OIL: Not so Villainous

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As the U.S. Senate stepped up its oil hearings last week, almost everyone had the industry pegged as the villain in the case. Oilmen had not only hiked prices as much as 12%; they had also, said the reports, failed to supply enough oil to ease Europe's Suez shortage. But the hearings were hardly under way before the character of the villain underwent an amazing transformation: he began to look almost like a hero. Wyoming's Democratic Joe O'Mahoney. Senate subcommittee chairman, concluded that the price boost was justified for small independents, because oil costs have risen sharply without price relief for nearly four years. Said O'Mahoney: "They have it tougher and need the increase."

What about the shortfall in oil shipments to Europe? To get an answer to the question, the House Commerce Committee heard General Ernest O. Thompson of the Texas Railroad Commission, which controls the production of Texas oil. On his flanks ranged virtually every important Texan in Washington, all well aware of how bad Texas has looked recently in the eyes of the world. On one side walked House Speaker Sam Rayburn, on the other Senate Majority Leader Lyndon Johnson. Said Speaker Sam, lest anyone mistake Thompson's qualifications: "The general, in my humble opinion, knows more about oil than any man in the world."

"A Jam-Up Job." Thompson's testimony was short and typically blunt. The oil crisis, said he, is a myth. Instead of sabotaging the oil lift by failing to boost production appreciably, Texas had done a "jam-up job," had helped make it "amazingly successful, all reports to the contrary notwithstanding." Texas was sorry that the world was angry at its actions. "We are accustomed to that," said Thompson. The facts were that the U.S. Government had not once officially demanded an increase in the allowable production set for the state's oilmen. The requests had come from Humble Refining Co., a Jersey Standard subsidiary, and from Magnolia Oil Co., a Socony subsidiary, both of them major Texas refiners with an economic stake in higher tidewater production.

The requests were refused, said Thompson, because there was no way for the inland wells to share equally in the profits—and the commission's job is to look out for small as well as big oilmen. Some 8,500 inland wells are still not connected to any crude-gathering pipeline; the oil must be trucked to refineries at high cost. Beyond that, the existing pipeline system is operating at capacity, could not carry more oil from wells to refining centers. The way matters stood, said Thompson, Texas had already boosted allowables three times since Suez, was pumping a record 3,500,000 bbl. daily—some 250,000 bbl. more than normal. What those who urge still another 250,000 bbl. daily increase fail to consider, snapped Thompson, is the fact that demand for Texas oil will soon decrease. The U.S. Bureau of Mines forecasts a drop of 350,000 bbl. daily in demand for Texas crude next month—and no businessman in his right mind hikes production in the face of a declining market.