Pure actually loses money on much of the gasoline it sells. "When we charge our refineries with the $3-or-so-a-barrel crude we have to buy on the outside, we lose money," explains Harry Moir, Pure's vice president for marketing. "Additional evidence that this choice of retailing policy by the majors may have been wasteful is implied by the fact that returns in marketing-by such limited and extremely arbitrary accounting measures as are available seems to have run consistently lower than in other branches of the industry during the last 20 years." (61 Yale Law Rev 848 (1958). "The table shows that for a period of 7 years for which data are available the production and pipeline divisions of the oil industry produced on the average more than twice in the total annual net profits of the industry. The refining and marketing divisions' losses cut these profits in half. In other words, if the refining and marketing divisions could operate merely on a break-even basis the oil industry's profits would be more than doubled. These tables indicate that for the period shown the pipeline division, having only 7.1 percent of the industry's investment, produced 86 percent of the industry's total final net profits. Production division having 42.7 percent of the investment, produced an additional 120 percent of the final net profits * * * refining and marketing with 50.2 percent investment produced losses equal to over 106 percent of final net profits." (U.S. Tariff Commission Data, World Petroleum magazine, December 1937.) A prospectus of the Pure Oil Co. dated August 30, 1937, says: "Under conditions existing in recent years, marketing operations, considered as a separate and distinct activity without regard to earnings from collateral operations and based upon the acquisition of refined products by the marketing divisions and subsidiaries at no allowance from published wholesale market prices, show substantial losses with the result that the company's consolidated net earnings have been substantially less than they would have been had it been possible for the company to sell its crude oil production as such at posted prices or as refined products at full published wholesale market prices." VII. CONCENTRATION But the big years of a few companies-notably among the 5 internationals— masked the more modest performance of some of the 15 large, primarily domestic integrated companies included in the study. "*** the internationals, which accounted for 60 percent of the group's $38 billion in capital employed and 70 percent of its $3.6 billion in earnings. This underlines another fundamental of current business conditions: a strong crude position, especially in the United States, exerts the greatest leverage on profits for all companies, domestic or international." (Oil & Gas Journal, Apr. 13, 1964, p. 45.) "The independent, it was stated, suffers proportionately much greater harm from the decline in allowable production, with the consequent deferral of income beyond the period permitted by most financing available to small firms. And, with the sharp decrease in allowable in the major control States over the past few years, there has been an increasing pressure on the independent producer to sell out to the major company. This not only contributes toward concentration of existing production resources, but also poses a threat to adequate development of new production capacity, since the independent traditionally has been the industry mainstay in exploratory drilling." (Atty. Gen. Rep. on I.O.C., May 1963.) "In essence then, 1962 saw the rich in the oil industry becoming richer and the poor getting poored. Thus those who were well supplied with crude, such as Texaco and Standard of California, hit record sales and per-share earnings. Some domestic outfits, Shell and Cities Service among them, bucked the trend. but they were the one either self-sufficient in crude or at least becoming increasingly so. Any way you looked at it, crude oil was the key to profits." (Forbes, Jan. 1, 1963.) "Fabricators in other industries have some assurance that pressures on the prices of their products will be transmitted back to raw material levels, so that the independent enjoys some reasonable prospect of a remunerative margin. Crude oil markets are sheltered against pressures." (De Chazeau and Kahn.) For a description of the buy-out and sell-out trends, see, "Mergers Thin Bigtime Jobber Ranks-End Nowhere in Sight," NPN, July 1959, page 80; Business Week, June 6, 1959, "Oil Giants Protect Their Market Through Deals with Independents," page 137. For concentration trends at the production level see, "Big 55-013 0-66-vol. 1—62 Stakes in U.S. Mergers," Petroleum Press Service, February 1964. One-half of the "production oriented” companies listed on the New York Stock Exchange sold out between 1952 and 1962. (Oil & Gas Journal, Nov. 4, 1963, p. 88.) The decline in independent refiners need not be documented. "Adelman predicts $1 a barrel foreign prices." (Fortune, op. cit., February 1965, p. 222) Concentration. "In 1961, wildcatters drilled almost twice as much footage in the United States as a decade ago (45 million versus 28 million in 1951) and got, for their pains, a little more than half as much oil (7.9 barrels per foot drilled)." (Forbes, June 1, 1963, p. 32.) APPENDIX I (FROM NPN) WHO'S BUYING AND MERGING These larger companies Acquired or merged with these, or bought properties indicated: Aero Oil Co.. Ashland Oil & Refinery Co--- Atlantic Refinery Co---. Cletrac Corp_ Frontier Refinery Co.. Hess, Inc.- Humble Oil & Refinery Co.‒‒‒‒ Mobil Oil___ Murphy Corp---. Ohio Oil Co‒‒‒‒‒ Phillips Petroleum Co-‒‒‒. Plymouth Oil Refinery Co‒‒‒‒ Signal Oil & Gas Co---- Sinclair Refinery Co. Tenneco Corp. (Hartol Div.) 1 New name to be Hess Oil & Chemical. 1962 Hartzler Oil Service, Carlisle, Pa. Buckley & Scott, Watertown, Mass. Corypenn Oil Co., Tucumcari, N. Mex. Union Petroleum of Florida (29 stations). Ballard Oil Co., Hartford, Conn. Boulevard Fuel Co., Paterson, N.J. Meadville Corp. (49 percent). City Oil Co., Salinas, Calif. Elks Oil Co., Tuscaloosa, Ala. (13 stations). Florida Southern Oil Co., North Miami, Crites Oil & Gas Co., Fort Worth, Tex. Star Service & Petroleum Co., Centralia, Ill. (23 stations). Tri Oil, Inc., Atlanta, Ga. Eveland Oil Co. and Hurricane Oil Co., Century Oil Co., Long Beach, Calif. Simpson Oil Co., St. Louis, Mo. Mitchell Oil Sales Co., Montclair, N.J. Albemarie Paper Manufacturing Co-----. Ethyl Corp. American Petrofina__- Atlantic Refining Co----- British-American Oil Co‒‒‒‒‒‒‒‒ Cities Services Oil Co----- Continental Oil Co------ Col Tex Refining Co.... Famariss Oil & Refining Co.- William J. Gerwe--- Hudson Oil Co---- Huffman Oil Co., Burlington, N.C. Marathon Oil Co---. Shell Oil of Canada___ Socony Mobil____ South Penn Oil Co_____. Braun Bros., Great American Oil, Cosden Petroleum Co., Big Springs, 17 Stations from Tidewater Oil Co. in Royalite Oil Co., Calgary (majority Merchants Oil Co., Charlotte, N.C. Pendergraft & Williford, Inc., Jack- Turner Oil Co., Corpus Christi, Tex. (21 stations). Ohlenbusch Oil Co., Lubbock, Tex. 18 stations from Pauley Petroleum Co., Los Angeles, Calif. Corypenn Co. Petroleum Carrier Corp., Tampa, Fla. Clement Robitaille, Montreal. (8 sta- Car-Lan Oil Co., Candor, N.C. Gillespie Oil Co., Hattiesburg, Miss. Petroleum Heat & Power, Philadel- Fletcher Oil Co., Gary Ind. Madison Petroleum, New York, N.Y. Bryan-Cooper Oil Co., Raleigh, N.C. Casity & Whetstone, Clearwater, Fla. Jim White Oil Co., Ontario, Calif. (21 E. Robinson Inc., Hartsdale, N.Y. (majority interest). Wolf's Head Oil Refining Oil City, Pa. (majority interest). Tidewater, Pan American Petroleum Corp., and other companies have bought Honolulu Oil, but Department of Justice filed a complaint charging antitrust law violations and seeking divestiture of the properties acquired. These larger companies Standard Oil Co. of Ohio___. Tenneco Oil Co... Wilshire Oil Co. of Calif.. Witco Chemical Co____ American Oil.. American Petrofina__ Benedik Oil, North Brunswick, N.J. A. T. Williams Oil, Winston-Salem, N.C.. Taylor Oil, Winston-Salem, N.C. Bartkus Oil, Boulder, Colo‒‒‒‒ Boyle Fuel Spokane_. British Petroleum__. Champlin Oil & Refining_ Cities Service____ Eastern Gas & Oil, New Bern, N.C.. Floridan Oil Orlando, Fla_ Gulf Oil__ Humble Oil_ Husky Oil_ Kerr-McGee____ Marvin W. Johnson Oil, Longmont, Eddy Fuel, Spokane. Cities Service Oil Ltd. (Ontario and and Quebec refining and marketing properties). Gus Hudson Oil, Oklahoma City. Apex Fuel, Chicago, Ill. (50 percent interest). Fuel Oil Service Co., New Bern, N.C. Osceola Oil, Kissemmee, Fla. Blakely Oil, Phoenix, Ariz. Watson Hall Co., Seattle, Wash. Shell Canada (18 stations). Tan-Kar Oil (acquired management Montgomery, Ala., only). Metropolitan Petroleum Co., New York Port Terminal Corp., Albany, N.Y. Suburban Propane Gas Whipany, N.J--- Plateau Inc., Farmington, N. Mex. Техасо- Vickers Refining_. Premier Oil & Refining of Texas, Houston, Tex. (50 percent of refining and marketing properties). Troy Oil, Indianapolis, Ind. (office, bulk plant, fuel-oil accounts, and rolling stock). Foster Oil, Inglewood, Calif. Premier Oil & Refining of Texas Hous ton, Tex. (50 percent of refining and marketing properties). APPENDIX II The figures used in arriving at the following percentages and totals were taken from the records as published by the Motor Fuel Tax Division, Department of Revenue, State of Illinois. They are approximate as to totals and percentages but conclusively show a trend. DEAR MR. WEDINCAMP: Pursuant to your request made through your attorney, Mr. Howard, of Jesup, Ga., we are extending your sales contract and related documents to May 18, 1965. It is understood that you will surrender possession of our marketing equipment upon the termination of this extension. Please evidence your agreement to this extension as outlined by signing and returning one copy of this letter. Very truly yours, Above understood and accepted. GULF OIL CORP., R. L. JOHNSON, Sales Manager. FRED H. WEDINCAMP. |