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"So when these people talk about the raise in the price of domestic crude oil Oklahoma independent producers have received, they do not know all the facts concerning what Oklahoma independent producers actually get, or what it costs them to get it.”

Some of the so-called independents are very large in comparison to Mr. Delaney. These companies could not establish a crude-oil price increase.

The independents benefited from the price increase instituted by Humble on January 3. When Humble increased the price of Oklahoma oil by 35 cents many companies followed suit. However, Standard of Indiana increased the price by only 25 cents and almost all companies have reduced their prices to the level established by them “because they are a very large purchasing and marketing concern in that area. Inasmuch as the price of Oklahoma crude had been reduced in 1956, the actual increase is even less than the 25 cents.

Discussed action taken by Gulf Oil Corp. against the Oklahoma Corporation Commission.

Cited figures showing that in 1955 “the major companies of Oklahoma were responsible for 24 percent of the newly discovered reserves and independent producers were responsible for 76 percent."

Costs of finding oil are much greater in the United States than in Venezuela or the Middle East. “It is utterly impossible for a nonintegrated producing company or an individual to meet the costs of American operations and successfully compete with international concerns under domestic market demand regulation."

The financial resources available to the large independents and the majors are not available to the regular independent companies. "If the independent oil producer has a place in the national economy, it is absolutely necessary that steps be immediately taken to provide a climate in which he can survive.'

There are two prices for oil in the industry. “The producer who has a pipeline connection to his lease receives the posted market price for his oil; whereas, his less fortunate counterpart who has not received a pipeline connection * * * receives the posted price less from 20 cents to 50 cents per barrel in trucking charges which he must absorb."

Prices paid for Venezuelan crudes have advanced more than those paid for Oklahoma crudes.

“One of the unsolved questions in my mind which has arisen since the closure of the Suez Canal is the reason for the tremendous increase iu imported petroleum products which reached a maximum during the first 2 weeks of January 1957. * * *" Reserves of oil and products in storage in this country have risen.

Tanker costs have more than doubled in the last year.

Mr. Delaney sees no "logical reason why oil should first be transported from the Middle East to eastern seaboard points in the United States and then move from the United States to Britain,"

Believes a crude-oil pipeline to the east coast "is one of the crying needs that the Nation has, both from the standpoint of normal economic conditions and to meet the emergency conditions of any kind.” Also believes it necessary to have crude-oil lines to the west coast.

However, Texas oil could not be economically pipelined to the west coast unless there were a refinery there that would accept it.

Is not attacking the majors just because of their size. He said: "I recognize the fact that we have got to, at all times, import reasonable amounts of foreign crude and to encourage and develop foreign reserves to supplement our own. But I have taken this position, that the larger a business concern is, the greater its public responsibility becomes and the higher standard of ethics and conduct it must have if it performs the function that its size places the duty upon it to perform."

May have been justification for increasing price of Venezuelan crude, but cannot see any justification for great increase in tanker rates.

The Oil and Gas Journal of January 21, 1957, has the following: "Value of foreign holdings to major oil companies is pointed up in recent figures on the source of the companies' earnings. Several firms bring in more money from abroad than they earn in the United States."

Is not optimistic about "resumption of normal world commerce in
Middle Eastern oil."


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""* * * Since we have at present no effective means of controlling imports of oil and since no regulation, either State or Federal, is being applied to the pricing of crude oil or marketing its products, a condition is brought about whereby those who control imports and markets, control the industry and may price their products as they please.”

In his opinion, "a short paragraph amending the Sherman Act to provide that any unified, concerted, or simultaneous act endangering the national security or imposing unreasonable restraint on trade or an unreasonable burden on interstate commerce, would have the effect to keep imports in line with national requirements as a supplement in domestic production and to prevent undue pressure in domestic market-demand determination.”

Suggestions for legislation inserted at this point in the record.

"If self-executing legislation is not the answer, then I feel that a board or agency having the sole power and the duty to fix the market demand for and to determine the volume of imported oil necessary to supplement the domestic supply, should be established. * * *”

Letter from the president of the American Association of Oilwell Drilling Contractors to Representative John Jarman relative to drilling costs inserted at this point in the record.

Thinks separation of international oil companies from control over pipelines and tankers would promote competition.

Senator O'Mahoney said Mr. Delaney's presentation had led him to the conclusion “that the 15 giant corporations which make up the original members of the MEEC, having a selfish interest in the transportation of oil and the delivery of oil, have a conflict of interest when they undertake to manage for the Government the oil-lift program, and that the Government itself should be in complete charge, relying upon their cooperation.” This is especially true since they are granted some immunity from antitrust laws.

Statement of James V. Cresente, executive secretary, the Cleveland Inde-

pendent Gasoline Dealers Association, Inc., Cleveland, Ohio; accom

panied by Joseph A. Thiel, attorney Statement of introduction. Is appearing to "protest this last increase in price that was forced on the public, on January 10."

The members of his association are all retailers, no wholesalers. This price increase meant no increased profits for the retailers. Instead, *From January 1940 to October 1956, the dealer suffered a gradual loss of 2.94 percent of his gross profit on his regular gasoline. During the same period, his loss of profit margin for premium amounted to 4.18 percent."

In the last 4 years “the oil companies received a 3-cent increase on the price of gasoline, and the dealers in our area have not received onetenth of a cent, the oil companies have taken it all.”

This pertains to other dealers in the Cleveland area, also. Twentyfive to thirty percent of the dealers are going out of business because they are not making any money.

In Ohio "the retail price and the wholesale price is set by Standard Oil of Ohio. That is the basis of our complaint. We do not set the price.” This retail price is set at the company-operated stations.

The tank-wagon price is set when Sohio sells the gasoline to the independent dealers.

Mr. Cresente agreed that Sohio is operating its stations at an uneconomically low price so as to drive independent dealers out of business.

Mr. Cresente “would like to see Standard Oil of Ohio divorced from the company outlets-either get into the picture owning all the stations, or get out of the company-operated outlets-because they are in direct competition with their own dealers. They have forced these dealers to go along with the Standard Oil price, not only on gasoline but many times on TBA” (tires, batteries and accessories).

Standard of Ohio is a partially integrated company.







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The independent dealer cannot continue to exist under present conditions. He predicted “that within the next 5 years at least 20 to 25 percent of our dealers will go out of business because of labor alone. We must have margins to have more money to buy better labor."

About 10 percent of Sohio's retail outlets are company owned, and "are spaced very strategically in every location to set and control the price in those areas."

In his area "the jobber is given an extra 3 cents per gallon. And some of these jobbers do operate their own stations." This gives them an extra reduction in cost—an extra margin. In Cleveland the jobbers who own service stations do not operate them themselves, but lease them to other dealers. Only if they cannot get a dealer to operate the stations do they operate them.

He assumes that Sohio sells to its own stations at the same price it sells to him.

"It should be noted that the 1-cent increase per gallon by the Standard Oil Company of Ohio was immediately followed by all other suppliers in the Cleveland marketing area. This increase, of course, was on the tank-wagon price to dealers, which, of course, then reflected itself in the retail price, which again cut the gross profit percentage of the dealer."

Felt this price increase was unnecessary.

Although public sentiment is against the price increase, it has not resulted in less gasoline being sold because the business is not competitive, and the automobile owners must have the gasoline, no matter what the price.

"Labor, today, is the largest single factor that decides whether the dealer will stay in business * * *! Really good attendants are very

Tables showing comparison of compensation between service-station attendants and factory workers inserted at this point in the record.

The company-owned service station attendants are much better compensated than the employees of independent stations can be.

Does not expect legislation that would limit the pay of labor but feels Sobio should not run filling stations in competition with its own dealers. Questions whether it is legal.

Cannot get better workers un vil the station owner can obtain better margins of profit.

The operators are frequently overworked. "Someone has to operate the station. But certainly short leases and narrow margins are not the inducements to entice better operators.”

“When we realize that gasoline supplies were in overabundance, it can be seen that the law of supply and demand would normally dictate a reduction in the cost of gasoline. I thus believe that it is self-evident that the recent increase had no economic justification, but was put into effect to enlarge the profits of the oil companies at the expense of the public.”

Newspaper releases showing that "Standard Oil Company of Ohio is the market leader" inserted at this point in the record.

“The recent increase in the price of gasoline alone will cost Ohio consumers some $27 million per year * * *."

Map showing "concentration of the company-operated stations” inserted at this point in the record.

"I could discuss the overbuilding of service stations, the short-term leases, the pressure tactics, and other matters which deeply affect the livelihood of the independent dealer; however, they are merely more evidence of the dictatorial position of the oil companies.

Thinks prices should be rolled back to level of January 2, the day before the recent price increase, and that Sohio should be divorced from company-operated stations.

Is not condemning the whole oil industry, but “power in industry, as well as in Government, carries important responsibilities. If these responsibilities are abused then the power must revert to the people. This is our democratic form of government and the people are the ultimate judge in this country.”








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Statement of Lester Clark, Breckenridge, Tex.; accompanied by Bruce Street,

Graham, Tex.
Statement of introduction.

Is speaking for himself and four Texas associations representing independent operators.

“We commend this investigation and tender to you our complete cooperation. For a monopoly to exist anywhere within the oil industry, it must have control where the oil comes out of the ground-and that is where the independent stands. We are, as a result, highly sensitive to the problem because if a monopoly gets control, we know we will be the first to go." He believes that a situation favoring the creation of a monopoly exists."

Is concerned not only with the independents' well-being but about the consumer and the Nation's security. They have been saying for a long time “that reliance on foreign oil was an unwise and unsafe course.”

Has been no shortage of oil or oil products here, and during the period since the Suez closing imports have been adding to these stocks.

If there has been failure during the time of crisis the failure has not been on the part of the independents but “rests upon those companies which had—and have control of the stocks and production made available and which have both the resources and the ability to respond to Europe's needs."

Pointed out that there are 7 companies that “control and own 70 percent of the free world's known reserves of oil and 50 percent of the world's oil production.' Named those companies.

Article entitled “Ten Oil Giants Own Majority of Reserves" inserted at this point in the record.

Emphasized the fact that the majority of the holdings of these companies are in foreign lands; and that “these companies listed have a significant relationship to my operation and the operations of all other domestic producers.

3." Has no quarrel with any “domestic companies, large or small, except insofar as they may be affiliated with or controlled by the large importers in the furtherance of their conduct.” Although some of the major domestic companies have denied him and other independents pipeline connections, he is sure this will be resolved by the railroad commission. Believes the nonimporting majors are being hurt by imports the same as the independents, but the independents are in “a life or death struggle.”

The majors are their "competitors in the effort to secure ownership of the oil in the ground,” but “they are also our customers." Outlined "some details about the independents' position in this relationship.”

Believes these points “make clear the very weak position in which the independent oil producer operates in the field, against the advantages held by the major importers.” Independents have been able to survive because in the past all producers "have been equals, from a competitive standpoint, because of our State conservation laws.” This proration of production "is an essential safeguard against monopoly.” It "worked successfully, until these importing companies—who are our equals under the law in Texas-acquired their vast new reserves of foreign oil, which they can produce without regulation and bring into the United States without control.” By circumvention, the importer can control the price the independent receives as well as his production.

In his opinion, “the failure of these major oil importers to deliver oil needed in Europe, and their continued importing into this country, has furthered their control over the domestic oil industry and, in particular, over the independent.” Referred to facts supporting this statement.

“When it was in the interest of the majors to stimulate development of our domestic oil reserves, the crude prices paid to independents were generally kept in line with the realistic capital needs of the independent * * *. 'Today-even with the recent crude increase--crude prices which I receive are not adequate to pay replacement costs."

We now have two oil industries—the domestic oil industry is operating under effective State laws while the American members of the international oil industry are operating beyond control of effective regulation, on any level.” Independents do not object to reasonable amount of imported crude-only unlimited imports.

În 1956 his expenditures were 62 cents more per barrel than the receipts.




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The independents have always developed most of the oil reserves, but because of lack of capital “America was not able in 1955 and 1956 to maintain the reserves necessary to keep up with increased demand." The importers' control of the price of crude “is the most effective and most telling control that could be applied to limit competition.”

Is concerned about the recent price increase because, “The importers allowed, over a period of years, the independent's position to deteriorate. Then, by the timing of their increase, which by their own statements was long overdue, they created a public outcry against the independent, which permits them to argue against future increases."

Materials demonstrating this “outcry” inserted at this point in the record.

Pointed out that "in posting this increase, the importers followed a pattern of great significance."

Believes the variance in the recent price increases was due to the differences in ownership of the fields, with those fields owned by the majors getting most of the price increase--not due to the quality of the oil as has been stated. There are in some instances, however, differences in crudes which justify differences in price.

Information submitted to substantiate this statement inserted in the record at this point.

The price increase in 1953 was more uniform than the recent one.

Documents containing production and price figures inserted at this point in the record.

Listed 3 ways in which the companies could have met the oil needs of Europe.

Prior to the price increase he was producing "all that they would take." In some areas the purchasing companies had imposed a proration by taking only a certain amount of the oil produced. This was less than the Railroad Commission allowed.

When the price of crude oil was cut, “Cities Service led off with 7 cents a barrel and they were imposing pipeline proration, not taking all of the allowable oil; they were importing crude oil and increasing, I understand, their imports.” He has no pipeline--no transportation facilities to market. The purchasers use their own facilities.

Three companies with pipelines to his storage facilities are members of MEEC. They are taking the full allowables.

Document showing fields which the majors won't buy from inserted at this point in the record.

Th lack of transportation facilities "has been called to the attention of the public so much that the railroad commission has ordered a hearing on April 1 to show cause why these pipeline companies should not extend their lines to gather this oil.”

Independents such as he could not afford to build a pipeline to the west coast.

Majors had asked for increase in allowables in areas where they were predominant producers.

Days of production allowed per month in west Texas have been cut down each year since 1948 when it was allowed every day.

The reason is that the gathering lines that serviced the area and brought the oil to the gulf coast have been changed to products lines. Thinks this is violstion of the law.

Document pertaining to this change in the gathering lines inserted at this point in the record.

Would not have been necessary to increase allowables to increase movement of oil. Would only have required better transportation facilities. Mr. Street said that one reason for the inadequacy of facilities was that the gathering and transportation facilities had been allowed to deteriorate as a result of excessive imports.

Mr. Clark said the price increase had not brought about increased production. Takes time as well as money to find new reserves. Production increase was due to allowables increase.

At the same time that Texas production increased and oil was being taken out of stocks on hand refinery runs have also increased.










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