Control of California Oil Curtailment

Abstract

The organized curtailment of California oil production is not yet one yearold but during its first year it has accomplished so much that it is now firmlyestablished as an agency of economic efficiency. The principle of cooperativecurtailment has been adopted by other states and it is safe to say that theprinciple will continue as long as the demand for petroleum is notably lessthan the potential production. It is interesting to note that this sameprinciple of regulating supply to meet demand is now being urged for otherindustries, such as agriculture and mining.Since Oct. 31, 1929, when curtailment was instituted by the oil producers ofSanta Fe Springs and Long Beach in an effort to avert the disaster of ruinouslylow prices which confronted them, there has been a constant and increasingly effective curtailment program in California. Prior to that time a notableeffort toward the restriction of oil production was made under the direction ofF. C. Van Deinse during the early summer months of 1929. A considerablereduction of oil output was recorded as the result of this effort, but becauseof incomplete cooperation and the discovery of still deeper zones at Santa FeSprings the effort was abandoned; flush field production became unrestrainedand prices soon fell to low levels.This initial curtailment movement was educational and experimental.It showed all operators a way out of their overproduction difficulties anddeveloped the principles followed in later curtailment efforts. Thus it wasthat only a few days after their oil had been reduced to 60 c. per barrel, theoperators of Santa Fe Springs got together and agreed to restrict their currentproduction of more than 270,000 bbl. daily to not more than 150,000 bbl. daily.The operators at Long Beach followed the same course a few days later andagreed to limit their production to not more than 110,000 bbl. daily.The Santa Fe Springs operators chose H. P. Grimm as umpire and director oftheir proration program. Neal H. Anderson was chosen umpire for Long Beach.Since that time, as the need for curtailment has increased, practically everyfield of the state has come under the curtailment of these two umpires.