PETROLEUM. 
13 
Production and consumption, of course, can not coincide in amount ; 
lienee, of necessity, there are reserves of petroleum above ground 
which serve as an expansion and contraction joint, so to speak, be- 
tween supply and demand. When there is an overproduction in re- 
spect to current needs, the reserves or, as commonly termed, the stocks 
increase; conversely, with industrial expansion or lessened output, 
drafts are made upon the stocks, which then decrease. The condition 
of the stocks, therefore, is a sort of pulse to the crude-oil market, 
since prices, under the influence of the same factor of supply and 
demand, fluctuate in like manner. The stocks, under conditions of 
unorganized production, have come to be unusually great during the 
past few years, representing roughly in 1916 a six-months’ supply. 1 
At the present time, under war conditions, the stocks are being 
rapidly depleted to meet a consumptive demand which is greater 
than the productive capacity of the country. 
The price of crude petroleum at the well varies considerably ac- 
cording to quality, distance from market, and other factors. The 
paraffin oils of light gravity, such as those produced in Pennsylvania, 
are the most valuable because they yield the largest percentage of 
products in demand, while the asphaltic oils of heavy gravity, such 
as those of California and part of the Gulf region, command a price 
roughly a fourth of that which the best quality oil enjoys. Thus the 
Pennsylvania crude commenced 1915 with a price of about $1.50 a 
barrel and ended 1917 at about $3.75, while during the same period 
California crude 2 3 climbed from about 35 cents to practically $1. 
These two types of oil represent the extremes of quality, with the 
factor of distance from markets nearly the same in the two instances. 
Between these limits range the prices of all the other oils of the 
country, the quotation at any given time and location being a com- 
plex of quality and of balance between supply and demand, with all 
the qualifications that the latter expression involves. The wide range 
in prices for a single raw material, with the utmost concession to dif- 
ferences in location and composition, suggests an undue discrepancy 
to be credited against the conditions under which oil is produced. 
The dependence of sustained production upon an unbroken cam- 
paign of drilling exploration, and the extent to which such a cam- 
paign is carried on by “ wildcat ” operations on the part of small 
companies and individuals, lead to many perplexing legal and eco- 
nomic difficulties. Land, of course, is rarely owned by the operator, 
so that he must ordinarily either purchase or lease the oil (and gas) 
right. The laws connected with oil lands have not been modernized, 
but are confusing and in part conflicting, so that the operator is put 
1 The stocks have been estimated as follows : On hand Jan. 1, 1916, 186,000,000 barrels ; 
on hand Jan. 1, 1917, 174,000,000 barrels; on hand Jan. 1, 1918, 153,000,000 barrels. 
3 That below 18° Baume in gravity. 
