18 JANUARY 1957, Page 29


By NICHOLAS DAVENPORT WI1AT is lacking in the new Prime Minister's Cabinet is a separate Minister for Petroleum— the vital fuel which is to fill the power gap in the critical period before nuclear power can come to our aid. Today's muddle over petrol ration- ing is laid at the door of the old Ministry of Fuel and Power and Mr. Macmillan has not helped by handing it all over to a new Ministry of Power which is to take care of steel as well. The fact that a prominent industrialist, who advised Mr. Macmillan on his housing drive, is called in to take charge suggests that he has been told to concentrate on the building of nuclear power stations. But at the moment we arc desperately short of oil—and Sir Percy Mills knows nothing about the complicated oil industry. I suggest that Mr. Macmillan should write him a letter in the following terms:

'Dear Percy [I assume from the published exchange of letters with his Ministers that Mr. Macmillan is on Christian-name terms with all members of this matey Cabinet], 1 would like you to forget about those nuclear power stations for the moment and concentrate on getting us some more oil from America--damned quickly! Otherwise we may run into serious unemploy- ment. The set-up in the American oil industry is quite fantastic but fortunately you do not have to deal with Foster Dulles or any other impossible mandarin. You just have to fly over to Dallas or Houston and see the so-called "three wise men of Texas' who constitute the Texas Railroad Com- mission which regulates the flow of oil in that State. Texas accounts for about 42 per cent, of the entire American oil production and it is the only State which can immediately raise its daily output and export it to Europe. But it is extremely touchy about outside interference. As an Ameri- can official said the other day : "Tell the British that the independent State of Texas is a good deal more independent of Washington than the independent State of Great Britain." The citizens of Texas elect the "three wise men" of the Rail- road Commission (why "railroad"?) for a period of six years and charge them with the administra- tion of the oil-conservation laws. They have to prevent waste, which is defined as "production of crude oil in excess of transportation or market facilities or reasonable market demand." They actually assess market demand each month and then fix an "allowable" output, which is expressed as a fraction of the MER—the maximum efficient rate of extraction. This month it is sixteen days, that is sixteen-thirty-firsts of MER, and each well's output will be fixed at not much over half capacity! Can you beat it? I am told that this funny business has resulted in largely increasing the extraction rate for Texas oilfields, so for heaven's sake don't criticise them! Praise their almighty wisdom! But see if you can't get them to increase the "allowable" for February at their meeting on Friday. Otherwise I fear the American export to Europe will fall well below the planned 500.000 barrels a day on which we were relying to main- tain supplies at only 75 per cent. of our require- ments. If it sinks below that, it will be serious for Your steel industry and indeed for all of us.

'Before calling on the "three wise men" of Texas I advise you to sec a representative of one of the "big five" of the fifteen companies form- ing the US Middle East Emergency Oil Com- mittee. The most important will be the Standard Oil of New Jersey man. His subsidiary, the Humble Oil and Refining, which is the biggest buyer of Texas crude oil, increased its buying price two weeks ago by 12 per cent. This is a body-blow to our balance of payments, but I dare say it will get more oil on the tankers. With- out a substantial bribe I did not expect the independent companies in Texas would budge: many of them, having surplus stocks in the interior which cannot be moved by pipeline down to the coast, have so far strongly opposed in- creasing the "allowables" of the more accessible wells. The higher price might make it economic for them to ship their surplus by railway tank car to the coast. Don't quarrel over the price. We can safely leave it to an irate Democrat senator to raise the question of monopolistic price-fixing. See what the Standard Oil man advises. I am convinced that America could produce an extra two million barrels of oil a day—far more than we need—if only we knew how to "oil" the wheels. So don't come back and tell me "There ain't gonna be more oil." Yours ever, Harold.

PS: I know all about The Spectator's oil bank proposal, but I'm not Churchill and Ike isn't Roosevelt Lend-lease in oil will have to wait till the third world war. Just now we're having a cold war with America.'

The extraordinary fact is that the Washington Government is doing nothing to help us get American oil in this emergency. It is merely trying to get its own oil out of the Middle East. Just after Christmas a firm of Stock Exchange brokers sent out a circular on oil shares to their clients which contained this sentence: 'Because the energy requirements of the USA as well as those of the UK and Western Europe cannot be fully met without drawing upon a greatly increased production from the Middle East we hold the view that the American Government is bound to give priority in its foreign policy to such a settle- ment of the Arab problem as will enable oil to flow through the pipelines, etc.' How right they were! Oil investors should take note—and not forget the 'big oil five' of America as well as the 'big three' over here.