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that period, although for several years lower than in 1899-1900. Moreover, during the years 1899-1900 there was an increase amounting perhaps at times to as much ascent a gallon in the cost of the packages in which the refined oil is carried, and the price of acids was also increased. Some of these prices have since then lowered. Again, as is well known, the cost of labor for several years in the past has been higher. We should not forget, also, that an increased price of crude oil would in itself justify some increase in the margin. As was explained in connection with sugar refining, any waste of raw material from refining is more expensive as the price of that material increases, and in addition to this the amount of circulating capital invested in the raw material increases with the price of that material, so that the added loss of interest must likewise be taken into consideration. Taking all these things into account, there can be little doubt that part of this decrease in the margin during the years 1905-1910 may properly be ascribed to an increased cost of refining, thus lessening somewhat the profits.

As an offset to this of course should be noted, what has been mentioned before, an increase in the value of the by-products, which would permit a lowering of the price of oil without loss, although it is doubtless for the interests of the company, and naturally, that the two should be divorced as far as possible.

The independent oil producers have said much about the arbitrary acts of the Standard Oil Company in fixing the prices of crude oil. The charge of arbitrary action by the Standard Oil Company was conceded by its witnesses before the Industrial Commission to be

true in special cases. That organization in special localities at times raised the prices of crude oil, until it ruined a rival pipe line for the transportation of the crude oil which was also a buyer of that oil. Then, on the absorption of this line the price was again lowered, to the great disadvantage of the oil well owners. Again, at times when the Standard was almost the sole buyer of crude oil, it kept prices so low that well owners were practically compelled to sell out to it before the price was raised. Most of these instances, however, had to do with special localities, and produced no great effect on the entire market, though they were doubtless enough to add decidedly to the profits of the Standard Oil Company.

The greater general changes in the price of crude oil, which affected also the prices of refined oil, have been brought about by other causes. The discovery of the very productive fourth sand oil wells in Butler County, Pennsylvania, only about 80 feet below the third sand levels, led to a great increase in production and to the consequent rapid fall in price noted on the chart in 1873 and 1874. It was claimed by Mr. Lee that the fall of the two preceding years was brought about by the general demoralization in the oil business caused by the relations of the railroads with the South Improvement Company, one of the predecessors of the Standard Oil Company and its successors. Moreover, the year 1873, it will be recalled, was a panic year. The checking of the flow of oil during the next three years raised the price in 1875 and 1876, as is noted on the chart, though the refined increased much more than the crude. Then the discovery of the famous Bradford oil fields in

1876 led to the great decline of 1877 and 1878. The depression noticed in 1890-1892 in the price of crude oil was caused by the discovery of the MacDonald field in Allegheny County, Pennsylvania, with some of the largest wells ever known in the country. The sudden rise in 1895 seems to have been due to the discovery of the fact that the amount of oil on hand and the production were declining very rapidly, as compared with the demand and to the desire to get stocks ahead. It is probable that some of the refineries had sold ahead beyond their capacity to supply from any stock which they had on hand. The advance in crude oil was largely thought to be arbitrary, and intended perhaps to squeeze these independent refineries. Whatever the exact cause, there is no doubt that there was an urgent demand on a short supply, and that the market was largely speculative for a time.

The rise in 1898 and 1899 is doubtless due to another check in the output. It is probable that the price would have continued high from that time on, had it not been for the still further new discoveries of the oil fields of Kansas, Texas, and California. In 1904, for the first time, more petroleum was produced in the United States west than east of the Mississippi River.

It is interesting to note the changes in the price of oil after the decision of the United States Supreme Court dissolving the Standard Oil Company, as explained in some detail in Appendix D. The decree of the court ordered that the transfers of the stock of the central company be made to the various independent companies into which it was to be divided. Such a process took some time naturally. The order was of September

1, 1911, when the books were closed. The distribution was made December 1, 1911.

From the year 1908 on until 1911, as will be noted by following the course of line B, there had been a decline in the price of crude oil, due mainly to the discoveries of the oil fields west of the Mississippi River. The price of refined oil was, however, not only maintained but increased so that the margin shows a decided rise in the latter part of 1909, which was maintained and somewhat increased in 1910, 1911, and 1912. During the year 1912 and the early part of 1913, the sudden rise in the price of crude oil, far more than enough to outweigh the slight increase in the price of refined, reduced the margin very materially from 4.33 to 2.80. This oil margin was maintained for more than a year until the excessive output of crude oil in 1914 caused a sudden drop in price, enabling the company to raise the margin to that obtained before the decline. It is probable that the lessened demand from Europe on account of the outbreak of the war also had a material effect on the fall in price of crude petroleum, which, although it enabled the company to increase the profit per gallon, probably lessened the total profit. As a result of the overload put on the transporting and refining branches of the petroleum industry by the excessive output of crude oil in 1914, the year 1915 may be characterized as a period of readjustment in which activity in production was purposely retarded. The Cushing Pool, in eastern Oklahoma, which had completely dominated the industry since June, 1914, attained its maximum production, estimated at 300,000 barrels a day, in April, 1915, and entered a stage of

rather abrupt decline, which, with the passing of millions of barrels of storage oil in that area into the control of a few strong companies, resulted in an increased demand for oil produced in other parts of the country. This demand was accompanied by advancing prices, which still remain high.

The heavy red line D shows the purchasing power of petroleum as contrasted with commodities in general as indicated by the index number. The line marked $1 on the scale is taken as the base from which this line representing the purchasing power is calculated. This line representing 100 gives the average purchasing power of petroleum for the five years 1895 to 1900. The course of the line from that date (1900) to 1914 shows a decided decrease in the purchasing power of the gallon or barrel of oil since that date. The line representing the purchasing power is drawn on a larger percentage scale than that representing the mere prices of oil, so that the fluctuations seem much more marked although the trend is accurate. The very decided decrease in purchasing power in the years 1900 and 1901 is caused primarily by a decrease in the price of oil, although in 1901 there was also a slight increase in prices of general commodities which would in itself, of course, lessen the purchasing power of oil. The sudden rise during 1902 is due to the increase in the price of oil in the latter part of that year. In the years following, from 1903 to 1910 inclusive, there was a decided decrease. This is caused primarily by the steadily increased price of general commodities which was offset through the year 1907 by the decided drop in commodity prices, following the panic, not offset by a corresponding drop in oil. The

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