How Much Oil?

“We have already found well over half the crude oil we can expect ultimately to find in the United States. Only about a twelve year supply of oil remains.” (Report of Representative Short’s House Armed Services Subcommittee, submitted May 6, 1948.)

“ . . . you can be certain Americans will develop within this country all the hydrocarbon products that our people need, in peace or in war. Of that I am as sure as I am that the sun will rise and set tomorrow.” (J. Edgar Pew, Vice-President Sun Oil Company. Testimony June 19, 1945, before a Special Committee to Investigate Petroleum Resources (O’Mahoney Committee) )

It seems that both these statements are not about the same thing or, if they are, one of them is quite wrong. If such contradiction is prevalent in the highest levels of government and industry, it is understandable that the interested citizen finds it difficult to form an opinion on American oil resources.

There obtains much widespread confusion on the state of American oil reserves. The reader hears from several sources such alternately comforting and alarming estimates of the number of years supply of oil remaining to us as those contained in the above quotations.

In a nation foreseeing living for many years in a condition of partial mobilization and under a “garrison economy,” the state of petroleum resources is of paramount concern. It will be of value to us to investigate the background of these contradictions—to obtain an accurate picture of the part oil plays in the life of America and the best qualified estimate of our petroleum reserves.

Petroleum in Peace and War

It has been said of the recent war, “the Allies swam to victory on a sea of oil.” The wartime demand for petroleum products, not including Axis and Russian areas, increased from five to seven million barrels a day, despite drastic curtailment of non-essential civilian uses. During World War II the U. S. Armed Forces alone used oil at the following rates: Army, 641,800 barrels a day; Navy, 680,000 barrels a day. In peacetime as well as war, however, petroleum is a strategic mineral.

In the United States today petroleum is the greatest single energy source. This is in contrast to the power sources of the rest of the world. The estimated sources of energy for the United States and foreign countries for 1948 is seen in Table 1, below.

Table 1. Estimated Sources of Energy, U. S. and Abroad, 1948

	Oil and	Coal	Water
	Natural Gas		Power
U.S.A.	50 %	45.5%	4.5%
Foreign	29.6%	63.3%	7.1%

In the last half-century in America petroleum and natural gas have rapidly gained on coal as the principal fuel, as shown in Table 2.

The United States, more than any other nation, has evolved a way of life dependent on a steady supply of oil and other petroleum

Table 2. Growing Importance of Oil as a Source of Energy in the United States Compared to Other Energy Sources. Units: B.T.U. Values, Quadrillions

	1900	1910	1920	1930	1940	1944	1949
Coal	7.1	13.1	17.2	14.2	13.4	18.0	12.5
Petro-
leum	0.6	1.8	4.0	7.8	11.2	13.0	17.7
Water
Power	0.2	0.6	0.8	0.8	0.9	1.2	1.5

products. Of the petroleum brought to the surface of the earth in the last year before World War IT, 1938, the United States consumed over 60%.

Table 3. World Consumption of Petroleum 1938

U. S. and Canada	6?%
Europe	15%
Latin America	6%
Asia	5%
U.S.S.R.	8%
Australia and New Zealand	11%
Others	21%

The daily consumption for that year was: world, 5.2 million barrels; U. S., 3.2 million barrels.

In 1949 the daily consumption for the U. S. was 5.8 million barrels. A daily consumption for the United States of upwards of 7 million barrels is anticipated for 1951 by the Petroleum Committee of the Munitions Board, Department of Defense.

As great as is the difference between United States consumption and that of other nations, the statistics are not nearly so surprising as those of per capita consumption.

Table 4. Per Capita Consumption of Petroleum Products. Gallons per Year 1938

U. S. and Canada	353
Australia and New Zealand	122
U.S.S.R.	41
Latin America	39
Europe (except U.S.S.R.)	31
Africa	9
Asia	4
World Average	37

If any statistical evidence were required to reenforce the arguments for the superior material benefits of the American life, these should be conclusive.

Not only is America the greatest consumer of oil but also the world’s greatest producer. The world production of petroleum for 1950 was 11,000,000 barrels per day, up 11.1 per cent over the previous year. Of the refining capacity of the world, seventy per cent in 1944 was American owned or controlled. The position of the United States as a petroleum producer is seen in Table 5.

Table 5. Percentage Distribution of Crude Oil Production

-	1939	1948	1949	1950
U.S.A.	60.0	59.0	55.5	52.0
Venezuela	9.8	14.4	14.2	14.2
U.S.S.R.	10.5	6.7	7.4	7.3
Iran	3.7	5.6	6.0	6.4
Saudi Arabia	0.2	4.2	5.1	5.3
Kuwait	—	1.4	2.6	3.3

For those whose concern with oil production is primarily that of the security aspect, it is reassuring to note that the second largest producer is a Latin American country. Owing largely to United States investment and search, Western Hemisphere production other than that of the continental United States has risen over a hundredfold since the turn of the century and is now second only to that of the United States.

Table 6. Oil Production Western Hemisphere Other than United States. Million Barrels per Day

1900	1920	1930	1940	1944	1949
0.01	0.46	0.63	0.88	1.11	1.79

In 1949 the Western Hemisphere, outside the United States, produced a total of 656 million barrels, or more than either all of Europe (291,726,000 barrels) or all of Asia (593,645,000). Venezuela alone in 1949 produced almost as much oil (482,316,000 barrels) as all of the Middle East (499,642,000 barrels).

Substitutes—Atomic Energy

There has been much popular speculation about the replacement of conventional fuels by atomic energy, both for commercial and military uses. Leonard M. Fanning, one of the foremost authorities on the oil industry in America, says of the future of atomic energy as a fuel:

“On the basis of the progress that has been made in studies of the commercial uses for atomic energy, it seems possible that it can be used for power in large transport units such as ships, supersized aircraft of the jet propulsion type, and rockets. No fundamental reason exists against such application. However, the people engaged in these studies see no evidence at the present time that atomic energy can serve for motor vehicle propulsion. In short, though at present it seems unlikely that atomic power will ever really replace our common fuels in most applications, it is likely to be a supplement to existing methods.”

The applicability of atomic energy in the power plants of ships will be put to the first practical tests upon the completion of the nuclear-powered submarine now under construction on the ways of the Electric Boat Company in Groton, Connecticut.

Natural gas is, of course, a product of the oil fields and is now being widely used as a fuel. It has not necessarily replaced oil but the increase in gas consumption has resulted in less increase in the use of oil. Research in the development of synthetic liquid fuels is being energetically pursued by the oil industry and the federal government. The synthetic program will be covered in detail in a later section of this paper.

It may be observed, then, that petroleum is, and will remain for the forseeable future, America’s number one energy source; that its replacement by other fuels for many years will be accomplished slowly and to a limited extent.

Reserves

It has been shown that the United States is drilling, refining, and consuming oil at a prodigious rate. It would seem that we are using our reserves of this strategic mineral injudiciously. There is widespread belief that this is true, and there are many persons who, for divers reasons, would have us believe that so called “vested interests” are mining and selling this fuel at a rate prejudicial to the common safety and welfare. From many sources we hear reports of imminent oil famine. Popular journals have carried alarming news of the limited amount of petroleum left in the United States. Research reveals that these warnings of early shortages are not without historical precedent.

Investigation shows that most shortage scares have their origins in unmalicious ignorance of the meanings of the terms employed to describe the state of oil reserves and of the history and organization of the industry. Apprehension about reserves is frequently reflected in the public statements of sincere officials whose preoccupation is with preservation of natural wealth or maintenance of military security.

There are those in national life, however, who employ a knowing misinterpretation of these terms and figures to suit their own purposes. The latter authors of the theory of approaching oil famine can be justified neither on the grounds of patriotism nor disinterestedness. Foremost among these harbingers of drought is the militant socialist. The “Exploitation of National Resources” has long been a shibboleth of doctrinaire socialists. They have great enthusiasm and organized and effective propaganda. Nationalization of “basic” industries is their avowed aim. This aim is frequently made palatable by the employment of an inoffensive euphemism. “A national oil policy” to the socialist really means nationalization. Failing immediate nationalization, the disciples of state ownership urge ever-tightening controls of industry by federal legislation. This Fabian approach has the recommendation that eventually government restriction will be so close and embracing that the practical division between federal control and state ownership will become academic. Especially vulnerable to such control are those industries engaged in mining natural resources, and among the foremost targets of the socialists is the petroleum industry.

The oil scare has all the immense and time- tested emotional appeal of the horrors of “monopoly and big business.” Many of the scares are echoed and reenforced by our less responsible journalists exploiting any hysteria to maintain circulation.

The series of shortage forecasts started as soon as petroleum began to occupy an important place in the American economy. In 1908 David T. Day, Chief Geologist of the U. S. Geological Survey, made the first systematic attempt to measure American petroleum resources. He estimated that the “total yield of the petroleum fields of the United States” would be somewhere between a minimum of 10 billion barrels and a maximum of 24 billion, 500 million barrels. Day concluded that our petroleum resources would be exhausted between 1935 and 1943.

During the first World War, as during the second, there was a flood of pessimistic forecasts. In 1915 Dr. Ralph Arnold, a noted geologist of the day, announced that at the end of the previous year we had only 5,763,000, 000 barrels of oil in the ground. The following year, however, the U. S. Geological Survey raised the Arnold estimate to 7,629,000,000.

In 1916 Mark L. Requa, a consulting engineer for the Bureau of Mines and later General Director of the Oil Division of the U. S. Fuel Administration, predicted an imminent acute shortage, during which the United States would import more and more oil and prices would become prohibitive. He said further that:

“In the exhaustion of its oil lands, and with no assured source of domestic supply in sight, the United States is confronted with a national crisis of the first magnitude.

“We must either plan for the future or we must pass into a condition of commercial vassalage, in time of peace relying on some foreign country for the petroleum wherewith to lubricate the highways of commerce, in time of war at the mercy of the enemy who may either control the sources of supply or the means of transportation; in either event our railways and factories will cease operation, our battleships will swing helplessly at anchor, and our country will resound with the martial tread of a triumphant foe.”

This statement was made 35 years ago. Since then our production and consumption have increased four hundred per cent, the United States has fought two world wars and has provided gasoline for an average of one automobile for each family in the country.

In 1918 Chester G. Gilbert and Joseph E. Pogue of the Division of Mineral Technology of the Smithsonian Institute estimated the petroleum resources at 7 billion barrels. They further maintained:

“There is no hope that new fields, uncounted in our inventory, may be discovered of sufficient magnitude to modify seriously the estimate given.”

One of the gloomiest forecasts was submitted in 1919 by David White, Chief Geologist of the U. S. Geological Survey, who estimated oil remaining available in the ground on January 1, 1919, as 6,740,000,000 barrels. He estimated that “the peak of the production of natural petroleum in this country will be reached by 1921.” He foresaw at the 1917 rate of production—namely, 380,0,000,00 barrels—the complete exhaustion of American resources in 17 years. He considered it “very improbable” that the total recoverable oil in the ground amounted to 8 billion barrels. It was his thought that by 1925 the country would be dependent upon foreign oil fields to the extent of 150,000,000 barrels a year. Annual oil imports, of course, have never reached this figure.

The United States Geological Survey, in in cooperation with the American Association of Petroleum Geologists, estimated that as of January 1, 1922, the reserves of oil recoverable by methods then in use totaled 9,150,000,000 barrels. These reserves were, the report added, “enough to satisfy the present requirements of the United States for only twenty years if the oil could be taken out of the ground as fast as it is wanted.” The survey asserted that the United States was dependent on foreign sources of oil, and that “this dependence is sure to grow greater and greater as our own fields wane.”

Very obviously all these predictions were wrong. One of the reasons' they were so wrong is that these prophets had neither the facilities nor the information to make the accurate estimates that we have today.

The 1922 Geological Survey report was the first to make the distinction between proven known fields and undiscovered fields. Since this survey, it has become customary for geologists to limit their forecasts to what has been termed “Estimated Proved Reserves”; that is, oil underground in areas which have

Estimated Proved Petroleum Reserves in the United States (1000’s of Barrels)

	Proved Reserves as of Dec. 31, 1943	Changes in Proved Reserves Due to Extensions and Revisions during 1944	Proved Reserves in New Pools Discovered in 1944	Production during 1944 (Estimated)	Proved Reserves as of Dec. 31, 1944 (Columns 1, 2, 3 less column 4)
	(1)	(2)	(3)	(4)	(5)
Alabama	—	—	360	43	317
Arkansas	296,929	20,423	5,148	29,441	293,059
California	3,336,823	242,575	76,925	311,771	3,344,552
Colorado	45,111	46,025	647	2,960	88,823
Illinois	294,622	100,661	2,727	77,296	320,714
Indiana	31,039	3,887	1,651	5,090	31,493
Kansas	645,852	42,431	12,498	99,030	601,751
Kentucky	35,190	15,236	331	9,677	41,080
Louisiana	1,483,826	107,062	112,055	129,556	1,573,387
Michigan	55,248	17,745	10,700	' 18,559	65,134
Mississippi	38,372	6,973	179,533	16,367	209,011
Montana	108,051	11,829	346	8,582	111,650
Nebraska	1,000	—	—	419	581
New Mexico	653,981	-54,101	2,240	39,556	562,564
New York	90,525	—	—	4,694	85,831
Ohio	32,643	—	1,925	2,944	31,624
Oklahoma	908,618	165,547	20,844	124,747	970,262
Pennsylvania	137,323	—	—	14,185	123,138
Texas	11,324,954	740,213	53,103	747,790	11,375,480
West Virginia	43,839	—	—	3,084	40,755
Wyoming	499,394	89,636	25,269	32,569	581,730
Miscellaneous*	306	50	—	61	295
Total U.S.	20,064,152	1,556,192	511,308	1,678,421	20,453,231

* Includes Florida, Missouri, Tennessee, Utah, and Virginia.

been proved by drilling and which oil is economically recoverable by current methods of production.

This was the basis of a survey made in 1925 by a Committee of Eleven of the American Petroleum Institute, in compliance with the request of the Federal Oil Conservation Board. This 1925 API Survey is still regarded as the most exhaustive inquiry of oil resources made in America and has become a standard for subsequent inquiries. This 1925 Committee placed the Estimated Proved Reserves at 5,321,427,000 barrels of crude oil; but it stated further that after pumping and flowing there would remain in the area then produced and proved 26,394,157,000 barrels of crude, a considerable portion of which could be recovered. The Committee of Eleven also pointed out the possibility of improving methods of deep drilling and the vast area of land underlain by sedimentary rocks not fully explored, in which geology indicated oil was possible. The Committee also pointed out the possibility of oil in the vast deposits of oil shale, coal, and lignites.

This Committee of Eleven concluded and reported that “there is no imminent danger of the exhaustion of the petroleum reserves of the United States.”

However, reports of imminent exhaustion were recurrent in the late 20’s and early 30’s. The alarmists were confounded temporarily by the discovery of the great East Texas Field. Within three years of this find another scare encouraged the American Petroleum Institute to conduct another survey. The findings of this survey were published in 1935. In this report the nation’s proved reserves were put at 12,177,000,000 barrels, which is more than twice the estimate given by the Committee of Eleven ten years earlier. In these intervening ten years production of crude oil in the United States had totaled 8,692,000,000 barrels, or about sixty- three per cent more than the 1925 “proved reserves” estimate.

Encouraged by the success of the 1935 survey in allaying the reports of alarm, the American Petroleum Institute in 1936 inaugurated a definite annual measurement of the proven oil reserves and created the Committee on Petroleum Reserves. The Committee itself numbers less than a dozen members, but more than 100 petroleum geologists, engineers, and specialists, working throughout the year in every producing part of the country, contribute the data for each annual report.

Since 1937 these annual reports have been the authoritative basis for the measurement of our proved reserves.

A sample of a part of an annual report of the Committee on Petroleum Reserves of the American Petroleum Institute is included herein (as Exhibit I) both to show the form of the report and to convey an idea of the size of the figures involved, the ranks of the several oil producing states, and the way in which proved reserves advance annually. This table indicates that during 1944 we added 2,067,500,000 barrels of new petroleum reserves to the oil supply of the nation, and that after providing the greatest annual demand ever made upon the industry, there was a net gain for the year in proved oil reserves of 389,079,000 barrels.

Many otherwise well-informed persons have lent credence to shortage predictions by falling victim to misinterpretation of the term “known proved reserves.” Frequently this term is interpreted as meaning the total oil resources of the nation. Then, employing a simple and superficially reasonable formula, we arrive at a quotient that is supposedly the number of years’ supply of petroleum remaining. Thus, the “known proved reserves” divided by the current annual production produces the number of years’ supply. To employ some recent figures as an illustration: in a report dated May 16, 1945, the Petroleum Industry War Council Committee on Petroleum Economics stated that at the close of 1944 there was a total of some 20,453,231,000 barrels of proved reserves of crude petroleum in the United States. During the year 1940 domestic production of crude petroleum amounted to approximately 1,353,214,000 barrels. The division of the former figure by the latter reveals that, at going rates of production, the current known reserves in the ground constituted 15 years’ supply.

The fallacy in this computation lies in the negation of the historical fact that as production has advanced, the “known proved reserves” have kept pace with the advance.

It must be remembered that “known proved reserves” constitute only a small fraction of the total American hydrocarbon resources. The term means only that crude oil underground in developed or partly developed fields which is estimated to be recoverable under existing economic and operating conditions.

It must be recognized that some military leaders have been especially culpable in lending credibility to shortage scares by employing mistaken interpretation of terms. “Much of the public alarm as to oil supplies has a military source,” said an editorial in a trade periodical in 1948. Army and Navy leaders conscious of the strategic importance of petroleum have developed an unwarrantably anxious attitude toward American resources.

We have seen that prediction of early exhaustion of reserves has been an oft-repeated theme during fifty years, and that like many unqualified statements it has acquired credibility with repetition.

The historical relation between the production of oil and the known proved reserves is shown graphically in Exhibit II. Inspection of this figure reveals that in thirty years the United States has increased its oil reserves from 6 billion barrels to over 26 billion barrels. This net increase in proved reserves took place while 32 billion barrels were taken from the ground and two great wars were successfully fought.

It will be clarifying to investigate the history of this parallel rise of production and reserves.

Technology

Of the many factors contributing to the constantly increasing known reserves, the greatest multiplier is technology; that is, the ever advancing efficiency in methods of exploration, drilling, refining, and transportation.

The crude methods of wildcat wells and random drilling that characterized the early industry have been gradually replaced by scientific exploration. Beginning in 1912, geologists started mapping outcrops to locate favorable places to drill. The early method of drilling was by the cable tool system, a slow and laborious process which reached depths of only three to four thousand feet. In 1901 rotary drilling was instituted. Metallurgical research by both the steel and petroleum industries has produced improved alloys that permit depth of drilling the limits of which are economic rather than physical. In 1949 a well drilling in Wyoming reached a depth in excess of 20,000 feet.

Subsurface exploration by geologists, instituted in 1920, has been expanded until today it is one of the most useful methods of exploration. Geophysical methods were first successfully employed in this country in 1924 in locating the first salt dome on the Gulf Coast. Refraction seismic exploration has been continuously refined and extended until today nearly 500 crews are using this process in the field.

Gravity meters, imported from Europe in 1923, are now in wide use in the search for new fields in the United States. The magnetometer, introduced in the 1920’s, is now being used to map rapidly the magnetic fields of large areas by trailing it from a plane flying at 1500 feet altitude. This device permits magnetic mapping of hitherto inaccessible areas such as jungles, oceans, and mountains. Once the magnetic strength of a large area is known, geophysicists prepare contour maps to show the formations of the rock far beneath the surface of the earth and select for further exploration the most geologically promising areas.

The efficacy of the described exploratory methods is demonstrated by a comparison of the figures for successful wildcat wells employing scientific exploration with those drilled without benefit of technical advice. Currently those figures are: successful nontechnical wildcat, one in twenty-five, successful technical, one in eight.

Great wells with tremendous gas or hydrostatic pressures have been prevented from “gushing” by the industry’s development of the “Christmas tree” valve connection. Engineering knowledge has practically eliminated the gusher in the progress towards conservation of energy in the common interest.

Conservation and good engineering practice dictate that withdrawals from natural reservoirs be restricted far below the natural rates possible. Retarded rates of flow are efficient. They make possible a greater ultimate recovery from a given reservoir. They make possible a lower unit cost of production

Refining

The techniques of refining have advanced apace with those of exploration and drilling. Continuous research within the industry and at university and government laboratories has constantly increased the yield of gasoline and other refined products from the crude, and has all but eliminated losses and waste. Prior to 1932 there was no workable process for separating light and heavy fuel oils. Today the petroleum refineries in the United States produce scores of products, from high octane gasoline and highly specialized lubricants to cathartics.

The percentage yield of gasoline from crude oil has been increased from 25.3% in 1918 to over 40% today. This last year the Atlantic Refining Company announced the successful completion of experiments leading to the development of a new catalytic reforming process which will further increase the yield. A press account indicates the possibilities of this development as follows:

“If Atlantic’s new catalytic reforming process were used by the entire American Oil Industry— and it has been offered industry-wide—the company estimates that an additional 3,400,000 gallons of quality gasoline would be available every day.

“One barrel of crude oil will produce enough gasoline, by present refining methods, to run today’s new cars for 288 miles.

“One barrel of crude oil will produce enough gasoline by Atlantic’s new catalytic reforming process to run the car of tomorrow for 366 miles.”

American Petroleum Interests in Foreign Countries

American oil companies today are engaged in production and refining in several overseas areas. Of the total foreign crude oil production, over forty per cent is American owned. Of the refining capacities of foreign countries over one-third is American operated. Almost one-half of the estimated proved crude oil reserves of foreign countries is American controlled.

Much of this oil is sold in the countries where it is produced, or in adjacent areas, or in other overseas markets. These American activities are in Venezuela, the West Indies, Mexico, Canada, Iraq, Saudi Arabia, the East Indies, and Europe. This supply of overseas markets from foreign fields helps maintain the domestic reserves. In 1947 a detailed investigation of the importance of foreign oil to American security was made by a member of the Yale Institute of International Studies, and it was concluded that the American interest in overseas petroleum activity is economic rather than strategic.

Table 7. American Oil Companies’ Control of Foreign Oil Production, Refining and Reserves, 1948

	Production (barrels per day)	Crude Runs to Stills (barrels per day)	Proved Crude Oil Reserves
Total foreign	3,820,000	3,458,000	49,695,350,000
Russia	600,000	569,000	7,590,000,000
Total foreign except Russia	3,220,000	2,889,000	42,105,350,000
American-owned foreign	1,530,000	1,077,000	21,086,400,000 43.8%
Per cent American of total foreign Per cent American of total foreign except	40%	31.7%
Russia	48%	37.3%	47.9%

Since then, however, United States commitments to collective security in the North Atlantic Treaty and our principal ally’s loss of her Iranian holdings by the Iranian government’s nationalization action have changed the situation to the extent that in another war American reserves would probably be called upon to provide most of the oil for the Allied forces.

Oil in Unexplored Land

In 1925 the Committee of Eleven estimated there were 1,105,454,459 acres within the United States where oil fields may reasonably be expected of which only 1,103,905 acres had been developed, thus leaving untested 1,100,000,000 acres. To put it another way around, there are about 1,700,000 square miles within which it is reasonable that new oil fields may still be discovered. The area in production in 1943 totalled about 8,000 square miles. It has been maintained that Texas alone, in which state in the last 20 years more than 50 per cent of all discoveries of new reserves have been made, has barely tapped its total supply.

“ . . . The area which has so far proven productive in Texas is less than 1% of the total area in Texas in which it is reasonable to expect oil fields to be found.”

Some of the areas known by geologists to contain thick sediments remain virtually unexplored. This includes thousands of square miles in the trans-Mississippi region of the Southeastern United States (Florida, Georgia, Alabama, and Mississippi); the trans-Pecos region of west Texas and New Mexico; the Anadarko Basin of western Oklahoma, and adjacent areas of Texas, Colorado, and Kansas; the plains region of the Dakotas, Nebraska, and parts of Montana and Wyoming; and the northern two- thirds of the San Joaquin valley in California.

In Alaska alone there are an estimated 200,000 square miles of promising territory which remain virtually undeveloped.

There is wide belief today among petroleum geologists that there exists in submarine fields off the coasts of the United States more oil than in the land areas. This thesis has been supported by one of the foremost petroleum geologists in the world.*

To risk laboring the point, it will be emphasized that none of this vast resource is included in the “known proved reserves.”

Conservation Practices

Some of the more important aspects of conservation in the drilling process were covered above under “Technology.”

Since the decision of the United States Supreme Court in the case of “Ohio Oil vs. Indiana” in 1900, it has been recognized that a state is fully authorized to pass and enforce conservation legislation. Such legislation was needed both for the prevention of waste and for the protection of correlative rights of operators and royalty owners.

The means available for the attainment of these ends included: proper location, spacing, drilling, operation, and abandonment of wells; regulation of gas-oil ratios, thus controlling the rates of flow and effecting uniform withdrawals of oil and gas throughout a reservoir; limiting of the production of the state and of the several fields to market demands; and allocation of the allowable production in a field among the wells and leases so as to enable each owner to recover an equitable share of the oil.

Over the past half-century the several oil producing states have created the agencies and enacted the legislation required for the attainment of these aims.

The successful operation of the conservation program, however, has been a cooperative process, requiring the combined efforts of operators and regulatory authorities.

Twenty of the major oil and gas producing states have joined the Interstate Oil Compact, which was created in 1935 to make more efficient the machinery of conservation. The Interstate Oil Compact Commission is the principal medium of interstate cooperation in the solution of mutual problems. Implementation of the recommendations of the Commission is left to the states.

Due to the concerted efforts of the Commission, state regulatory agencies, the United States Bureau of Mines, educational and research institutions, and the industry, there have been recovered millions of barrels of oil which twenty years ago would have been abandoned as unrecoverable. The result of the industry’s voluntary evolution and adoption of programs of unitization and proration, made possible by the cooperation of the oil producing states through the Interstate Oil Compact, has been the building of this nation’s proved reserves from an estimated 4.5 billion barrels in 1926 to over 24 billion barrels this year, despite the withdrawal of over 30 billion barrels during the period. Moreover, it has obviated the necessity of widespread centralized control by the Federal Government.

Synthetics and Substitutes Program

The industry has done much experimentation on the conversion of natural gas into gasoline. Although research into gas reserves is beyond the scope of this paper, it is germane to note some of the paramount facts of this growing energy source. Natural gas is important to the petroleum industry not principally as a potential source of gasoline and other hydrocarbon products, but as a replacement for oil as a fuel for industrial and household purposes. It has been estimated that the known recoverable reserves of natural gas in the United States is between 160 and 180 trillion cubic feet.* Six thousand cubic feet of natural gas contain hydrocarbon equivalent to one barrel of crude oil. Today in the United States there is only one plant making liquid products from natural gas. This plant, started in 1946 is currently, because of technical difficulties, only in partial production. However, it will be seen that, in an emergency, natural gas is a great potential source of gasoline and other liquid products.

The principal sources, however, of synthetic liquid hydrocarbon products through the adaptation of known processes, are coal, lignite, and shale. It is estimated that from shale in this country ninety-two billion barrels of liquid products could be extracted —that is, at the current rate of consumption, about 65 years’ supply. But coal and lignite alone are estimated to be able to supply one trillion, five hundred million barrels of liquid fuel.

The U. S. Bureau of Mines estimates that coal and lignite comprise 98.8% of the proved mineral fuel resources, whereas petroleum and natural gas constitute only 1.2%. Since all coal and lignite can be converted by suitable known processes to gaseous and liquid fuels, it is evident that, if and when needed, these enormous reserves could be used to supplement petroleum and natural gas. The amount of oil obtainable from coal and lignite has been estimated, at anticipated rates of consumption, to constitute a supply of not less than one thousand and probably two thousand years.

The ways in which petroleum may be supplemented include the conversion of natural gas by the gas synthesis process; distillation of oil shale, liquefication of coal or lignite by high pressure hydrogenations, and conversion of water gas from coal or lignite by the gas synthesis process and by alcohol from fermentation of vegetable matter. Any or all of these supplementary sources may be employed, if the petroleum supplies ever decline to a point where these higher cost synthetic products become commercially competitive with natural petroleum products.

The petroleum industry is now spending over ten million dollars annually on synthetic liquid fuel research.

In Summary

No one can gainsay that every gallon removed from the ground is a gallon less; nor can a limitless increase in estimated reserves be predicated on an extrapolation of the record of the past.

The literature of the industry is replete with predictions, similar in both content and phraseology, of nearing exhaustion of oil reserves. All these predictions have been proved by time to be erroneous.

The current oil policy of the U. S. has included for several years past the import of about 500,000 barrels a day, and this importation may be increased later. However, this policy has been protested by many producers on the grounds that it discourages domestic exploration and drilling and tends to keep the domestic price depressed.

The best statistical evidence available demonstrates that, within the continental boundaries of the United States, there are sufficient petroleum reserves to fill all our anticipated needs for several generations. The facts discredit the predictions of drought and vitiate the arguments for increased government control.

Advanced exploratory, drilling, pumping, and refining techniques give promise of continuing to keep reserves well in advance of requirements. The discovery of untouched fields, numbered in millions of square miles (including submarine fields on the continental shelves), will further increase our resources. The cooperative conservation practiced by the industry, together with the conservation laws of the petroleum producing states, the efforts of the Bureau of Mines, state educational and research institutions, technical engineers of the industry, and the coordination activities of the Interstate Oil Compact, have demonstrated their ability in controlling the production of petroleum products with a minimum of diseconomic practice. Activities by U. S. companies in drilling and refining in foreign countries, both in the Western Hemisphere and in the East, have proven judicious and flexible methods of augmenting domestic production.

Although the facts do not support overanxiety, we can not on the other hand be overly nonchalant about the situation. Several considerations justify the conservative aspects of our national oil policy reflected in the plan to continue large imports. These considerations include the increased costs of search, production, and transportation in terms of money, manpower, and critical materials, including steel. However, the entire picture is one to encourage and justify optimism.

American private industry, unhindered, has always discovered and provided the required oil, and it is reasonable to assume that it always will. Whenever there is indication of approaching depletion, it will provide the synthetic fuels or other power substitutes necessary.

There is no material at hand to suggest that another arrangement could do the job better. No nation bound by government restrictions or dominated by state control has made such progress. It is recognized universally that American oil development leads the world. The United States has found and has produced, by any method of comparison, more oil more conservatively than any other nation.