OIL SHARES AND PETROL PRICES
While I must confess to some surprise at the sudden reduc- tion in petrol prices, I have not changed my view of the pro- spects of either the oil industry or oil shares. A cut in petrol prices based on a reduction in crude prices in the United States would have had serious implications, but that is not the way events have moved. Export prices from the Gulf ports, so far from declining, have been as firm as a rock, so firm indeed that many people- here had been looking for Is. 8d. rather than Is. 7d. petrol before the autumn. Why, then, the id. reduc- tion ? My own guess is that prices have been reduced partly because tanker freight rates have fallen since the spring and partly because the distributing companies, with an expanding market to serve, have found their costs per unit have been falling
The big combines, one may be sure, have definite ideas of the proportion of the total sales they feel they ought to maintain, so that another factor influencing the decision to cut prices may have been the active expansion policy followed by several of the smaller groups. I have no doubts that in recent months the British petrol market has been a very profitable field of operations such as has encouraged the small distributors to stretch out for every gallon of the increase in sales. In these conditions, the bigger units in the market may have felt that the time, as well as the bpportunity, had come to curb any tendency towards excessive enthusiasm. In any event, the statistical position of oil in the United States is so strong and profit- margins are still so satisfactory that the holder of oil shares should not lose any sleep.
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