The first postwar winter was survived with considerable impairment of the company's financial structure. Petrol Corp. was finally able to obtain supplies from 17 companies for last heating season. See schedule attached. I would like to point out, Mr. Chairman, the 17 companies that I referred to before are listed on the first attachment, the total gallons which we received from them from July 1, 1946, to June 30, 1947, by products, and on the second attachment I have made a digest of our supply and sales data for the present heating season. In the first line we have shown written contracts; in the second line, spot commitments. We refer to spot commitments as one where the buyer comes to our terminals and pays cash. He is the type that has one truck or maybe two. He is his own employer and he supplies kerosene and gasoline and fuel oil to corner stores, and there are quite a few of those buyers. During the war, the Petroleum Administration, because of our centralized facilities for handling a large number of those small buyers, recognized us and we handled most of them in the areas in which we operated. Our total in gallons by products is on the third line. I have made a comparison to our 1941 business. For the committee's information, Price Waterhouse & Co. made an audit of all company sales during 1941, and that audit of all of the operators in district 1, which is from Maine to Florida, was our measure, more or less, of what each company was entitled to take out of the pool after the Government requirements were determined and I show the increase in our business forecast this year compared to 1941. While my company has increased approximately 2.8 percent annually and almost 20 percent in the 7 years or six heating seasons, the industry is up about 50 percent. Now, when we started this heating season, against those sales commitments, we only had one assured supplier and that is our partner, the Cities Service Oil Co., who came in with us last Spring. Mr. PRIEST. Mr. Chairman, since Mr. Callis has interrupted his statement may I ask one question? Mr. BENNETT of Michigan. Mr. Priest. Mr. PRIEST. Mr. Gallis, you said that most of your deliveries were received from the east coast refineries. By what method of transportation are your deliveries received? Mr. GALLIS. That was during the war, sir, and we used barges and small tankers; intercoastal movements; some pipe line, but in the main we lifted the products from Baltimore, Philadelphia and New York refineries, direct into our barges. Mr. PRIEST. Thank you, sir. That is all, Mr. Chairman. Mr. CALLIS. Sinclair and Gulf have given us approximately onehalf and one-third respectively of those quantities furnished us during the heating season of 1946-47. Cities Service, which acquired a 51 percent stock interest in Petrol Corp. in May 1947, is increasing its shipments to the company approximately 450 percent. The other suppliers including both major oil companies and independent Gulf coast refiners, have thus far failed to make supplies of refined products available to Petrol Corp. either entirely or on any basis comparable to their shipments last year. As an indication of the lure of mounting prices in an increasingly short petroleum supply market, I wish to relate our experience with one Texas refinery. Early in 1946, Petrol Corp. negotiated a 3-year supply contract with Eastern States Petroleum Co. of Houston, Tex., for 588,000 gallons of refined products daily. With the first indications of an imminent short petroleum market later that year, the refined products tendered by Eastern States Petroleum Co. declined to such inferior quality as to be unsalable in Petrol Corp.'s marketing areas. Consequently, Petrol Corp., for the protection of its customers, was obliged to discontinue liftings of such products under the Eastern States contract and to look elsewhere for substitute sources of supply. Information indicates that the products committed to Petrol Corp. by Eastern States under this contract were immediately diverted to more profitable sales and are now going to major oil companies and to export market at prices substantially in excess of prices stipulated in this contract, which would have more than another year to run. It is my understanding that one of the principal beneficiaries of this deal is a major oil company that is not living up to previous deliveries to our company. For years Petrol Corp. has been a prime supplier of Federal, State, and municipal governments and their agencies and activities. It has taken care of the fuel-oil needs of many hospitals, schools, and other institutions. The failure of some of our former sources to continue those supplies to us have jeopardized public health and welfare. Vital public transportation services are supplied with motor fuel by Petrol Corp., including the Capital Transit Co. of Washington, D. C., the Philadelphia Suburban Transportation Co. and the Lehigh Valley Transit Co. Furthermore, Petrol Corp. has dependent upon it numerous utilities, telephone systems and other industries as well as 60,000 individual homes, in the area surrounding Petrol's terminals at Philadelphia, Baltimore, and Washington. Petrol Corp. supplies fuel oil as well as gasoline and kerosene to the three main farm cooperatives operating in the six-State area from New York to Virginia and serving over 600,000 farm families. In the late summer of 1947 when it became apparent that the company's historical suppliers no longer chose to supply it with products, Petrol Terminal Corp., of Baltimore, Md., of which I am also president and majority stockholder, at my personal instigation, launched a comprehensive construction program to cover Petrol Corp.'s supply deficiencies by acquiring a war-built refinery at Texas City, Tex., and entered into negotiations for the purchase of an additional war-built facility at Beaumont, Tex. In addition to the acquisition of these refinery facilities, Petrol Terminal committed itself for crude petroleum from various domestic and foreign sources. With assured crude commitments, ample refinery facilities and adequate transportation, Petrol Terminal Corp., in conjunction with Cities Service, expects ultimately to be in a position to provide for the entire supply needs of Petrol Corp.'s thousands of customers. However, the crude and refinery programs will not be in full swing with maximum operation until the late spring or early summer of 1948, and it is during this temporary period that the company will be unable to take up the entire supply program where the former suppliers have left off. Since my appearance before the Wherry and Tobey Senate committees investigating the petroleum situation, we have worked out many loans and exchanges between members of the petroleum industry, aggregating several million barrels of products in the Philadelphia, Baltimore, and Washington areas. Such companies as Standard, Tide Water, Gulf, Shell, Sinclair, American, Texaco, Atlantic, Sun and others have made it possible for us to fulfill our obligations to the trade, thus averting a complete break-down of the distribution system in these three key areas. All of these products were borrowed or exchanged upon Petrol's promise and Petrol Terminal's promise to repay the products in kind during December, January, and February. Petrol Terminal Corp. started its refinery during the third week of December and has produced crude oil and finished products to the extent of 2,371,000 barrels. Twenty cargoes have been delivered to the east coast as a result of these refinery facilities being made available to the east coast consumer. Those quantities in the contracts, Mr. Chairman, are through the month of February. They are either on water or they are committed, or we have borrowed against them. Petrol's forward supply position for the balance of the heating season will continue to be tight but now that the industry as a whole can function with Justice Department approval with the same cooperative teamwork which was so outstandingly successful in meeting the problems of the war years, Petrol's problem of tight supply will doubtless be worked out with a minimum of dislocations to the public interest. The management of Petrol has left no stone unturned to take up the burden of supplying its east-coast customers where the former suppliers left off. We have done the best we could under the circumstances. I will be glad to answer any questions the committee may have upon the subject. (The schedules above referred to are as follows:) Petrol Corp. analysis of purchases, July 1, 1946, to June 30, 1947 Inventory, July 1, 1946. Eastern States Petroleum Co., Inc. Pan American Refining Co.. Hartol Petroleum Corp.. Tidewater Associated Oil Co. Coastal Refineries, Inc. Sid Richardson Refining Co. Pontiac Refining Corp. Total 356, 626, 585 41, 675, 033 31, 059, 746 25, 035, 744 148, 717, 800 21,938, 719 88, 199, 543 Petrol Corp. sales and supply data SALES ESTIMATE, 12 MONTHS, JULY 1, 1947, TO JUNE 30, 1948 Written contracts.. Total.. 1941 directive 59 sales. Increase Percent of increase 7-year period (2.8 percent annually). 395, 000, 000 32, 900, 000 61, 100, 000 35, 500, 000 159, 000, 000 23, 000, 000 83, 500,000 330, 000, 000 35, 000, 000 68, 500, 000 19, 200, 000 987, 800, 000 17, 500, 000 102, 000, 000 65,000,000 12, 100, 000 17, 400, 000 16, 300, 000 71,200,000 5, 500, 000 1 18,500,000 Sales estimate. To be supplied by Cities Required from other sources.. SOURCE OF SUPPLY 395, 000, 000 32, 900, 000 61, 100, 000 35, 500, 000 159, 000, 000 23, 000, 000 83, 500,000 147, 000, 000 10, 000, 000 17, 000, 000 18,000,000 80,000,000 4,000,000 18, 000, 000 248,000,000 22, 900, 000 44, 100,000 17, 500, 000| 79, 000, 000 19, 000, 000 65, 500,000 1 Red figures. Mr. BENNETT of Michigan. Any questions, gentlemen? Mr. BUSBEY. Yes; I would like to ask some questions, Mr. Chair man. Mr. BENNETT of Michigan. Mr. Busbey. Mr. BUSBEY. Mr. Callis, you say in your statement that the Petrol Corp. was incorporated in 1934. Were you one of the original incorporators and an officer of the corporation? Mr. CALLIS. Yes, sir. Mr. BUSBEY. Do the present officers remain substantially the same as the original incorporators? Mr. CALLIS. They remained the same until the Cities Service came in with us, and they now have about equal officer representation; and on our board they have four directors, and we have three. Mr. BUSBEY. Do you think the cut in your supplies from various other companies was due in any part to the Cities Service getting control of the Petrol Corp.? Mr. CALLIS. I think it was entirely due to that, sir. Mr. BUSBEY. Of course, you appreciate you are not the only distributing organization in this predictment? Mr. CALLIS. No, sir. Mr. BUSBEY. I might say that from Chicago I have had many complaints from small distributors to the effect that they cannot get their supplies from some of the major oil companies. It would appear that the major oil companies are attempting to take over this retail trade. Did that have any effect in your picture? Mr. CALLIS. I would think the contrary, sir. Mr. BUSBEY. You do not think that it had any effect, then? Mr. CALLIS. I believe the major oil segment of the industry prefers to have marketers like those jobbers and distributors that you refer to in Chicago and others similarly situated, on the east coast, to do the actual selling and delivering and distributing to the trade. I think the record of the industry would show that about 85 percent of the heating oil and kerosene consumed by homes is actually delivered by the jobber in the distributor segment; and even if the major factors in the refining industry wanted to absorb those small fellows, they would have to expand their operating personnel in direct proportion. It is almost an analogous situation to the service stationsthe several hundred thousand service stations in the United States that are manned and operated by private businessmen. They could not possibly be absorbed by the major refining segments. The preponderance of help is in the distribution and marketing segment, and I just cannot conceive that such a situation is in the wood at all. I do not think it would be practical, and I do not believe the public would get the kind of service from big corporations that they get from coal men and fuel distributors and small businessmen whose bread and butter is in the service that they render. Mr. BUSBEY. Do you have a chart showing the sales per year of the Petrol Corp. since its incorporation? Mr. CALLIS. No, sir. Mr. BUSBEY. You do have such records? Mr. CALLIS. I would be glad to produce it. I have shown on the attached summary-I do not know, Congressman, whether you were here when I mentioned this or not. Mr. BUSBEY. Yes. Mr. CALLIS. But, on the last sheet of this, I have given the condition of my company since 1941, which was the last normal year in the industry. We show an increase of about 20 percent over 1941, when Price Waterhouse & Co. audited the records of all of the companies. Mr. BUSBEY. You could furnish such information for the record? Mr. CALLIS. Yes; I will be very happy to. Mr. BUSBEY. Mr. Chairman, I suggest that Mr. Callis be permitted to furnish this information and that it be incorporated and made a part of the record. Mr. BENNETT of Michigan. Without objection, it is so ordered. (The information requested is as follows:) |