OIL

Northern Advocate, 14 February 1928, Page 7

OIL

THE WORLD STRUGGLE

TO ATTAIN SUPREMACY,

w At the meeting of the Whangarei 'Chamber of Commerce on Wednesday night, Mr A. R. Crane discoursed most interestingly and informatively upon the subject of Oil, the full text of his address being as follolvs; —

It has been justly said, “Who has nil has empire.” The question of oil has become one of the most vital in all countries. Control .of the ocean by heavy oils, control of the air by highly refined oils and of the land by petrol and illuminating oil, makes oil an important factor. Empire of the world will be maintained through the financial power attaching to a substance more penetrating, more influential in the world than gold.

The nation which controls this precious fuel will see the wealth of the rest of the world flowing to it. The nation which obtains the world’s carrying trade takes toll from all those whose goods are carried.

“The country which dominates, by means of oil,” said the chairman of the British Controlled Oilfields (a semi-official, semi-private organisation which the British Government has especially commissioned to fight the Standard Oil Company), “will comm£® at the same time the commerce of the world. Armies, navies, money will coimt as nothing against the lack of oil. The war proved it. The fundamental basis upon which the industrial life of modern nations rests is fuel.”

Before the war, Britain, the United States 'and Germany owed the whole of their power and wealth to coal. It would have been true to say that the British, Empire rested upon a foundation of coal. It is essential to have control over fuel in time of peace for economic prosperity, and in time of war to supply the navy aud maintain control of the seas. Oil has considerable advantages over coal. Its extraction is remarkably easy compared with ,coal. The cost is much less, and once the installation is made it flows by itself into the reservoirs, whence it is conducted by pipe-lines to the seaports and there pumped into ships.

Eor half a century oil itae used only for lighting purposes, and then it had to compete with gas and electricity, and there was some talk of limiting production. Between 1900 and 1910 the invention of the internal combustion engine and the enormous development of motoring gave it a new impetus. Fine oils only had been used

up to then. In refining there’ remained 60 to 75 per cent of waste products. The residue was called mazut, or fuel v V »il. The famous wells of Baku yield **-*crude naphtha, from which the petroleum or kerosene is distilled, while the heavier residue, mazut, is used for lubricating oil and for fuel.

DIESEL INVENTION,

Then the German, Diesel, invented the internal combustion engine for heavy oil. The mazut, subjected to high pressure in a cylinder, produces an explosive mixture which, without sparking plug or magneto, drives the pistons in the manner of the petrol engine. No boiler is required, and the installation takes much less space than a steam engine of the same power. The following will show the advantage of the Diesel over steam —two boats of

• the same power:—

H.P. —Diesel Engine: 21,000; Steam Engine: 21,000. Weight of Engine.—Diesel; 1000 tons; Steam: 3400 tons. Space Required.—Diesel: 5300 cub. |uetres; Steam: 10,000 cub. metres.

T Daily Consumption.—Diesel: 100 tons oil; Steam: 360 tons coal. Consumption (voyage 15 days).—Diesel: 1500 tons oil; Steam: 5400 tons coal.

Bunker Space (voyage 15 days).— Diesel: 1700 cub. metres; Steam: 7000 cub. metres.

Mazut has been introduced directly into the furnaces of great ships. The heating power of this formerly despised product is almost double that of coal. To load the Olympic with coal would, take five days and 500 men, amt with oil 12 hours and 12 men. On the Cunard and White Star liners the economy of space has been as much as 33 per cent, and on the Mauritania (sister ship to the Lusitania) the adoption of oil fuel allowed of the reduction of the crew by 300 men. In wartime the presence of a squadron burning coal is disclosed by enormous clouds of smoke. Burning oil, it becomes visible only at the moment of attack. “No smoke, no funnel,’ ’ exclaimed Lord Fisher in his strenuous campaign for the transformation of the British Navy. Many years elapsed •before he. saw the triumph of the new fuel.

The world tonnage afloat in June, 1927, was 59,688,000, compared with

42.514.000 in June, 1914. It is noteworthy that oil tankers increased from 1.479.000 tons to 5,916,000 tons, motor ships from 334,000 to 4,271,000, and steamers fitted for oil fuel from 1,310,000 to 18,500,000. Half an hour after receiving an order to raise steam the ship is ready to start, and 35 minutes afterwards it is going at full speed. In six minutes it. can pass from normal to maximum speed. A voyage at forced speed entails no extra fatigue for the crew, but coal it is slavery.

LOCATION.

Oil is found naturally in different' forms, Very rarely is it found on the surface or gushing up by itself without the help of 'pumps. It is usually met with at a great depth under ground, and to detect its presence it is necessary to make borings. It is generally in pockets, in which oil and gas are found above water. When one reaches a pocket in the neighbourhood of the gas the latter (gas) escapes by the outlet which is offered. If the boring first reaches the oil, and if the pressure of the gas is sufficient, the oil gushes out and forms a spring. More often the gas pressure is not sufficient to raise the liquid to the surface, and it is necessary to instal pumps. The duration of the flow is essentially variable, but one well flowed for seven years. One often hears of pools, rivers or veritable lakes of oil. These expressions are most inaccurate, but apart from certain exceptions the deposits are neither rivers nor pools. They are actually solid layers of sandstone, often very hard, impregnated, saturated wit'll oil. This sandstone is very porous and contains thousands of cavities or poelce-ts enclosing the precious rock oil. Its thickness varies from the usual 30 or 50 metres, yielding 200. 500 or 1000 barrels a day, to one kilometre, yielding 70 to 100,000 barrels a day.

From the greenish-brown oil, which is lighter than water, no fewer than 128 chemical compounds are obtained, which are used in 40 different industries.

CONSUMPTION,

The history of oil is as old as the world, since there is mention made of it in the Book of Genesis. The world production in 1910 was 820 million barrels of 42 gallons, and in 1921 it was 759 million. Mexico’s percentage in 1910 was 1.10 per cent, in 1921 25.00 per cent. It is Mexico which saves the world today, for the United States, the greatest producers in the world, do not even supply enough for their own consumption and are obliged to. call in the' help of Mexico to make/ good their deficit. Th'e consumption of oil is rising at a terrific rate. Automobilism and aviation owe their existence to it. Certain British engineers are not afraid to assert that one ton of mazut used in a Diesel engine for ships is emiivalent to at least six tons of coal. Everywhere the substitution of oil for boal is going on, and consumption is developing ■with such rapidity that fears arc entertain ed as to the supplies in the future. America consumed in 1907, 24,000,000 tons of oil; in 1918, 57.000,000; in 3910. 75,000,000; in 1920, 90,000,000, and in 1921 the consumption was greater by barrels a day than the national' produfetion. The United StatW consume twice as much oil as the rest of the world, while their resources do not amount to more than one-seventh of those of the world —their consumption increased in 1920 by 25 per cent, and their production only by II per cent.

Calculated on the present population, the oil reserves in the United States would soon come to an end. Other countries consume half as much oil as the United States, while their soil contains seven times more. These countries consume 2,000,000 barrels a year. At this rate they have a reserve for 250 years. The total amount of oil which can still be extracted from the soil of the world has been computed at 60 thousand million barrels—43 thousand million have already been brought to the surface. Of the 60 thousand million which remain to be extracted, 7000 million are to be found in the United States and Alaska, and 53,000 million in the rest of the world.

TWO GREAT TRUSTS,

All the oilfields are scattered in the four corners of the world and are in the hands of two great trusts, one American (the Standard Oil) and the other Anglo-Dutch (the Royal Dutch Shell) and certain other companies controlled by the British Government. Although it sometimes happens that Governments oppose each other openly in the struggle for oil, they prefer in general to hide behind trusts. There exist in the United States numerous oil concerns, but all producers must bow before the unchallenged supremacy of the Standard Oil. This purely American concern started operations 20 years before the Royal Dutch, a Dutch company with considerable British and French capital. Today there is no longer one standard oil, but 40 companies all bearing this name, followed by that of a town or State, such as the Standard Oil of New Jersey, and the Standard Oil of Ohio, The New Jersey is the mfist important, but all are federated under one great administrative body. From the Board of Directors ot the Standard Oil companies emanates the general policy of this federation of companies, as powerful as the Government of the United States —more powerful sometimes. The founder of the Standard was John Rockefeller, then a small dealer in oil, who in 1865 conceived the idea of forming a federation of all American oil dealers. It was to put an end to the merciless price war waged amongst 250 refineries that the Btantlard was formed. This was a combine of refineries, not of producers. In 1911 the Standard owned 90 per cent, of the pipe-lines and controlled 86* per cent, of -the oil production of America.

The European market was almost completely conquered. Everywhere the Standard operated by means of its subsidiary companies.

TRANSPORT

The difficulty is not to produce oil, but to transport it, as it is generally found in desert regions. Rockefeller constructed pipe-lines to the great centres, and in this way the Standard obtained practical control of the markets. This was the cause of the first success of the Standard. The second success was its alliance with the great railway companies and the support which it received from the railway magnates. The railway companies made the competitors of the Standard pay increased rates, and evidence was produced before a commission showing that rates ■were increased from 87 to 333 per cent., from 63 to 207 per cent., and from 82 to 267 per cent., and further systematic negligence was proved with regard to competitors.

THE STANDARD

The Standard Oil Company forme a veritable state within a state, which nothing can bend. In 1892 and 1911 its constitution was judged illegal, but in vain. To combat the verdict the trustees voted the dissolution of the trust, and then the assets were apparently divided into 20 distinct companies, but the nine old trustees possessed the majority of the shares in each company. To think of Rockefeller’s modest company in 1870, with its 600 barrels of oil per day and its small capital of a million dollars, and to see what it has become today is to be lost i'n amazement. The capital has increased from 1 to 1000, profits have increased from 1 to 100,000, and production has increased from 1 to 300,000.

DUTCH CHALLENGE,

It looked as though all competition was impossible, and \ yet a European company has been found bold enough to attack it, not only in Europe and Asia, but on its own ground of the United States. This was the Eoyal Dutch, allied to the Shell Company. Thirty odd years have sufficed to give it a unique position in the oil world. The Eoyal Dutch Oil Company was founded in 1890. Two years later further capital was required. The appeal to the public was a, failure, but in .1894 a dividend of 8 per cent was paid. In 1895 a further appeal for increased capital was successful and a 44 per cent dividend was declared. In 1897 the capital was further augmented, and the dividend increased to 52 per cent. The Standard Oil Company in 1898, becoming uneasy at the prosperity of its rival, tried to obtain control, but failed. In order to destroy its young competitor it sold in outside American markets at less than cost, which reduced the Dutch Company’s profit to 6 per cent, but in 1901 it again rose to 24 per cent, and during the Great War 45, 48 and 49 per cent was’paid, and in some years-, shareholders received dividends in shares of 200 per cent, thus tripling its .nominal capital. The Shell Transport and Trading Company, a young British company, was founded in the East and put up a keen competition with the Eoyal Dutch, but in 1902 between the two companies a commercial agreement was concluded, 40 per cent of the profits going to the Shell and 60 per cent to the Eoyal Dutch.

DETERDING HISTORY.

And now welcome to the hero of the history of oil supremacy —Henry Deterding, the skilful manager of the Royal Dutch. The Standard Oil considered China as its private property. It had taught the Chinese to use kerosene by distributing lamps free of charge, and when the Royal Dutch appeared as a competitor it was giving away 2,000,000 lamps per annum. The (Standard sold the refined oil at under cost, selling in the Far East at 50 per cent lower than iln Holland, (although this market was much nearer the American oilfield. Through this competition Deterding receipts from the sale of kerosene were reduced by 3J million dollars (£750,000), but he would not give way. He di!d not leave China; he stood his ground and fought. Later an agreement was reached by sharing the trade on a 50—50 basis, afterwards increased in favour of the Royal Dutch to 60 per cent. For the first time Deterding had conquered. After many attempts an understanding was reached whereby the quota, of oil that each group might send to the British markets was determined, and later a similar agreement with regard to the Far East.

The Standard made several tempting offers to the Royal Dutch, even going so far as to allow the Royal to make its own conditions. The Royal always refused, for the future was its own. .

What will happen to the Standard when the oil resources of the United States are exhausted? Since 1919 it has been endeavouring to acquire oil fields in the rest of the world to guard against this danger, but everywhere it finds the closed door. The Royal Dutch, aided by the British Government, has taken possession of all that remain in the world.

BOLD POLICY,

One day, to the great astonishment of everybody interested in the American oil industry, Deterding brought a cargo of oil to the United States and sold it under the very noses of the directors of the Standard Oil. Emboldened by this first success, he bought oil-bearing properties in Oklahoma and other territories. By a bold policy, and without recourse to the sharp practices of the Standard, Deterding revenged himself for the attack upon him in the Far East.

Of all the wars that Doterdiug has waged that of California is the most interesting. It required remarkable audacity for the Royal Dutch to establish itself on the very territory of the Standard in America. It triumphed over the coalition of the Standard and the independent oil companies. In 1916 the Royal Dutch controlled one-ninth of the American output, and i'n 1920 one-third of Its total production comes from the United States.

ENORMOUS CONTROL,

The Panama Canal itself is seriously menaced. The United States have spent more than 300 million dollarsr in constructing the canal, and now American vessels are going to be dependent upon the Royal Dutch for oil. Mr Deterding has a depot at one end of the canal and another at the entrance to the Gulf. He dominates American commerce. He followed the commercial example of Great Britain. He has stations at all the strategic points of the world. Ho also controls the Suez Canal at each end. The capacity of the refinery at Suez was increased by 7000 barrels per day, on account of the increase in the tonnage passing through the canal during the war. The Royal Dutch, controlling 80 companies, will give an idea of itho network which has spread over the whole world; and it is gratifying to note that one of the companies is operating in New Zealand under the title of the British Imperial Company.

■COLOSSUS SHAKEN,

The Standard Oil is- no longer the colossus of the world. It has never completely recovered from the judgment delivered against it in 1912. The very heavy taxation imposed upon it has also contributed to limit its powers of expansion. The American Government takes 44 per cent cent of its income in the form of taxes.

In 1920 Rockefeller himself paid Federal tax of 12 per cent and a super tax of 65 per cent, and the amount of taxation paid by him amounted to 14,800,000 dollars. This taxation is severely hampering Rockefeller and his associates.

Up to 1890 the Standard Oil reigned as absolute mistress of the oil market, both in Europe and America, but shortly the oil from the Caucasus, Galicia and Roumaniia began to break up this monopoly. European financial groups became more and more progressively interested in the new oil enterprises. Germany had formed an actual trust which, but for the war, would certainly have led to German control of all European oil.

The most skilful part of the policy of the Royal Dutch was to establish itself wherever there was any oil, while the Standard Confined itself almost exclusively to America.

The power of the Standard has diminished, and its control of oil is only effective in the United States, and even this control the Royal Dutch is striving to filch from it. It has formed a new trust, uniting the companies hitherto independent, and this trust has the financial support of the Morgans. It is particularly directed against the Standard Oil and an effort is to be made to group in another combine all Rockefeller’s competitors. British companies closely connected with the British Government are now in exclusive possession of 90 per cent, of the future world production. What a change in the situation!

“OIL WORLD’S NAPOLEON.”

If the Royal Dutch has succeeded in its amazing effort to reduce the power of the Standard Oil it is because it possessed a man who was worth millions, whom the Americans in their outspoken admiration have called the “Oil World’s Napoleon.” Henry Dcterding is his name.

“Mr Deterding is Napoleonic in boldness and Cromwellian in depth,” said Admiral Lord Fisher. “The strongest personality in the oil-world is no longer Rockefeller, but Deterding.” The Royal Dutch was established in 1890. Kessler, “Old Kessler,” as he was called, was chairman, with headquarters at Batavia. Needing an assistant, he engaged young Deterding, who was then employed in a bank at Batavia. Kessler died suddenly in 1900 and Deterding succeeded him. A combination of personal, political and economic forces resulted in the formation of the Royal Dutch, Shell group, now a world power. Under the laws of the United States a similar group would be impossible. Deterding’s profession of faith, so to speak, is summarised in the declaration he made to the Committee of Imperial Defence in 1913: “Oil is the most extraordinary article in the commercial world, and the only factor which retards its sale is its production. There is no other article in the world of which you can guarantee the consumption as long as you can produce it. In the case of oil, begin by guaranteeing the production, and consumption will look after itself. The great point for the Navy is to make certain of oil from a group which can draw its supplies from many different geographical points.”

CLEAR-CUT DECISIONS,

Deterding conducts his business like a soldier. He accepts or refuses a proposition once and for all. It is often dangerous not to fall in with his wishes. One corporation, with a capital of £1,150,000 in £1 shares, set itself against the will of Deterding, and at the end of the struggle the shares were Worth 6£d, at which price the Royal

Dutch bought and took control of the company. ' The establishment of close relations between the Royal-Dutch-Shcll and the British Government was one of the most noticeable activities of the oil world. It has not been proved that the British Government really controls the Royal Dutch, but well-informed people believe it does.

“Deterding knows more about the affairs of the Standard than the Standard itself.” This statement was made by a director of the American company. On one occasion he attended a board meeting of the Standard in order to tell the directors that they owed him a rebate for oil sold in his Chinese preserves, and that they must not sell any more, or it would be war. He spoke for 10 or 15 minutes. Without a note, he quoted details and even figures; for example, the exact number of gallons sold by the Standard in various places. After his departure, by referring to the shorthand report of his remarks, his statements were found to be accurate in every detail.

WAR AND OIL

It has been justly stated that “armies, navies, money, even entire populations, will count as jiothing against the lack of oil.” That the Allies won the Great War is in great part due to the two great trusts, Standard and Royal Dutch, which placed themselves at the service of the allies.

Germany before the whr imported 1,263,000 tons of oil, but from the very beginning of hostilities nearly all the sources of supply were closed to her, Germany, hemmed in on all sides, saw her last resources disappear when the Eastern front broke up.

“As Austria could not supply us with sufficient oil,” wrote Ludendorff in his memoirs, “and as all our efforts to increase production were unavailing, Roumanian oil was of decisive importance to us.” That is why the German General Staff fought so hard for Galicia, then for Roumania, and finally for the Caucasus. .

When the Eastern front gave way Germany’s resources vanished. She had only left her benzol, a little heavy oil and no lubricating oil. Her .motor lorries were not in use in calm periods —Ludendorff kept them for critical moments.

In December, 1917, M. Clemeilceau sent a telegram to President Wilson stating: “At the decisive moment of this war, \yhen the year 1918 will see military operations of the first importance begun on the French, front, the French Army must not be exposed for a single moment to a scarcity of the necessary petrol.” The supplies came forward, and Marshal Foch was able to fill up the gaps where the British front had been broken and execute his strategic surprises by the use his 92,000 motor lorries and the 50,000 tons of petrol month which was placed at his disposal.

Lord Curzon declared: “Truly posterity will say the Allies floated to victory on a wave of oil.” The war had shown the value of oil. BRITAIN’S TRIUMPH. The whole of the British Empire contains only 4 per cent, of the known resources of the globe. Great Britain, to maintain her world supremacy, resolved to win the control of oil as she had done that of coal. It was the silent task of a few men; their proceedings were unknown even to people interested. They decided to wrest from America the mastery of the oil world. They laid their plans in silence and followed them for years with determination. They sank millions of carried on intrigue in every corner of the world, and even fomented revolutions. Why? To gain money or honours? No, These men counted their wealth in millions. In Britain there is a tradition that a successful business man has obligations towards the society in Which he has amassed his wealth. “It is to this tradition that Britain owes her great loaders. It is those leaders who have created her world empire.” Notwithstanding Britain’s slow, circumspect, cautious, deliberate and staid actions as compared with the American peremptory, quick, instant and impetuous character, sleepy old England has achieved a result that will materially assist in paying part of the £IOO,OOO per day for the next 62 years which is due to America.