Abstract

With petroleum consumption declining temporarily after V-J day, the oilindustry is urged to use this period as a kind of stopgap to rebuild itswar-depleted inventories and help cushion the effect of this decline onproducers and refiners. Higher inventories should be reestablished, sincerecent experiences have indicated that, by and large, the present inventoriesof crude oil are too low even with the tremendous current production available.The following analysis indicates that inventory levels could be built up toabout 490,000,000 bbl. by the end of 1947, an increase of about 40,000,000 bbl.over the reported stock estimated far the war's end. If at the end of the warthe military have some 20,000,000 bbl. on hand, this inventory will either beresold to the industry or certain demands that have been assumed to be met byindustry will be supplied out of these military stocks, which would leave about 20,000,000 bbl. (net) to be built up from current production. For stockrebuilding the industry could use 10,000,000 bbl. of crude plus 10,000,000 bbl.of products, totaling 20,000,000 bbl. If this were spread over a year, thiswould mean 55,000 bbl. a day. By analyzing the average inventories held in ayear with the total quantity of goods handled during the year, the followingstudy and tables indicate how far the inventories should increase in theimmediate postwar period.

Introduction

For the period immediately following V-J day, most of the petroleumeconomists have forecast a considerable decline in the total consumption ofpetroleum and its products in the United States. This will be caused by theelimination of most of the military demands and the inability of civilians toimmediately replace automobiles, burners, etc., and thus increase theirrequirements to make up for the military decline. When the automobile industryhas been back on full production for two or three years, civilians will be ableto consume much larger quantities of gasoline. Delay in the manufacture of newoil burners and the time it takes to construct new homes, adds up to the samestory for distillate fuels. In reviewing this outlook, the question has arisenwhether the petroleum industry should not use this period of lower consumptionas a kind of stopgap to rebuild its war-depleted inventories and help cushionthe effect on producers and refiners of this sudden drop in requirements. Somepersons have indicated that hundreds of thousands of barrels a day could beused for this purpose extending over a year or more. Refineries will be inexistence, which could run over 5,000,000 bbl. of crude oil a day and crude-oilproduction might be running 600,000 to 700,000 bbl. a day above the demands nowforecast for the period after V-J day.

T.P. 1870

This content is only available via PDF.