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This is one of the greatest business success stories of the century. It is a story about an industry that has attained so much success that it has been almost fatal, in the Judgment of some analysts. The following suggestions are a few ideas which may enable the industry to recover from its success before it does, in fact, become fatal.
To present the conclusions in proper perspective, it is necessary that the economic and political climate of the year 1947 be recalled.
The United States had only recently concluded a victorious war —- a war in which U. S. military forces and their allies literally rode to victory on a sea of oil. The bulk of this tremendous volume of oil was drawn from the reserves of U. S. oil companies and other domestic producers.
As a result of war demands for petroleum products, very little shut-in reserve capacity existed in this country. Of course, a few producing fields, such as East Texas, Conroe, Eastings, Wasson, Yates, etc., had unused productive capacities. Limited transportation facilities, however, served as restraints on the effective marketing of any reserve productive capacity from such fields.
Military demands for machinery and equipment resulted in drastic curbing of drilling activity in the six years preceding 1947. Very little exploration had been initiated during the war years, and many leases were ready for development in 1947.
Reserve and productive totals for 1947 are given in Table 1.
RESERVES AND PRODUCTION FOR 1947
U.S. Reserves, year-end (bbl) .................... 24,741,660,000 Free World Reserves, year-end (bbl)................................ 61,683,035,000 U.S. Daily Production (B/D) ........................… 5,510,211 Free World Daily Production (B/D) ..................… 7,664,115
These data indicate that the nation had approximately 12 1/2 years' supply of crude oil in the ground at the then going rate of domestic consumption. The entire Free World's supply, based on proven reserves and daily production, was 22 years.
Price ceilings enforced by the Office of Price Administration (O.P.A.), which had held the price of crude to about $1.20 during the war, had been lifted by 1947. The price of crude in 1947 averaged $1.93 /bbl.