Chapter IV: Introduction: By J. E. Spurr

Coal and iron are the backbone of industrial civilization, and should be considered first in any attempt to analyze the ownership and control, as between nations, of the world’s mineral resources. Kin to coal in growing importance, however, is the lighter, fluid and volatile mineral substance, petroleum, whose significance is vast and as yet not wholly defined. More easily transportable than coal, and yielding refined products whose explosive action in internal-combustion engines furnishes greater power in proportion to weight than was once deemed possible, petroleum and its products, apart from their immense direct economic importance, may, in the automobile, the submarine, and the air plane, and through numerous other applications, control strategically, from a nationalistic standpoint, the more inert foundations of civilization. Moreover, the use of crude petroleum as fuel, especially for ships, is of the most vital importance in these days of greater competitive plans for expanding world-wide commerce, and establishing the strength and ready efficiency of navies. Great maritime nations must have, for their oil-burning ships, oil-bunkering stations under their own control in all parts of the world where they wish their commerce to dominate, and their navies to protect their interests efficiently.

The recognition by certain strong and aggressive nationalities of this critical factor has brought about a situation that is perhaps unparalleled in the mineral history of the world. Coal and iron have always been decidedly static as to control--they have remained largely under the supervision and direction of the countries in which they occur. Transportation costs, the conjunction of iron and coal deposits, and other factors have prevented these minerals, in spite of their vast importance, from being fully used as a world commodity. By contrast, petroleum is coming to be universal, like gold, in its acceptance and applicability; but, unlike gold, it is essential in the highest degree to the advance of modern civilization. The fluidity of this mineral, its consequent amazingly cheap transportation and handling by pipe lines, the completeness with which it can be utilized, all combine toward making it in the future the crucial factor of commercial and of political control. Moreover, this fluidity of form and ease of application facilitate the control of petroleum by vast commercial organizations, like the Standard Oil of America, and others in various parts of the world; and even make its world control feasible and probable. Recognizing this tendency, many nations, like England, France, Holland, Argentina, and Mexico, have taken steps looking toward a partial nationalization of their petroleum resources, in order to protect themselves against foreign commercial aggression in this particular. England has gone farthest in this direction, and has reached and is reaching out aggressively into other countries to secure, through commercial control, backed where necessary by political pressure, a world empire of petroleum to serve her world-wide colonial empire. The United States, on the other hand, has dominated the world’s petroleum industry through her own vast resources, worked by interests which have grown without conscious governmental help or even in spite of governmental and popular opposition, and have reached out and secured footholds in other countries.

In the past the mineral development of the world has led to great changes in political sovereignty. Important as these have been, the events that may result from the nationalistic competitive exploitation and control of the world’s petroleum supply bid fair to exceed in importance all similar changes of the past. The perception of the problem and of the necessity, and the advantage of the initiative, naturally belongs to those nations with restricted area and resources, that have grown great by trading and by exploiting the resources of other countries. Such a nation, for example, is England, a country that is fortunately the natural ally of the United States. By contrast, in the United States, a nation concerned hitherto only with the development of its own vast resources, commercial enterprise in foreign countries has been backed by no fixed national policy, and indeed has often been treated as unworthy. In the new international era that was initiated by the World War, however, this policy of Chinese self-sufficiency and exclusion can not be safely continued, and the United States must not only perceive clearly the tendencies and movements of other nationalities, but consider how best to direct its own commercial and political plans so as to uphold its independence and power. Such a policy would naturally lead to international agreements as to the distribution and division of petroleum lands, resources, and production, and probably no one thing would contribute more to the promotion of frank understanding between nations and the removal of obstacles to permanent peace.

Mr. Northrop’s paper follows:

USES OF PETROLEUM

In its crude or semi-refined state, petroleum is extensively utilized as fuel under locomotive and marine boilers and to a small extent in internal-combustion engines of the Diesel type. Certain grades of petroleum are utilized in the crude state as lubricants.

The principal use of petroleum is for the manufacture of refined products, of which the number and uses are legion. The lightest gravity, etherial products are employed as anaesthetics in surgery. The gasolines are the universal fuels of internal-combustion engines, and the naphthas are widely used as solvents and for blending with raw casinghead gasoline in the manufacture of commercial gasoline. The kerosene group includes a variety of products utilized primarily as illuminants, but in annually increasing quantities as fuel in farm tractors. The lubricating oils and the greases derived from petroleum are indispensable to the operation of all types of machinery. The waxes derived from petroleum of paraffin base are utilized in many forms as preservatives and as sources of illumination, and in the last three years have become indispensable constituents of surgical dressings in the treatment of burns. Petroleum coke, because of its purity, is in demand for use in certain metallurgical processes and for the manufacture of battery carbons and arc-light pencils. Fuel oils obtained as by-products of petroleum refining satisfy the fuel needs of many industrial plants, railroads and ocean steamers. Road oils, as the name implies, are employed for minimizing dust on streets and highways; and artificial asphalt, a product of certain types of petroleum, has in many localities superseded the use of other forms of asphalt for paving purposes.

=Substitutes.=--For petroleum as a fuel under boilers in the generation of steam there are numerous substitutes, including wood, charcoal, coal, peat, natural gas, artificial gas, and electricity; as a fuel in internal-combustion engines some demonstrated substitutes are natural gas, artificial gas, benzol, and alcohol, and in the Diesel type of engine certain vegetable and fish oils can be utilized.

For illuminating purposes, animal fats, oils distilled from coal, natural gas, artificial gas, acetylene gas and electricity may be substituted for kerosene.

For certain types of lubrication carefully refined vegetable and mineral oils are acceptable, but for lubricating high-speed bearings and for all lubrication in the presence of high temperature and of steam no satisfactory substitutes for mineral lubricants derived from petroleum are known.

Substitutes for petroleum asphalt are available in the form of native asphalts, bituminous rocks, and coal-tar residues. For petrolatum, animal fats and vegetable oils can be substituted, and for paraffin wax, ozokerite might be made to satisfy such essential requirements as could not be met by refrigeration or by vegetable and animal oils.

CHANGES IN PRACTICE

Probable changes in practice that may be expected to affect the petroleum industry within the next ten years include an increased dependence by oil producers on geologic investigations in advance of drilling, the development of methods for deeper drilling than is now practicable, and the more efficient handling of individual wells and of entire properties, with a view to the ultimate recovery, at minimum cost, of a higher percentage of the oil originally present.

The tendency toward amalgamation of individual producing, transporting, refining and marketing interests into strong units capable of competition in domestic and foreign markets on relatively equal terms with each other and with pre-existing combinations of equivalent strength will doubtless increase, and with the growing strength of the several units will come an efficient and thorough quest for petroleum in all parts of the world.

In the refining of petroleum it is probable that methods will be devised and perfected for recovering more of the light-gravity products from low-grade petroleum and for the conversion of the less-salable products of petroleum into products of greatest current demand. Moreover, it is believed that internal-combustion engines will be so modified as to run successfully on petroleum products of lower volatility than gasoline. The use of petroleum as railroad, marine, and industrial fuel is destined to increase enormously in the next decade.

Although an important contributor to the oil-supply of Great Britain, the shale-oil industry has received little attention in recent years outside of Scotland. Investigations by the United States Geological Survey have demonstrated that the United States contains vast deposits of oil shale in Utah, Colorado, Wyoming and Nevada, much of which will average higher in oil content than the Scottish shale. Efforts already begun to develop methods for the recovery of shale oil on a commercial scale in the United States will undoubtedly result in the establishment of a shale-oil industry in this country within the next two or three years. The future growth of this industry will depend largely on the rapidity of the decline in the domestic production of petroleum.

GEOLOGICAL DISTRIBUTION

Commercial accumulations of petroleum are everywhere restricted to strata of sedimentary origin. In the United States petroleum is produced commercially from strata of all periods from Cambrian to Quaternary, the most prolific sources being in strata of the Carboniferous and Tertiary systems. The geological age of the chief sources of petroleum production in each of the other oil-producing countries of the world is indicated in the table following:

TABLE 1.--GEOLOGIC AGE OF PETROLEUM-BEARING FORMATIONS

Country System
_North America_
Canada Silurian and Devonian
Mexico Cretaceous and basal Tertiary
Alaska Tertiary (?)
_West Indies_
Trinidad Tertiary
Cuba Cretaceous and pre-Cretaceous
_South America_
Colombia Cretaceous and Tertiary
Venezuela Cretaceous and Tertiary
Peru Tertiary
Argentina Jurassic, Cretaceous and Tertiary
_Europe_
Russia Tertiary
Roumania Tertiary
Galicia Tertiary
Italy Tertiary
Germany (Alsace) Tertiary and pre-Tertiary
_Asia_
India Tertiary
Turkestan Tertiary
Persia Tertiary
_Africa_
Algeria Tertiary
Egypt Tertiary
_Oceania_
Japan Tertiary
Dutch East Indies Tertiary
New Zealand Cretaceous and Tertiary

From the foregoing table one might conclude that a direct relation exists between the distribution of Tertiary rocks and the supply of petroleum, but in the United States, which produces two-thirds of the world’s current supply, the quest for petroleum has, under scientific direction, included the entire range of the stratigraphic column, and has found petroleum in considerable quantities in the rocks of each geologic system younger than the Cambrian.

The fact that seeps and other surface indications of petroleum are generally more pronounced in the relatively younger Mesozoic strata than in the older Paleozoic formations, and the further fact that geologic exploration for oil and gas in countries other than the United States has been restricted in the main to areas containing the most pronounced indications of petroleum, tend to account for the predominance of the Tertiary system in the foregoing table and to indicate the fallacy of attempts to estimate the world’s reserves of petroleum on stratigraphic evidence alone.

Despite the broad geologic range of petroleum, its occurrence in specific members, formations, groups, series or systems is by no means universal. On the contrary, its occurrence is restricted to specific localities in which are fulfilled certain variable relations, as yet but little understood, that involve (1) the constitution, sequence and content of organic matter of the sediments; (2) the nature and degree of metamorphism they have undergone; (3) their structure; and (4) their degree of saturation with salt water. Because the most detailed geologic work is insufficient to provide a basis for the appropriate evaluation of the numerous factors involved, and because only a relatively small percentage of the areas of sedimentary rocks in the world have been examined geologically in appreciable detail, any estimate of the future supply of petroleum in the world is peculiarly hazardous.

GEOGRAPHICAL DISTRIBUTION

The geographical distribution of petroleum is as wide relatively as its geologic range. The oil fields of present commercial significance are situated, in the order of their importance as contributors to the world’s production of petroleum in 1917, in the United States, Russia, Galicia, Mexico, Dutch East Indies, India, Persia, Japan and Formosa, Roumania, Peru, Trinidad, Argentina, Egypt, Germany, Canada, Venezuela and Italy. Small quantities of petroleum have also been reported from Guatemala, Honduras, Costa Rica, Panama, Haiti, Porto Rico, Bolivia, Chile, Spain, Arabia, China, Australia, Papua, Philippine Islands, Nigeria, Belgian Congo, Gold Coast, Madagascar, and elsewhere. The geographical distribution of petroleum in the world is shown on the accompanying map. (Plate I.)

In the opinion of the author the most conspicuous developments of the world’s supply of petroleum in the next decade will take place in the countries that border the Caribbean Sea and the Gulf of Mexico. The trend in this direction is unmistakable. From 1913 to 1917, the annual production of petroleum in Mexico increased from 21,000,000 barrels to 56,000,000 barrels, and the potentialities of future production in that country have been demonstrated to be almost beyond comprehension. The output, originally considered valuable only as a source of fuel oil, is now yielding, by modern refining methods, increasingly important percentages of illuminating oils and gasoline. The only obstacles to enormously increased production are unsettled political conditions and inadequate facilities for marine transportation. These obstacles will doubtless be overcome within the next few years, and barring unforeseen contingencies Mexico will soon rank second among the oil-producing countries of the world.[2] Judged by the results of exploratory work already done in Venezuela and Colombia, both of those countries are destined to contribute appreciably to the world’s supply of petroleum within the next decade. Recently Colombia has given enough evidence of ability to furnish high-grade petroleum from wells of large individual capacity to warrant the large interests holding concessions there to exert every effort to overcome the adverse natural conditions that have so long barred the way to exploitation. Enough drilling has already been done in Venezuela to demonstrate that the resources of heavy-gravity asphalt-base petroleum in that country are large, and the recent installation of a modern petroleum refinery for the treatment of these oils on the island of Curacao, off the Venezuelan coast, has provided the market necessary to active field development.

[2] Mexico ranked second in 1918 and 1919.

In Trinidad the production of petroleum exceeds 1,500,000 barrels a year and has doubled in the last few years. With the increased facilities for ocean transport of petroleum that are becoming available, a large output is assured.

Cuba is not expected to become an important producer of petroleum, and present knowledge concerning the petroleum resources of the Central American countries is not such as to warrant the belief that oil fields of material consequence will be developed in any of them.

Petroleum production in the United States is expected to reach its maximum within the next two or three years and to decline steadily thereafter, although this country is expected to remain the leading oil-producing country of the world for the greater part, if not all, of the coming decade.

As regards those oil-producing countries of North and South America that have not been already mentioned, no significant changes in their present status are anticipated.

The petroleum resources of Russia (including Asiatic Russia) are believed sufficient to assure that country retaining its position as the leading producer of petroleum in the Eastern Hemisphere far beyond the next decade. During the last few years the output has been obtained under increasing difficulties, and as a consequence there has been no measure either of present productive capacity or of potentialities. Concerning the future of Russia as a source of petroleum Arnold[3] says: “Such large areas, both in European and Asiatic Russia, yield unmistakable evidence of the presence of oil in large quantities that it is to this country, among those of Europe and Asia, to which the future must look for a supply.”

[3] ARNOLD, RALPH: “The World’s Oil Supply”: Report Am. Min. Cong.,
19th annual session, 1917, pp. 485-486.

Russia being endowed with petroleum reserves, both proved and prospective, of great magnitude, the ultimate position of that country as the leading oil-producer of the world seems reasonably assured. Its immediate future is too intimately dependent on the progress from political turmoil to warrant a forecast.

The oil fields of both Roumania and Galicia are believed to have passed their maximum yield, and the possibilities of opening new fields of consequence in those countries are not considered large enough to justify a forecast of anything but a moderate decline of production in future years. No material change in the status of the negligible oil fields of Italy or of Alsace is anticipated at any time in the future.

With regard to the situation in Asia, the writer believes that the next decade will witness a steady increase in the output of petroleum in India, and the probable development of one or more important oil fields in Persia and possibly of fields in Asia Minor, Turkestan and China. In Oceania the same period will doubtless witness a material increase in the production of petroleum in Japan and Formosa and in the Dutch East Indies, together with the possible opening of new fields in Papua. Africa will doubtless receive considerable attention from oil operators in the next ten years, but on the basis of available evidence the results obtained in that period will probably not be large enough to affect the petroleum situation of the world.

POLITICAL CONTROL OF PRODUCTION

The status of the political control of the world’s output of petroleum in 1917, as determined by the best data now available, is indicated in the table following.

The accompanying diagram (Figure 1) shows the proportion of the world’s production of petroleum contributed annually by each of the principal producing countries in each of the last ten years.

TABLE 2.--POLITICAL CONTROL OF THE WORLD’S PRODUCTION OF PETROLEUM IN 1917

-----------------+-----------+----------+-------------
Source of | | |Country
production |Quantity of| |exercising
| production|Percentage|political
| (barrels)| of total |control
-----------------+-----------+----------+-------------
United States |335,315,601| 66.17 |United States
Russia | 69,000,000| 13.62 |Russia
Mexico | 55,292,770| 10.91 |Mexico
Dutch East Indies| 12,928,955| 2.55 |Holland
India | 8,078,843| 1.59 |Great Britain
Persia | 6,856,063| 1.36 |Persia
Galicia | 5,965,447| 1.18 |Poland (?)
Japan and Formosa| 2,898,654| 0.57 |Japan
Roumania | 2,681,870| 0.55 |Roumania
Peru | 2,533,417| 0.50 |Peru
Trinidad | 1,599,455| 0.32 |Great Britain
Argentina | 1,144,737| 0.23 |Argentina
Egypt | 1,008,750| 0.20 |Great Britain
Germany | 995,764| 0.20 |Germany
Canada | 205,332| 0.04 |Great Britain
Venezuela | 127,743| 0.03 |Venezuela
Italy | 50,334| 0.01 |Italy
Cuba | 19,167| |Cuba
+-----------+----------+
|506,702,902| 100.00 |
-----------------+-----------+----------+-------------

Aside from the control exercised by Great Britain through its protectorate relation over the petroleum resources of Egypt, control of the petroleum resources of the various countries is mainly by virtue of state sovereignty. This political control is in proportion to the strength of the government in the country exercising it. Recent developments whereby the British government becomes the majority stockholder of a corporation controlling the oil resources of Persia, practically transfer the political control, as well as the commercial control, of Persian petroleum from Persia to England. Mexico’s recently attempted firm political control of her vast petroleum resources depends for its success upon her diplomatic ability in dealing with the stronger governments of England and the United States, whose nationals have acquired a commercial control that is threatened by Mexico’s new and decided nationalistic policy.

COMMERCIAL CONTROL OF PRODUCTION

The commercial control of the world’s production of petroleum, as far as nations are involved, is determined in the main through direct ownership, of lands, leases and concessions, or by the control, through holding corporations, of subsidiary companies holding fee, leases, mineral rights or concessions of petroleum land. Except in Argentina, where the domestic petroleum industry is owned and operated by the state; in Germany, where the government participates directly in the financing of petroleum enterprises through the Deutsche Bank; and in Persia, where the British government owns a substantial interest in a company owning and operating extensive concessions, the commercial control of the petroleum industry is determined almost wholly by aggregations of private capital acting in their own interests.

TABLE 3.--NATIONALITY AND EXTENT OF CONTROL OF DOMINANT INTEREST

------------------+-----------+----------------+------------------
| | |Approximate extent
| Production| Nationality | of control by
| in 1917 | of dominant |dominant interests
Country | (barrels) | interests | (per cent.)
------------------+-----------+----------------+------------------
United States |335,315,601|United States | 96
Russia | 69,000,000|British-Dutch | 40+
Mexico | 55,292,770|United States | 65
Dutch East Indies | 12,928,955|British-Dutch | 100
India | 6,078,843|British | 100
Persia | 6,856,063|British | 100
Galicia | 5,965,447|German | 100
Japan and Formosa | 2,898,654|Japanese | 100
Roumania | 2,681,870|British-Dutch | 36
Peru | 2,533,417|United States | 70
Trinidad | 1,599,455|British | 80
Argentina | 1,144,737|Argentinian | 100
Egypt | 1,008,750|British-Dutch | 100
Germany and Alsace| 995,746|German | 100
Canada | 205,332|United States[4]| 80-
Venezuela | 127,743|British-Dutch | 80 (?)
Italy | 50,000|French | 96
------------------+-----------+----------------+------------------

[4] By control of refining facilities.

So far as the author is aware, Canada is the only country in which the petroleum industry may be said to be controlled by foreign (United States) interests, this control being by virtue of an essential monopoly of pipe-line and refining facilities.

The preceding table shows, according to the best information available, the nationality and approximate extent of control exercised by the dominant interest in each of the principal oil-producing countries of the world in 1917.

POLITICAL AND COMMERCIAL CONTROL OF RESOURCES

The accompanying diagram (Figure 2) shows graphically the approximate commercial control of the world’s production of petroleum in 1917.

Commercial control of the petroleum industry in the _United States_ is in the hands of the so-called “Standard Oil Group” of companies, through their control of most of the great pipe-line systems of the country, of probably 75 per cent. of the refining facilities and of a substantial part of the actual production. Other domestic interests having important shares in the control of the petroleum industry in the United States include the Southern Pacific Railroad Co., Cities Service Co. (Doherty interests), General Petroleum Corporation, Gulf Oil Corporation, Ohio Cities Gas Co., Cosden & Co., Sinclair Oil & Refining Corporation, The Sun Co., the Texas Co., the Tide Water Oil Co., and the Union Oil Co. Foreign interests in the United States include purely British companies, which control a production of about 2,000,000 barrels a year; British-Dutch companies represented by the Royal Dutch-Shell Syndicate, which control a production of about 9,000,000 barrels a year, together with refining and marketing facilities; and Franco-Belgian companies controlling a yearly production of about 1,000,000 barrels. Aside from the very probable holdings by individual Germans of shares in companies engaged in one or more phases of the petroleum industry of the United States, the author is aware of no organized German interest in any phase of the domestic industry.

Commercial control of the petroleum industry of _Russia_ is, under the political conditions now existing in central Europe, largely a matter of speculation. As nearly as can be ascertained, the dominant control is in the hands of purely British, Franco-British, and British-Dutch (Royal Dutch-Shell Syndicate) interests. Certain of the second-named interests are allied closely with an additional group of capitalists represented by the firm Nobel Bros., of much importance, the present control of which is by no means clear, from the literature available on the subject. Though originally Swedish, the financial interests now involved in Nobel Bros. are believed to include representatives of financial groups in England, France, and Germany as well, with control probably lying with the Anglo-Swedish interests. Before the war, direct German interest in Russian petroleum included control by the Deutsche Bank through a Belgian company (the Petrole de Grosny) of the important producing and refining company, A. I. Akverdoff & Co., control of which is now in British or British-Dutch hands. As in the United States, a considerable part of the actual production of petroleum in Russia is distributed among a large number of individually weak companies, dominated, through the control of pipe-line or refining facilities, by one or another of the principal groups.

Of considerable importance in Russian petroleum affairs at one time was the European Petroleum Union, organized for combat in the world markets with the Standard Oil trust. This union included among others such important petroleum operators as Nobel Bros., the Rothschild interests (now Dutch-Shell), Mantaschoff (now Russian General Oil Corporation) (British), and the Deutsche Bank, the latter controlling Akverdoff and Spies in Russia, together with important companies in Roumania and Galicia. How far this union controlled the affairs of its constituent companies is not evident from available data, and its present influence on companies now operating in Russia is uncertain.

Conditions in Russia make impossible any definite statement on the petroleum situation. A decree of the Bolsheviki government, dated June 20, 1918, on the nationalization of the petroleum industry, declared as the property of the state all movable and immovable property employed in and belonging to that industry. Trading in oil was declared a state monopoly and was delegated to the chief petroleum committee of the fuel department of the supreme Council of National Economy. As the chief producing areas are now under British military control, this decree is ineffective.

Commercial control of petroleum in _Mexico_ is divided among United States, British, and British-Dutch interests, which controlled about 65, 30 and 2 per cent., respectively, of the production in 1917. The interests of the United States include the Doheny group, operating principally as the Huasteca and Mexican Petroleum companies; the Standard Oil Co. of New Jersey, operating as the Penn-Mex Fuel Co.; the Sinclair interests, operating as the Freeport and Mexican Fuel Oil Co.; the Texas Co.; Gulf Co.; Southern Pacific Railroad; and others. The British interests are represented by the Pearsons, operating as the Mexican Eagle Oil Co.; and the British-Dutch interests by La Corona Petroleum Co., and Chijoles Oil, Ltd., controlled by the Royal Dutch-Shell Syndicate. No exclusively German interests are known to hold a substantial portion of any important company operating in Mexico.

Formerly concessions were freely granted to foreign individuals and companies for the exploitation of mineral deposits, and oil lands were sold by the native owners to foreigners. Article 27 of the constitution of 1917 expressly forbids any but Mexican companies acquiring directly or operating directly petroleum lands in Mexico.

All recent concessions for the exploitation of oil properties contain a provision stating that the concession will be declared null if any of the rights are transferred to any foreign government. The provisions and the intent of a series of presidential decrees issued on February 19, 1918, July 8, 1918, July 31, 1918, and August 1, 1918, are to nationalize all petroleum lands and to permit them to be worked only by Mexican citizens or by companies that agree to consider themselves Mexican and further agree not to invoke the protection of their governments. A bill was presented in December, 1918, to carry out Article 27 of the new constitution, but thus far no action has been taken in the matter. The decrees and legislation growing out of Article 27 have been protested by the chief petroleum companies operating in Mexico and by their respective governments.

Commercial control of the petroleum resources of the _Dutch East Indies_ is in the hands of the Royal Dutch-Shell Syndicate and is essentially absolute by reason of the restrictions contained in the Netherlands East India Mining Act and subsequent supplements on foreign acquisition of mining rights in the East Indian Archipelago. Actual control is in the hands of the Bataafsche Petroleum Maatschappij, which has a capital of $56,000,000 divided into five shares, three of which are owned by the Royal Dutch Petroleum Co., and two by the Shell Transport Trading Co. (British). Purely British interests control an inconsequential production of petroleum in British North Borneo and in Sarawak.

Prospecting licenses and concessions are granted only to Dutch subjects and to Dutch companies. It is officially stated that the object of these restrictions is not to exclude foreign capital; this is precisely their effect, and on account of the economic monopoly which the Royal Dutch-Shell now has of the petroleum industry of the Dutch East Indies, it would be very difficult for any new enterprise to gain a foothold.

Commercial control of the petroleum resources of _India_ is exercised by the Burma Oil Co. through its dominance of production, refineries, and pipe-line facilities, and by reason of agreements as to marketing with its principal competitor, the British Burma Petroleum Co., both controlled by British capital. The Burma Oil Co. is allied with, if not directly controlled by, a group of British financiers, one or more of whom is interested in companies in Trinidad and in Persia.

During the war the petroleum industry of _Roumania_ was temporarily wholly in control of German and Austrian interests. The advanced stage of development of the oil fields prior to the war and the intentional damage, much of which is irreparable, wrought in the fields by British detachments in 1916, when capture of the fields by Austro-German forces became inevitable, are believed, however, to have deprived Germany of a large part of the fruits of her conquest, as it is considered doubtful if the Roumanian fields can ever again be made to yield petroleum at the pre-war rate of 12,000,000 barrels per annum.

The American Petroleum Institute states that “Roumania is considering the erection of a state monopoly of both production and distribution on the ruins of the monopoly which Germany sought to establish there but was compelled by the armistice to renounce.”

Prior to the war Dutch or rather British-Dutch (Dutch-Shell) interests controlled about 30 per cent. of the annual production of petroleum in Roumania, German interests about 26 per cent., United States interests (Standard Oil Co. of New Jersey) about 18 per cent., French interests about 16 per cent., purely British interests about 6 per cent., and Belgian and Roumanian interests the remainder.

Through the Austrian “Society Gaz” and the German “Deutsche Erdoel Aktien-gesellschaft,” German interests have dominated the petroleum industry of _Galicia_ for years through the direct control of the larger producing and refining interests and by reason of the fact that the smaller scattered interests were dependent almost entirely on the two leading companies, the Galizische Karpathen Petroleum A. G. (controlled by Society Gaz), and the Premier Oil & Pipe Line Co. (controlled by the Deutsche Erdoel A. G., which is in turn controlled by the Diskonto und Bleichroeder, a branch of the Deutche Bank) for their transportation and refining facilities. British and Dutch capital were involved in the Galician fields prior to the war, but not, it is believed, to a controlling extent in either of the dominant companies.

The petroleum industry of _Japan_ is controlled wholly by Japanese interests and to a preponderant extent by a single company, the Nippon Oil Co. So far as the author is aware, no foreign interests share in any way in the development or control of the Japanese petroleum industry.

Commercial control of the petroleum industry of _Peru_ is exercised by the Standard Oil Co. of New Jersey through its subsidiary, the Imperial Oil Co. of Canada. This control involves about 70 per cent. of the annual production, the remaining 30 per cent. being divided in the ratio of 27 to 3 between British and Italian interests respectively. So far as is known no other interests are involved.

The interests engaged in the petroleum industry of _Trinidad_ include financial groups purely British, controlling about 57 per cent. of the production; British-Dutch interests (Dutch-Shell) controlling about 23 per cent., and United States interests (General Asphalt Co.), controlling the remainder. The leading operator in Trinidad is the Trinidad Leaseholds, Ltd., a British company that in 1917 produced about 42 per cent. of the petroleum output credited to Trinidad that year.

Commercial control of the petroleum resources of lower _Alsace_ has been in the hands of the Vereinigte Pechelbronner Oelbergwerke Gesellschaft and the Deutsche Tiefbohr A. G. Both of these companies are believed to be controlled by the Deutsche Bank through the Deutsche Erdoel A. G., and the Diskonto und Bleichroeder. The negligible production of petroleum in _Hanover_ is doubtless under the same financial control, although data that would warrant a positive statement to that effect are not at hand.

The petroleum reserves of _Argentina_, which comprise the only areas from which petroleum is being commercially produced in that country, are operated by the state through the Comodora Rivadavia Petroleum Commission. German interests are thought to have been involved in two or three unsuccessful efforts in the last decade to obtain petroleum on tracts adjacent to the government reserves in the Comodora Rivadavia district.

The petroleum industry in _Egypt_ is controlled wholly by British-Dutch capital operating as the Anglo-Egyptian Oilfields, Ltd., a subsidiary of the Royal Dutch-Shell Syndicate, through the Anglo-Saxon Petroleum Co., the last-named company being predominantly British.

Commercial control of the petroleum industry in _Canada_ is exercised in effect by the Standard Oil Co. of New Jersey, through its subsidiary the Imperial Oil Co. of Canada. This control is exercised through a virtual monopoly of pipe-line and refining facilities, and by the producing interests, though British and Canadian, being individually small and unorganized.

The production of petroleum in _Italy_, which is small, represents the output of two companies, the Petroli d’Italia, in which French capital is predominant, and the Petrolifera Italiana, which is believed to be essentially Italian.

Financial groups interested in petroleum in _Venezuela_ include the Royal Dutch-Shell Syndicate (British-Dutch), the General Asphalt Co., (United States), and a group of British financiers who control properties in Trinidad as well as the most important group of companies, other than Nobels and the Dutch-Shell, in Russia.

United States interests, including the Standard Oil Co., the Doherty interests, the Texas Co., the Gulf Corporation, and the Island Oil Transport Corporation, are predominant in the quest for petroleum in _Colombia_. The Venezuelan Oil Concessions, Ltd., an English company operating in Venezuela, is reported to have obtained a concession to explore for oil in the northwest district of _British Guiana_.

The Sinclair interests (United States) are particularly active in the search for petroleum in _Costa Rica_ and _Panama_; and the Sun Co. (United States) is understood to be investigating petroleum possibilities in other Central American republics.

The Pearson interests (British) have expended considerable effort in the quest of petroleum in _Algeria_ and _Morocco_, and in the former country American interests (E. E. Smith) are reported to have recently sought petroleum concessions from the French government.

British interests, including the British government, control extensive petroleum concessions in _Persia_, from which oil in unreported quantities is now being produced.

The most promising oil territory of Persia has recently been closed to American activity through the granting of a concession aggregating approximately 500,000 square miles to a British concern, the Anglo-Persian Oil Co., a majority of whose voting stock is owned by the British government. This concession runs until 1961. The importance of the oil territory is indicated by its reported potential capacity of 30,000,000 barrels yearly, with tremendous reserves undeveloped.

United States interests (Standard Oil Co. of New York) are understood to still retain control over the petroleum rights in certain provinces in _China_, where active prospecting in two or three localities a few years ago was reported to have yielded unfavorable results.

Petroleum in small quantities is produced in _New Zealand_ by purely British interests.

POSITION OF THE LEADING POWERS

=United States.=--As regards probable developments in the petroleum industry within the next decade, the United States, thanks to the enterprise and foresightedness of financial interests of domestic origin, seems to have a strong position. United States interests are practically supreme in the commercial control of the petroleum resources of the Western Hemisphere, dominating the petroleum industry in the United States, Canada, Mexico, and Peru, holding substantial interests in Trinidad and Venezuela and in the prospective petroliferous areas in Central America and Colombia. Its only competitors are British and British-Dutch interests, which control the petroleum situation in Trinidad and are not only strongly intrenched in the United States, Mexico, and Venezuela, but are aggressively seeking to enlarge their holdings in those countries and to gain footholds elsewhere. Unless the United States adopts measures, such as Federal operation of the trunk pipe-lines, to limit the aggressions of foreign capital in this country, and erects a firm forward-looking governmental policy toward the protection of investments of its citizens in petroleum properties in other countries, particularly Latin-American countries, it may witness its commercial supremacy in petroleum affairs wane and disappear, while it is yet the largest political contributor to the world’s supply of petroleum.

As contrasted with the strongly nationalistic and deliberately aggressive governmental policy adopted by Great Britain, France, Holland and some other nations, the United States has never adopted any policy founded on recognition of the importance of political and commercial control of petroleum. American companies may not own and operate oil lands in the British Empire, in the French possessions, or the Dutch colonies, but the only American restrictions on foreign activity in the petroleum industry are those which cover all minerals contained in public lands. Only American citizens, or those who have declared their intention of becoming American citizens, can apply for patents to such land. However, after the application is made, there is no restriction on transfer of the mineral rights thus secured.

=Great Britain.=--British and British-Dutch interests easily dominate the petroleum situation in the Eastern Hemisphere by supremacy in the petroleum industries of Russia, Persia, India, and the Netherlands East Indies. Domination of the petroleum situation in Russia alone is believed tantamount to dominion of the petroleum situation in the entire Eastern Hemisphere for the greater part of the next century. The strength of Great Britain’s present position in the world’s petroleum affairs lies in a strong governmental policy and in the wide scope of British petroleum investments, embracing practically every country where petroleum is an important product and nearly every country where it is a product of potential importance. The general policy of the British Empire seems to be to control all oil development and restrict operations by foreign capital. In Australia licenses are required for the exploitation of oil lands, and only companies incorporated in the United Kingdom or a British possession may receive such licenses. The Governor General has the right of pre-emption of all oil produced and in case of war may take control of all oil properties. In Canada, in those western provinces where minerals are the property of the Crown, petroleum and natural gas lands may be leased only to British companies. A similar restriction exists in Burma. In Burma a monopoly of the petroleum industry for 99 years was granted to the Burma Oil Co. in 1865. This grant seems to have been inspired by fear of the Standard Oil Co. of the United States, for the agreement between the company and the government stipulates that the former shall not amalgamate with other oil companies. Regulations of like effect exist in other British colonies where oil exists; in Barbados the British government has the right of pre-emption of all oil residues; in British Guiana, non-British companies can only hold lands by special license of the Governor; in British Honduras all mineral oil is reserved to the Crown; in southern Nigeria, the Gold Coast, Trinidad, and Tobago the British government has the right of pre-emption over all petroleum.

The recent granting of a concession amounting to a monopoly in the most promising oil district of Persia (a region that many oil experts believe likely to become one of the most important in the world) to a British company controlled directly (by stock ownership) by the British government, signifies an aggressive policy of England, outside of her own dominions, to secure and hold, under government control, oil lands in all parts of the globe.

It is understood that the best-known oil territories in Venezuela are already covered by concessions that are practically all controlled either directly or indirectly by British interests, chiefly the Dutch-Shell Syndicate.

So far as observed, German interests actually dominate the petroleum industry in Galicia and at home. Whether forced back on its own petroleum resources or on these reinforced by those of Galicia, Germany will obviously have an inadequate supply, and in consequence German interests are likely to be particularly aggressive in seeking petroleum in Mesopotamia, Africa and South America.

=France.=--Since control of the petroleum interests of the Rothschilds passed into the hands of the Royal Dutch-Shell Syndicate (British-Dutch), the influence of French finances in petroleum affairs has been negligible, outside Galicia and Italy, where its potency was not great. French capital will undoubtedly participate in efforts to determine the petroleum reserve of the Barbary States, French dependencies, but it will hardly be much involved in organized efforts to control the world situation with respect to petroleum.

The French mining law holds that oil and gas belong to the state, and may be exploited under concessions, the area and time limit of which are matters of negotiations between the applicant and the authorities. It is understood that the French government is unwilling to grant oil concessions except to companies the majority of whose stock is held by French citizens. A company incorporated recently to work the Algerian oil fields contains in its articles of incorporation the provision that 60 per cent. of its stock must be held by French citizens.

=Japan.=--Japanese investments in the world’s petroleum industry have not yet attained significant proportions outside Japan itself, though the Japanese government is officially alive to the importance of Japanese investments in petroleum properties in Mexico, particularly Lower California and Sonora; China; and undoubtedly Russia. Hence large investments of Japanese capital in the petroleum industry in one or all of those countries may be expected in the near future.

SUMMARY

Petroleum in its crude or semi-refined state is used as fuel under locomotive and marine boilers and as a lubricant. The principal use of petroleum, however, is in the manufacture of numerous refined products. Some of the more important products and their uses are as follows: ether, as an anæsthetic in surgery; gasoline, as fuel in internal-combustion engines; naphthas, as solvents and in the manufacture of commercial gasoline; kerosene, as an illuminant and as a fuel for farm tractors; lubricating oils; waxes, as preservatives, illuminants, and surgical dressings in treatment of burns; petroleum coke, in metallurgical processes and in the manufacture of battery carbons and arc-light pencils; heavy fuel oils; road oils; artificial asphalts, for pavements. The use of petroleum and its products as fuel, as a lubricant, and for illumination may be considered essential. Substitutes for most of these uses are known, but they are either inefficient or not readily available.

The most prolific sources of petroleum are in sedimentary strata of the Carboniferous and Tertiary periods. Because the most detailed geologic work is insufficient to provide for the appropriate evaluation of the numerous factors involved in the occurrence of petroleum, and because only a relatively small percentage of the areas of sedimentary rocks throughout the world have been examined geologically in any appreciable detail, it is difficult to estimate the future supply of petroleum or to predict that large accumulations will be discovered in any particular region.

The principal countries contributing to the world’s production of petroleum rank as follows in general order of importance: United States, Russia, Mexico, Dutch East Indies, Roumania, India, Persia and Galicia. Other countries produce less than 2 per cent. of the annual total. The greatest change that is likely to come in the geographical distribution of production is a larger output from the countries bordering the Caribbean Sea and the Gulf of Mexico, and from the Persian and Mesopotamian fields. Mexico now ranks second to the United States, and South American countries promise to become more important contributors to the world’s production than they now are. Russia is expected to become ultimately one of the chief producers of petroleum.

Within the next decade, through improved methods of production and through the further amalgamation of producing, transporting, refining, and marketing companies into strong units, the output will undoubtedly be larger and will be more economically produced. In the refining of petroleum it is probable that improved methods will make possible the recovery of a larger percentage of lighter products from low-grade petroleum. Internal-combustion engines are being modified so as to run on petroleum products of lower volatility than gasoline. The use of petroleum as fuel under railroad and marine boilers is expected to increase enormously in the next decade. As the output of the producing fields declines, the vast deposits of oil shale in the western United States will be developed as a source of oil.

So far as is known, political control of the petroleum resources of the world is determined by state sovereignty (see Plate I, page 7). In normal times, the United States controls politically over 66 per cent. of the present output of petroleum. Russia and Mexico ranked second and third in 1917, controlling 13.6 per cent. and 10.9 per cent., respectively. The remaining 9 per cent. was controlled by Great Britain, Holland, Persia (British government owned), Roumania, Austria-Hungary, Japan, Peru, Germany, Argentina and Italy in the order named.

The table showing the nationality and the approximate extent of the commercial control exercised by the dominant interests in each of the principal oil-producing countries, and Fig. 2 (page 12) are the best possible summaries of commercial control. United States capital is supreme in the commercial control of the petroleum industry of the Western Hemisphere. British and British-Dutch interests easily dominate the petroleum situation in the Eastern Hemisphere. France no longer exercises control over any important fields. Japanese interests, controlling at present all the oil fields of Japan, may be expected to make large investments in the petroleum fields of Mexico, China and Russia.