The petroleum industry during 1959 was characterized by one dominant theme - overcapacity to produce. This problem continued to dominate 1960 and will undoubtedly be a sore thumb for many years to come.
In the Free Foreign area, spare capacity to produce increased only slightly, barrelwise, during 1960 and as a per cent of total capacity, it leveled off. However, this adjustment is qualified by the fact that some major investments currently being made abroad soon wilI result in the availability in the world market of substantial volumes of new crude. This can only result in another upward cycle of the over-all spare producibility curve.
Of course, a certain level of spare is necessary because the oil industry is a growing business and cannot afford simply to exist from day to day. A certain amount of extra capacity is necessary to allow for the unavoidable downtimes which occur in producing operations; and, finally, there is the need to have some spare for handling emergencies.
All these factors require that money be invested in spare capacity, but the big question is, "What level of spare is desirable and when does it become a burden?". It would be an oversimplification to make a general statement about the worldwide industry because both the location and ownership of spare capacity have a great deal to do with its effect.
Fig. 1 shows spare capacity as a per cent of total capacity for the last decade for the United States, Free Foreign, and Free World areas.
