoy­ing an average year so far with a real­ization of t h e normal annual rate of about 39c for total demand. But t h e oil business is beset with a series of problems, t h e like of which it has cer­tainly never encountered before.

A pressing problem involves the o c ­tane race which is forcing the construc­tion of additional catalytic cracking and reforming capacity as well as d e -sulfurization facilities. Premium grades of gasoline, "with plat inum" or TCP o r just plain supercharged, are in vogue, and the industry is hard pressed to meet the demand. Looming in the future is the gas turbine engine which may very well become standard in t h e 1962 auto­mobile. Feeding on a low grade fuel such as kerosine, the gas turbine could obsolete the expensive cat cracker even­tually. Finally, there is a new source of energy in the form of nuclear fission

which is qui te capable of eliminating t h e market for heavy types of fuel oil such a s is used b y industry and the mari t ime services. While there are some i n the petroleum industry who dismiss the importance of atomic en­ergy, others point to t h e never-men­tioned possibility of using hea t gener­ated i n atomic reactors for industrial r>urnoSi-ss for direct aiy^iication or for conversion to steam or electricity.

The most woeful concept of the pe­troleum industry is that it will be re­duced to supplying liquid fuels as en­ergy sources. But t h e pressures of ob­solescence and technology coupled with vast financial resources seems to be propelling the industry (as a n energy supplier) into atomic energy programs of its own a n d into chemicals produc­tion. Part of the motivation may be derived from classified souls whose crys­t a l baDs foresee "free energy" from the

fusion process in 1 5 years or so. Now it is true that lithium-6 a n d deuterons make an interesting combination, but the problems of control a re such as to relegate "free energy" into the classifi­cation of economic nonsense. How­ever, the concept will only serve to hasten t h e conversion of petroleum in­dustry into full-scale chemicals produc­tion. After all, chemicals and energy are interchangeable in a sense, and the petroleum industry has been slowly and sometimes painfully coming around to the awareness of i t s mission in chemi­cals.

• Fuel Policy. Early this year, a government committee o n energy sup­plies and resources policy submitted a report to President Eisenhower on the subject of fuel policy. T h e report dealt with poliary applicable to oil imports, depletion allowances, and federal gov­ernment control of the natural gas in­dustry,

• impor t s . Government officials acknowledged for the first time the existence of a petroleum import prob­lem. T h e report stated that if crude oil and residual oils imports should significantly exceed the respective pro­portions tha t such imports bore to do­mestic production in 1954, the domes­tic fuels situation could b e so impaired as t o endanger t h e domestic economy and petroleum reserves necessary to national defense. Domestic oil com­panies have been particularly aggres-

4 2 1 6 C&EN OCT. 3, 1955

C&EN CHARTS

PROCESS

INDUSTRIES TRENDS

PRODUCTION (Chemicals & Allied Products vs. Industrial) BASE PERIOD INDEX, 1947-1949= 100, SEASONALLY ADJUSTED

160

160

140

120

100

CHEMICALS & ALLIED PRODUCTS

INDUSTRIAL

1953 1954 1955

JULY 170

AUG. 140

M O T O R FUEL Production, All Types Millions of Barrels

MOTOR VEHICLES Factory Soles, Passenger Cars, Coaches & Trucks, Thousands of Units

PETROLEUM CONSUMPTION Runs to Stills Millions of Barrels

sive in seek ing limitations on oil im­por ts on the "basis of national defense considerations, and higher costs of find­ing orude in this country. An excess c rude oil supply, resulting from un­checked imports , not only causes dras­tic cuts i n allowables b y state regula­tory bodies b u t also discourages wild-cat t ing because of lack of markets for c rude , it is claimed. On the other hand , conservation of a national re­source vvbich is a wasting asset seems to b e a s o m e w h a t neglected considera­tion.

• Natural Gas Regulation. The committee repor t stated that the FedT eral Government should not control the production, gathering, processing, or sale of na tu ra l gas prior to its ent ry into an interstate transmission line. On June 7, 1954 , the Supreme Cour t had ru led that t h e Federal Power Commis­sion has jurisdiction under the provi­sions of the Na tu ra l Gas Act over in­dependent na tu ra l gas producers selling in interstate commerce. This decision alarmed independent producers who felt that they would b e subjected to publ ic u t i l i ty concepts of the FPC, mainly tha t g a s should b e priced a t cost plus 6%. Cost i n this case apparently means t h e cost of locating reserves (excluding unsuccessful drilling ex­pense) plus production costs. Opera­tion of n a t u r a l gasoline plants was jeop­ardized b y t r ie insecurity of prices un­der present sale contracts.

Congress attempted to clarify the status of na tura l gas producers by hold­ing hearings on several bills, b u t the issue was never brought to a vote and will be he ld over to an election year.

• Statistical Picture. The American Petroleum Ins t i tu te announced that gasoline stocks a t the middle of Sep­tember w e r e 152 million barrels, the same as a year ago. Stocks of light fuel oil w e r e up to 141 million barrels versus 124 million a year ago, while heavy fuel oil supplies were over 10 million bar re ls lower than last year at 47 million bar re l s .

Impor ts of crude oil and products for the four weeks ended September 16 averaged 1,106,000 barrels versus 991,-50O barrels last year. Crude oil runs to stills in t h e most recent week were 7,471,000 bar re l s a day, including 758,000 of foreign origin.

Produc t ion of gasoline has averaged 26 million bar re l s weekly for the first half of September , according to the API , and refineries operated at an indi­cated ra te of 89 to 90%.

CHART CREDITS : Production (Chemicals and Allied Products Versus Industrial)—Federal Reserve Board; Motor Vehicles, Motor Fuel, Petroleum Consumption—Department of Com­merce.

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