THE PETROLEUM CULTURE
147
the name Caltex, while the Saudi part of the partnership became
known as xi (Arabian American Oil Company).
On October 3 1930, an independent wildcatter discovered the
giant East Texas field, and more crude oil began to flow into the
US domestic market in 1931. The oil companies began to buy up
leases in the new fields, but the quantity of oil was too great to be
absorbed easily, and the East Texas fields were soon producing a
million barrels a day, one-third of all United States production.
The major oil companies had control over crude oil refining and
product marketing through a system that was already tightly controlled. The companies could, in fact, state what they would pay for
crude oil from the new fields and, as the new oil began to flow, that
price was about $0.70 per barrel. At this time, the oil companies were
concerned about overproduction because it was clear that pumping
oil too rapidly from a field could damage long-term production. As
a result, in November 1932, the Texas legislature passed the Market
Demand Act, which defined prohibitable waste as any production
that was in excess of market demand. As soon as the Act became
law, the majors dropped their offering price to $0.25 per barrel on
January 1933, and then to $0.10 per barrel. Production was cut dramatically as market demand dropped. The major companies then
stepped in and bought up tens of millions of barrels at extremely
low prices before many of the independents went out of business.
In 1935, the Congress of the United States passed an Interstate
Compact to Conserve Oil and Gas, as well as the Connally Act,
which assigned production quotas to each State and the legislation was used to hold down production in order to maintain stable prices. Another impact on United States domestic oil supplies
was the policy decision to serve the domestic market largely from
American oil wells so that the United States would not become too
dependent on foreign oil and the cheap foreign oil was kept out of
the United States while domestic fields were being depleted.
In 1947, oil profits were high. Saudi Arabian crude oil cost $0.19
a barrel plus $0.21 royalty, and Bahrain oil cost $0.10 a barrel plus
$0.15 royalty. Consumers were paying $1.80 a barrel and more
for that same crude oil. Profit margins increased in the 1950s and
1960s while production costs decreased. The volume of oil shipped
increased, and the advent of supertankers decreased shipping costs
while selling prices were increased. In the late 1960s, Middle East
oil that was delivered to Europe and the United States at $2.00 or
more per barrel had cost much less to produce and transport; some
147
the name Caltex, while the Saudi part of the partnership became
known as xi (Arabian American Oil Company).
On October 3 1930, an independent wildcatter discovered the
giant East Texas field, and more crude oil began to flow into the
US domestic market in 1931. The oil companies began to buy up
leases in the new fields, but the quantity of oil was too great to be
absorbed easily, and the East Texas fields were soon producing a
million barrels a day, one-third of all United States production.
The major oil companies had control over crude oil refining and
product marketing through a system that was already tightly controlled. The companies could, in fact, state what they would pay for
crude oil from the new fields and, as the new oil began to flow, that
price was about $0.70 per barrel. At this time, the oil companies were
concerned about overproduction because it was clear that pumping
oil too rapidly from a field could damage long-term production. As
a result, in November 1932, the Texas legislature passed the Market
Demand Act, which defined prohibitable waste as any production
that was in excess of market demand. As soon as the Act became
law, the majors dropped their offering price to $0.25 per barrel on
January 1933, and then to $0.10 per barrel. Production was cut dramatically as market demand dropped. The major companies then
stepped in and bought up tens of millions of barrels at extremely
low prices before many of the independents went out of business.
In 1935, the Congress of the United States passed an Interstate
Compact to Conserve Oil and Gas, as well as the Connally Act,
which assigned production quotas to each State and the legislation was used to hold down production in order to maintain stable prices. Another impact on United States domestic oil supplies
was the policy decision to serve the domestic market largely from
American oil wells so that the United States would not become too
dependent on foreign oil and the cheap foreign oil was kept out of
the United States while domestic fields were being depleted.
In 1947, oil profits were high. Saudi Arabian crude oil cost $0.19
a barrel plus $0.21 royalty, and Bahrain oil cost $0.10 a barrel plus
$0.15 royalty. Consumers were paying $1.80 a barrel and more
for that same crude oil. Profit margins increased in the 1950s and
1960s while production costs decreased. The volume of oil shipped
increased, and the advent of supertankers decreased shipping costs
while selling prices were increased. In the late 1960s, Middle East
oil that was delivered to Europe and the United States at $2.00 or
more per barrel had cost much less to produce and transport; some