A Review of 1958 Domestic Petroleum Development

Abstract

AIME Annual Meeting, 15–19 February, San Francisco, California Introduction The year 1958 was one of many difficulties for the petroleum industry, as indeed most years are. In general, however, the industry approached its problems in a mature manner and by the end of the year had reached a relatively firm position once again. Let us review here some of the problems which faced the domestic industry during 1958. Recession and Heavy Stocks Hurt Industry The recession of 1958, of course, was a major factor in our domestic business. The downturn in industry in general created a smaller increase in domestic demand for petroleum products than had been expected, or indeed could have been handled. Thus, a new productive capacity which would have more than taken care of a normal demand increase of approximately four per cent was far in excess of the needs for the actual domestic demand increase of one and one-half per cent. Heavy stocks was another problem met by the domestic industry last year. During 1957 the Suez crisis created a non-repetitive demand for exports of crude and products to Europe. The solution of the Suez crisis was not immediately followed by sharp cutbacks in domestic production. The industry, therefore, entered 1958 with above-ground stocks very high at a time when the market was weakening. A cutback in production to work off these stocks, plus an additional cut to meet the weakening market already mentioned, was required and was done. Income suffered a compound blow and domestic oil company earnings for 1958 clearly indicate this fact. Imported oil and products continued to be a major problem for the domestic industry during 1958. Despite the decrease in domestic demand from normal increase rates, domestic producers had to share more of the market than ever before with foreign oil. As we are all aware, this problem has as yet not been solved, nor is it apparent that there will be any solution in the near future.