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Unformatted text preview: 13. The Flood 13. The Flood Dad Joiner Columbus Joiner Wildcat promoter Believed that there was a great amount of oil in East Texas Was convinced of this by Doc Lloyd, a selfeducated, self proclaimed geologist and a “trendologist”. Told Joiner exactly where to drill! Doc Lloyd is the one in the center of this picture shaking the hand of Dad Joiner 2 The Black Giant East Texas Reservoir 45 miles long, 510 miles wide, encompassing 140,000 acres altogether Field became known as the Black Giant Made all the earlier booms look like dress rehearsals!
3 Rising Supply, Falling Prices Prices fell and fell from $1.85/ bbl in 1926 to $0.15/bbl in 1931 East Texas oil production One thousand wells had been completed 6 months after discovery, area producing 340k bbl 4 Dan Joiner’s Black Giant QuickTime ™ and a YUV420 codec decompressor are needed to see this picture. 5 Discussion Questions Why did prices fall so sharply? What do you think of the governor’s action? 6 An Attempt for Order Texas Railroad Commission Prevent “physical waste” in oil production, but forbidden to stop “economic waste” Tried to get around this legislation
• If prices too low, all stripper wells shut down “Alfalfa Bill” Murray, governor of Ok, declared state of emergency Texas governor sent in several thousand guards and Texas Rangers Texas passed prorationing but set quotas too high
7 Hot Oil Hot Oil Term given to the excess oil that was illegally produced above the allowable quotas Smuggled out of Texas and Oklahoma across borders into other states One of the major reasons that price had fallen again State governments were not enough, the federal government need to step in and regulate the oil industry
8 The Feds Step In Ickes (the reformer) began an allout campaign against the “hot oiler” 1933: President had explicit power to ban and interdict “hot oil” from entering interstate commerce Oil Code Haunted by legacy of Teapot Dome Established under the National Industry Recovery Act (NIRA) Gave Ickes extraordinary power
• Set monthly quotas • Allowed states to proration and set levels of production 9 Further Legislation Supreme Court Connally Hot Oil Act (After Sen. Tom Connally) Overturned subsection of NIRA prohibiting hot oil (1/1935) Ruled much of NIRA unconstitutional (6/1935) Provided sufficient police powers to curtail hot oil States were not required to accept that level, however most acted on federally suggested level 1935: Establishment of Interstate Oil Compact Provided a forum for states to exchange information and plans, to standardize legislation, and to coordinate prorationing and conservation in production
10 10 Role of states was further formalized Emergence of Regulation QuickTime ™ and a YUV420 codec decompressor are needed to see this picture. 11 11 Discussion What did you think of Harold Ickes? So what got the industry to adopt unitization? What was the great irony for the oil industry between 1920 and 1932? 12 12 Tariff Imposed on Imports A tariff was also put into place for imported foreign oil Imports dropped from 912% to 5% 21 cents/bbl was imposed on crude and fuel oil $1.05 was put into place for gasoline Venezuela was the hardest hit country – it then overtook the U.S. and became Europe’s largest supplier
13 13 Stability
Finally, there was a regulatory system in place for the oil industry Two compelling assumptions central to the system: Entry of Illinois in late 1930s – Texas & Oklahoma cut back production to make way for Illinois crude Dollar a barrel rally cry was realized! Demand for oil is not responsive to price Each state had its “natural” share of the market 14 14 ...
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- Spring '07