seemed to include the removal or reduction of competition in the marketing end of the petroleum industry by entirely cutting or shortening the supplies of peddlers, dealers, jobbers, brokers, and even independent refiners. By reducing the competition in marketing the integrated companies intended to expand, and did expand their own direct marketing operations thus gaining a tighter control over an already almost dominated branch of the oil industry. Committee investigators interviewed and secured affidavits of many of the Chicago peddlers who were on their way out of business in July of 1947. The committee acted swiftly in the appointment of the special committee on oil and started its field hearings in Chicago in August of 1947. There followed numerous hearings in the field at Omaha, Nebr., Kansas City, Mo., Great Falls, Mont., and Los Angeles, Calif. The balance of the hearings were held in Washington, D. C. THE SURVEY In the fall of 1947, while the hearings were continuing, the committee undertook an extensive survey of the refining industry. Questionnaires were sent to all the major and independent oil refiners in the United States. Seventeen major oil companies, operating 100 refineries and 113 independent refiners, were questioned. The chart on the opposite page graphically presents the results. Typical answers received to both questionnaire A (relating to total purchases and receipts of refined petroleum products by integrated refiners from others) and questionnaire B (relating to refinery operations of integrated companies) appear in the record. 19 The integrated companies and the independent refineries both showed increases in crude oil processed for the first 6 months of 1947 over the same period of 1946. The integrated companies processed in their refineries 557,941,000 barrels of crude oil during the first 6 months of 1947 as compared with 56,289,000 barrels processed during the same period by the independent refiners. Thus, the independent refiners were processing about 10 percent of that processed by the integrated refiners. But as a greater portion of the independent refiners' product was being marketed by the integrated companies, because of direct purchase of the product or processing contracts whereby crude oil was furnished to the independent refiner and the product taken off his hands, the supply of product by the independent refiner to consumers, dealers, peddlers, or jobbers was actually less in 1947 than in 1946. The survey also revealed that the integrated refineries were operating in 1947 at 94.6 percent of capacity, while the independents were operating at 69.5 percent of capacity, with 20.5 percent being refined for other companies through processing deals. Had the crude oil been made available by the oil-producing States, the independent refiners could have run at capacity and prevented any real shortages on the domestic front. 19 Hearings, pt. 10, appendix, pp. 1303-1308. Attention should be called to the fact that the integrated refineries increased the amount of oil processed in the first 6 months of 1947, by 3.6 percent over the like period of 1946, whereas the independent refiners increased their runs by 4.1 percent. However, the 113 independent refiners reported an increase of 25.9 percent in sales of refined products to other refiners (mostly integrated). The integrated companies distributed 14.1 percent more refined products through company-owned bulk stations in the first 6 months of 1947 over the same period of 1946. This represented 11,889,000,000 gallons in the 1947 period over 10,418,000,000 in the 1946 period. With only a 3.6 percent increase in crude oil processed shown by the integrated companies, and a 14.1 percent increase in distribution through their company-owned bulk stations, the figures would indicate that this difference must be accounted for by purchases of refined products from independent refiners or the result of processing agreements. The trend of increase in direct distribution by the integrated oil companies in early 1947 is indicated by the following typical figures from their questionnaires: Direct distribution of refined petroleum products through bulk stations owned, leased, or operated in 12 Midwestern States of Ohio, Indiana, Michigan, Illinois, Wisconsin, Minnesota, Iowa, Missouri, Kansas, Nebraska, North Dakota, and South Dakota-6 months. While the national survey of direct distribution by the integrated companies was not completed, the replies to the questionnaires received indicated the same tendency to expand direct distribution. For example, the Atlantic Refining Co. replied that its total gallonage of refined petroleum products distributed through its own bulk stations (owned or leased by the company and operated by the company, or operated by commission agent or lessee) in the United States for the first 6 months of 1946 was 753,765,242 gallons while in the first 6 months of 1947 it was 942,710,909 gallons. THE OIL PEDDLER In the larger cities of the country there exist great numbers of independent oil dealers who do not have their own storage and in many cases no fixed source of supply. These operators range in size from single trucks to whole fleets. Apparently there is difficulty in many metropolitan areas in the securing of bulk plant or terminal sights and these dealers or "peddlers" as the representative of an integrated company chose to call them,20 habitually buy their supplies from a refiner, terminal, or bulk-plant operator. They pay cash on receipt, and deliver fuel oils and kerosene to the consumers; usually householders but in many cases industrial accounts. At the first committee hearing in Chicago, great numbers of these tank-truck dealers appeared in person. Their association representative (claiming to represent 90 such dealers) protested verbally and by affidavit 21 that the dealer pioneered the fuel-oil trade 22 over many years; that in prior years the refiners even gave them a bonus for their business; 23 that many dealers had been positively cut off from a source of supply for fuel oils,24 many substantially reduced in supply; 25 that 20 carefully canvassed showed they had been cut 62 percent from their former year's supply; 26 that some had been offered a quarter of a cent a gallon 27 to turn over their accounts and cease Hearings, pt. 10, p. 1298. pt. 9, p. 1072. "Hearings, pt. 9, pp. 1057-1068. ?? Hearings, pt. 9, pp. 1050, 1052. 23 Hearings, pt. 9, p. 1088. 24 Hearings, pt. 9, pp. 1055, 1057, 1068. 25 Hearings, pt. 9, pp. 1050, 1080. 24 Hearings, pt. 9, p. 1054. 27 Hearings, pt. 9, p. 1051. business; 28 that the integrated companies were encouraging the sale of oil burners 29 guaranteeing to supply fuel oil to consumers 30 and taking on new business; 31 and, that their margins had been cut and the prices they paid raised to them.32 Many of the complaints of the dealers were against terminal operators who, when called to testify, stated that they purchased from refiners that had not as yet given them a commitment for the 1947-48 heating-oil season.33 One of the large suppliers of fuel oil to jobbers and terminal operators in the Chicago area, Standard Oil Co. (Indiana), before the hearings concluded in Chicago agreed to deliver to their customers an amount of fuel oil during the 1947-48 heating season equivalent to that which was delivered in the 1946-47 season, the same as their own outlets, and if they had any additional the wholesale customers would be treated in the same manner as their own outlets.34 Another, Cities Service Oil Co., committed itself to sell independent fuel-oil dealers the same quantity of fuel oil that they purchased from them the previous year and to better it if their supply could be enlarged.3 While the situation with the tank-truck dealers in Chicago was not completely settled at the hearings the ground work was laid for the committee staff members to handle the complaints. Gradually all of the suppliers adopted the formula of giving a supply equal to the previous year and to participate in any surplus.* There are in operation today many, many tank-truck dealers who, had conditions continued on their course through the 1947-48 heating-oil season, would have been out of business. The spotlight of a public hearing, the generosity of suppliers, or the fear of legislation, whatever the cause, the result has been an aid in perpetuating American small business. THE INDEPENDENT OIL JOBBER As has been pointed out the independent oil jobber may handle one line of refined petroleum products, such as gasoline, or fuel oils, or he may be a full-line jobber. Many complaints were heard from jobbers both at open hearings and by letter. A Chicago jobber, appearing at the Chicago hearing, testified that Cities Service had reduced his future fuel-oil supply to 40 percent of normal 36 and that in buying supplies on the open market through brokers he had to pay a premium of over 2 cents per gallon.37 An independent oil jobber 38 from Fort Wayne, Ind., who for many years had purchased fuel oil from an independent refiner in Michigan was refused fuel oil for the 1947-48 season. The independent refiner 39 was unable to secure sufficient crude oil, and Gulf Refining Co. refused to deliver the amount delivered in former years unless processed for their account. By refusing to accept such a processing deal the independent refiner lost the crude oil and could not supply fuel oil to the 28 Hearings, pt. 9, pp. 1050, 1072-1073. 29 Hearings, pt. 9, p. 1048, pt. 10, pp. 1310-1312. 30 Hearings, pt. 9, p. 1045. 31 Hearings, pt. 9, pp. 1048, 1051–1053. 32 Hearings, pt. 9, pp. 1048, 1069. Hearings, pt. 10, pp. 1281, 1282. "Hearings, pt. 10, p. 1217. 35 Hearings, pt. 10, p. 1232. 36 Hearings, pt. 10, p. 1186. #7 Hearings, pt. 10, p. 1189. 38 Hearings, pt. 9, pp. 1122-1130, 1140. "Hearings, pt. 9, p. 1132. *Referred to in hearings as the "Wherry formula." |