Drilling for Black Gold with “The Oil Age,” 14 March 1923

by Paul R. Spitzzeri

Today marked the historic confirmation of Deb Haaland as the Secretary of the Interior, making her the first Native American to serve on a presidential cabinet, three years after she was elected as one of the first pair of Native American women in Congress. Among her responsibilities with the Department of the Interior is broad oversight of the development of natural resources, including oil and gas, and she faced considerable questioning from Republicans about her past statements on fossil fuel extraction while she answered that she would be putting forward policies developed by the president.

Tonight’s highlighted historic artifact from the Homestead’s holdings take us back almost a century with the 14 March 1923 issue of the Los Angeles-based oil industry publication The Oil Age when the development of oil and gas resources were ramping up considerably with government support and encouragement and concerns about greenhouse gas emissions, climate change, and conflicts on energy policy surounding these were far off into the future.

In fact, one of the major issues in California at the time had to do with the problem of rampant fraud among oil stock speculators and the publication lauded the state’s corporation commissioner Edwin M. Daugherty as he had “announced his determination to prosecute to the limit all violators of the Corporate Securities Act” and then quickly got to work with the arrest of stock salespeople in the booming Signal Hills field, where Walter Temple was one of many firms seeking a bonanza.


The article continued that “these men and women are said to have been operating without permits” and that Los Angeles County officials, working in conjunction with state agents, reported “that a number of persons have been victimized by speculators who work entirely in the oil fields, approaching visitors and selling them stock under false pretences.” Moreover, “their business is so shady that they do not have offices, and do not dare to apply for State permits to sell stock.” This isn’t the same problem that made huge news later with the shenanigans of the notorious C.C. Julian, but Daugherty and his department had plenty to do in trying to police corporate activities in the rollicking oil world.

Another interesting little item concerned statements made by the populist Wisconsin Senator Robert M. La Follette that American consumers should steel themselves to pay “at least a dollar a gallon for gasoline,” because of expected issues with supply and price. This led the head of Standard Oil Company of California (which operated on the Temple family’s lease near Montebello), Kenneth R. Kingsbury to retort that the senator’s claims were uttered to rationalize an investigation he was making “and to frighten the public into supporting whatever further campaign against the oil industry he plans to make.”


Kingsbury added that “not in years has gasoline been as cheap as it is today on the Pacific Coast” and that “the present generation will never see dollar gasoline here.” The official continued that “when the price of any comodity goes beyond the point at which satisfactory substitutes can be purchased, there will be no buyers for it.” It would, in fact, be decades before gas cost a dollar a gallon and I can remember twenty years ago when the price actually dipped just below that for a brief period!

A very informative article by Wayne Loel and Van Court Warren on “Oil Development in California During 1922,” which was read to a group at the American Institute of Mining and Metallurgical Engineers’ Division of Petroleum Technology in New York a few weeks prior. The piece noted that, while commenting on the state broadly, there was “special emphasis on the extraordinary status of the recently discovered fields in the Los Angels basin.” It was added that “had it not been for the enormous production of the new fields in the southern part, California would not now be facing an oil crisis, comparable only to that brought about by the abnormal conditions in 1913.”

For 1922, statewide production was nearly 140 million barrels, a growth of nearly a quarter from the prior year and “this extraordinary increase was brought about by the three fields [Huntington Beach, Long Beach and Santa Fe Springs] recently discovered in the Los Angeles basin,” and which by themselves yielded more crude than the rest of the state. The problem was that some 25 million barrels had to be placed in storage as no market could be found for all this surplus petroleum. Efforts to reduce production were hampered “because each of the new fields in situated on land subdivided into city lots, thus enabling hundreds of small companies to drain the pool as rapidly as possible.”


The rampage in production meant “an enormous proportionate cost” as “extraordinary facilities are needed to handle the peak output, which must afterwards be scrapped unless new pools are discovered as fast as the old ones are exhausted, which condition is not likely to continue over many years.” It was stated that, excepting the trio of new fields, the rest in the state “are now past their peak.” One figure noted the production at a half-dozen regional fields and it was observed that “the effect of rapid development is in evidence in both Montebello [where the Temple lease was located] and Richfield [in northeastern Orange County], where the peak has been reached in 2 years, followed by a rapid decline.”

This issue would become an increasingly problematic one for Walter Temple, who derived his small fortune from royalties coming from the Standard Oil-drilled wells at his Montebello lease and then sought to replicate that success in many places, including Huntington Beach and Signal Hill, to little avail, while he ramped up investment in speculative real estate ventures and poured large sums in improvements at the Homestead, including the building of his home, La Casa Nueva.


As to state production, the authors noted that there was “a forced drilling campaign, induced by high prices and unusual consumption,” that rose to its heights in 1918, after which there would have been a drop in production, except for the stunning success of Elk Hills in the lower San Joaquin Valley and at Richfield, leading to another major growth period through 1921. Following this was the inauguration of that “Big Three” mentioned above, which drove production up again the following year.

It was forecast that another peak would be hit in 1923, but “a rapid decline may not take place at once, for a few more new fields may be discovered” or older ones might have deeper pools to tap. Because of improvements in rotary drilling technology, it was assumed “that when the new territory has been exploited, the final decline for California will be very rapid, instead of gradually declining as have some of our older fields.” The future, though, would show that decline to be decades away.


As to those new super-producers, Huntington Beach, the earliest, did not blow up until a third sand area was found the prior summer,but, by the end of 1922, some 2 million barrels were extracted a month, though it was predicted it would not go to much higher “since the present low price of oil will retard the drilling” in the field. Santa Fe Springs was said to be in the same situation, while Long Beach was considered to be “probably in a little better position as the second sand is wonderfully productive” and that a third appeared to be present, keeping produtction high “for a considable time.”

With respect to refineries, there were many new small facilities “due to the abnormal increase in production of refinable oil in the Southern California fields, together with a considerable increase in the consumption of gasoline.” A problem, however, was the refineries were not keeping up to the production from wells “so that a large quantity of high-grade oil is going into storage.” Once the boom in production was over, it was assumed that many refineies would either close or be taken over by bigger companies.


Concerning storage, the amount of oil thus handled went up from 68 million barrels in early 1920 to 78 million about two years later, with about two-thirds of that in northern California, though “because of the increase in production from the Los Angeles basin, practically all of the new storage is being built in the southern part of the state. In the latter part of 1922, 6 million barrel capacity facilities were finished locally, as opposed to a million in the north, taking total capacity to 85 million barrels. Of this, the American Petroleum Institute, provided an exact figure of just over 61 million barrels in storage, leaving some 23 million available. Of those stocks, about two-thirds was heavy crude and the remainder refinable and of lighter grade.

For transport, it was reported that there were no new pipelines built during the past year, outside of some extensions to newer fields, but, it was added, “there has been much activity in the way of increasing the storage and bunkering facilities at Los Angeles harbor, brought about by the increased exports to the eastern seaboard.” It was cheaper, moreover, to ship oil via the Panama Canal than from mid-American fields by pipeline. With so much excess product, as noted above, there were plenty of oil tankers at the ready for shipment and 30 million barrels were shipped out and an expected 20 million more for 1923.


It is interesting to note the statement that “prices in California are fixed by the Standard Oil Co., with the co-operation of the other large companies.” In addition, it was stated that “there has never been any arbitrary control of prices in the state for, by reason of its isolation, the natural law of supply and demand has been sufficient.”

A section titled “Late Financial Reports” showed sales and closing quotations for oil companies on the stock exchanges of Los Angeles and San Francisco, and it was observed that, as stock in Union Oil Associates was rising, “there is some talk of the Shell Company buying this stock in an effort to get control” of its competitor. As noted here previously, Shell’s attempt was staved off by the formation of Union Oil Associates from the mother firm of Union Oil of California. Otherwise prices did not change markedly for quotations at either exchange in the past week.

More useful statistical material can be found in the “With The Refiners and Marketers” section, showing changes in refineries between 1914, 1919 and 1921 thanks to information provided by the Bureau of the Census in the Department of Commerce. The number of facilities more than doubled in seven years and the work force grew from 31,000 to over 74,000, while the value of products leapt from just under 400 million to over 1.7 million dollars.


As for California refineries, a table showed over 50 in operation with eight more projected. Of the existing facilities, the largest were Standard’s large ones in Richmond (opened in 1902 and with a 60,000 barrel daily capacity) and El Segundo (opened in 1911 as “The Second” refinery at 55,000 capacity), while its Bakersfield refinery, launched in 1912, had a capacity of 20,000. Associated Oil, with a refinery opened in 1913 in Avon, near Martinez, northeast of the Bay Area, had a 35,000 barrel capacity, while Union’s Los Angeles facility, brought on line in 1917, could refine up to 32,000 a day. Just behind were Shell’s Martinez refinery and that of General Petroleium in Vernon, opened in 1912, at 30,000 each.

The oldest of the state’s refineries was in Fresno (1882), though F.P.F. Temple built a modest steam-powered one at Newhall in the mid-Seventies. There were three other operating facilities dating to the 1890s, including a small Shell refinery at Chino and the Harbor Refining Company’s Los Angeles plant. All eight of the projected plants were in the Los Angeles area, with one at Huntington Beach, another at Vernon, one in Hynes (Paramount) and the rest in Long Beach, Wilmington and Los Angeles. These were mostly small with a combined capacity of 27,000 barrels, more than half at the Wilmington refinery of the Blue Tank Pipe Line and Refining concern.


For production, there were statistics by types of oil, including gasoline (from $1.2 to $5.1 gallons valued from $106 million to over $840 million from 1914 to 1921); illuminating oil (only a slight increase in production at just below 2 million gallons, but the value jumoing from $97 million to over $150 million), fuel oil (458 million to 1.2 billion gallons and valuation from $16 million to nearly $60 million), and lubricating oils (518 million to 949 million gallons at values from $56 million to nearly $195 million) among others.


There is much to be learned in industry journals and company magazines, such as the bulletins of the Standard and Union companies, and the Homestead has a decent collection of such publications, so more of these will appear under the “Drilling for Black Gold” heading.

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