by Paul R. Spitzzeri
In the wake of the recently concluded 28th meeting of the Conference of the Parties, held by the United Nations and which refers to those governments which signed on the a pledge to deal meaningfully with climate change, there are, naturally, varying points of view on the success of the gathering. Some note the continuing intransigence of many oil producing countries which demur from accepting the phasing out of fossil fuel use instead of a gradual phasing down, while others pointed out that this was the first time that idea of shifting away from oil and gas was agreed upon at one of these conferences. While some representatives were cautiously optimistic that the future focus will be on renewable energy, others were disappointed that more was not included in the final text to commit more concretely to the reduction in fossil fuel production.
Then came the recent news that 2023 will mark a record year of oil production by any one country in history and that nation was the United States. While there are major initiatives toward what some call a “clean energy revolution” in America, with hundreds of billions of dollars directed toward it and the Biden Administration began its term in 2021 with action on ending the Keystone XL pipeline project and a ban on oil leases on federal lands (though this was overturned by the courts), the Russian invasion of Ukraine and other events and conditions, led it to push for increased oil development. Political and economic reality, as pointed out by The Atlantic in an article a week ago, has pushed for this, but there are long-term calculations that increasing production now to reduce gas prices will be critical for the 2024 presidential election and federal government policy about energy after that.
A century ago, the 27 December 1923 issue of California Oil World featured a blaring front-page headline in red ink: “INDUSTRY OPPOSED TO BUREAUCRATIC REGULATION,” referring to positions taken by the American oil industry at the annual national convention of the American Petroleum Institute (API). Founded in 1919, the API is the national trade association for oil and gas producers and, while it has not been known for progressive thinking about the industry and climate change, it is certainly interesting to read this piece in Forbes that suggests it is, according to some ultra-conservative standards, part of so-called “ESG cartel,” the acronym standing for “Environmental, Social and Governance” investing that seeks to direct funds to companies that meet standards or criteria in these areas.
At the St. Louis confab, the paper continued.
The great American oil industry has spoken in terms that can not be misconstrued. It is unalterably opposed to any and all bureaucratic rule or regulation, by either State or Nation. It asks only to be left alone as long as it is conducted on its present competitive basis, with its stock interests held by so large a percentage of the American people and with so many distinctive aggregations of capital struggling with each other for the privilege of serving the wants of the people.
Uttering this declarative position was API President Thomas A. O’Donnell (1870-1945,) a native of the Erie, Pennsylvania area who lived in Colorado and was engaged there in gold mining until, at age 19, he came to southern California and was employed by what shortly became Union Oil Company of California. After about four years, he went to work for Edward L. Doheny, who, with Charles Canfield, opened the Los Angeles Oil Field and went on to be a dominant figure in the industry. A year later, O’Donnell formed a partnership with Mericos “Max” H. Whittier and, by the end of the 19th century, he went on his own in oil prospecting.
O’Donnell made his pile at the booming area at Coalinga, at the west side of the San Joaquin Valley southeast of Fresno, and headed several companies. When Doheny shifted attention to Mexican oil fields, O’Donnell managed his California interests and went on to head California Petroleum Company, which became part of Texaco. During World War I, he oversaw oil production under the United States Fuel Administration on a volunteer basis and, when the war ended, and the API was formed, O’Donnell became its founding president, serving in that role until 1924.
Suffering from respiratory issues, O’Donnell leased land in the early Twenties at Palm Springs next to the well-known Desert Inn, built a house there, and then acquired property for the community’s first (of a great many) golf course, the O’Donnell Golf Club. A second residence was constructed as his health worsened and he couldn’t climb stairs and, shortly before his death, O’Donnell arranged for a 99-year lease for the club and then deeded the property to the City provided that the lease be honored and that the land only be used as a golf course or park afterward.
The account went on that “President O’Donnell pointed clearly in his address that bureaucratic rule by State or Nation means the death of prosperity for all but a few” with the only available jobs going to those who were “salaried servants or officials.” Moreover, went the claim, there would be stagnation as a result of government regulation, not efficient operations or progress in the industry, and evidence was said to be the federal management of railroads and shipping during the recent war. The API chief was feted for his unequivocal stance, even as it was said that there those in the oil industry who “had become somewhat frightened” and were “advocating, more or less openly, [for] some form of legislative control.”
Several of O’Donnell’s statement were quoted by the paper including “every time you pass a law that invites the government to take a part in this business, you are inviting concentration into the bigger hands, the larger companies” and “there is not a person or a family that controls five percent of the oil industry in the aggregate.” With the latter, however, it is to be recalled that, before anti-trust legislation was passed by Congress, John D. Rockefeller’s Standard Oil Company, in the late 19th and early 20th centuries, controlled an astounding 90% or so of oil refineries in America. In 1911, the U.S. Supreme Court ruled that Standard had to be broken up into nearly three dozen companies.
O’Donnell then offered his view that,
It is the united effort of all the people engaged in this industry that has brought about its wonderful development. It is the most romantic development that has ever occurred in the history of man. It has been useful to the people engaged in it and to humanity at large.
Whatever the API head meant by “romance,” he obviously did not touch on a particularly potent issue of the moment, the Teapot Dome scandal, which involved alleged bribes offered to Secretary of the Interior Albert Fall by oil tycoons Harry Sinclair and O’Donnell’s former boss Doheny in exchange for leases of federally held petroleum naval reserve oil lands.
California Oil World gave itself a pat on the back for being “On The Job,” as an article headline put it, telling readers that it was “fulfilling its mission—to give all the news of the oil fields—and especially that of particular interest to those interested in California” by sending a staff member to St. Louis for the API meeting, deemed “an epoch-making gathering of the oil interests of America.” It added that it was unclear what the Institute’s position was “on the much talked about proposals to place the business [industry] under the yoke of federal or state regulation,” but it was proud to relate “the ringing statement” of O’Donnell. The paper concluded “the moral of the zealous activity” it carried out was “obvious,” in that it was not only “the authority on the California oil fields but also the only newspaper in the world devoted exclusively to oil.”
Another API conference highlighted reported on by the paper was the address of Charles F. Kettering, head of the General Motors Research Corporation from 1920 to 1947. Telling his audience that “there is perhaps no other industry in the world today that is as important to civilization as the petroleum industry,” Kettering blithely noted that research was a matter of “why we are where we are and where the hell we are going.” He asserted that the oil game was run by “able and honest fellows,” but also exhorted them,
If you fellows would spent one-tenth of one per cent [of your time?] telling the people of the United States about petroleum like the automotive industry has about automobiles, regardless of whether what we told them was so or not, they would know more about it . . . The petroleum industry needs to tell the public the story of petroleum in an honest, frank way, and instead of people criticizing they are going to marvel at your accomplishment because, you have accomplished something that is worth the hand-clasp of every American motorist in the world. You have done a thing that has done more for this country than perhaps any other thing in the world . . . You gentlemen have not the slightest reason to stand up and accept the criticism of the American public is giving your industry and you won’t have to accept it if you will go out and tell the story . . . The rubber industry has tried to tell its story in advertising tire. The steel industry has told its story. The automotive fellows have told their story, but you gentlemen have kept silent. You can’t continue it.
Among other front page news was a brief report that the prior week saw California oil production leap to 720,000 barrels, with about three-quarters coming from the southern part of the state. Leading the way was the relatively new field at Torrance, where the first gusher was brought in during June 1922 and production in this early phase peaked in 1924-1925, with yields jumping from 33,000 to 42,000 barrels a day thanks to the completion of a dozen new wells. A table of new wells included those in that field, as well as at the major producing areas at Long Beach (where, it was observed by the paper, 105 million barrels were produced since the field opened in June 1921 with 80 million for the current year, 55 million since July), Santa Fe Springs, Huntington Beach and one labeled “Puente.”
This was also known as the “Puente Hills” field and the paper reported, on a back page piece, that “Whitley Oil Co. has put Puente Hills on the map as the newest potential oil field of Southern California by bringing in No. 6 . . . the largest ever brought in in the Whittier-Puente field.” The Whitley well was located north of Whittier “on the westerly nose of the Puente Hills” and came in five years after the company began efforts, with the gusher located by geologist and engineer Eric A. Starke, formerly with Standard Oil Company of California, which leased the productive lands of Walter P. Temple at nearby Montebello.
Three earlier wells were minor producers and #6 began drilling in March 1921, with delays including following the death of company namesake Charles W. Whitley. Others involved in the firm were dairy owner Frank Pellissier, Albert R. Rideout, and Jay M. Danziger, recent divorced from Charles Canfield’s daughter, Daisy (who then married film star Antonio Moreno)—with these men owning considerable land in the western Puente Hills and surrounding areas. Elsewhere, there were reports on well operations throughout the region, courtesy of the State Mining Bureau, while tables of oil stock trading are also notable.
It was also reported that, with the exceptions of Coalinga, Compton and Torrance, all California oil fields produced less oil in November than in the prior month, with an aggregate decline of north of 46,000 barrels daily or not quite 2.2 million for the month. Total production for the month was almost 22.4 million barrels or about 747,000 per day with most fields also showing declines year over year, with the very notable examples of Santa Fe Springs, Huntington Beach and Long Beach standing out for the opposite.
Huntington rose from above 52,000 daily in November 1922 to over 73,000 a year later, a climb of about 40%, but Santa Fe Springs shot up by more than 250% from over 80,000 to just shy of 214,000 per day, while Long Beach also produced well more than double, going from below 98,000 to nearly 242,000. The new Torrance (Redondo) field climbed from 1,368 to well north of 20,000 to become the sixth largest producer in California in short order. With the latter at 7.25 million monthly and Santa Fe Springs at almost 6.42, these field alone produced 60% of the state total of almost 22.4 million barrels, while Huntington was just short of 10% of the aggregate.
Declines varied widely at most fields, so Richfield in Placentia and Yorba Linda in Orange County dropping by more than 20% to 15,313 barrels per day, Whittier fell by about 12.5% to 1,700 barrels, but Coyote Hills in La Habra and west Fullerton plummeted by nearly 90%. The Los Angeles-Salt Lake field on the westside was nearly static and Fullerton (which included Brea Canyon and Olinda) dropped by only 5%. As to Montebello, where the Temple family’s startling stroke of fortune came after June 1917, the decline was 8%, but there was a steady drop over preceding years, which did not herald well for Walter P. Temple as he ramped up both his independent oil prospecting and his burgeoning real estate development, including Temple City, established earlier in 1923.
As to stocks at fields, pipelines, refineries and tank farms, the total was 89 million barrels, a very slight increase from October, but an almost 50% increase from the year before. Of the total, almost a third was stored at refineries, but the comparative amount from November 1922 was 18%, so there was quite a switch with respect to storage conditions generally. Generally, dating back to 1918, daily output of oil was close to four times higher, even though the number of wells was only some 15% higher, at about 9,400 compared to 8,200 five years earlier. As for crude prices, they dropped dramatically due to that huge growth in output, with amounts varying from $1.60 to $2.95 per barrel, depending on gravity, in July 1920 to a range of 60 to 76 cents in early October 1923.
From the federal mining bureau’s data on California, we learn that refinery output from 41 facilities was almost 13 million barrels less in November than October, but more than 16 million higher than demand, thereby increasing stocks in inventory. November averaged about 3.5 million barrels daily, while consumption dropped more than 270,000 barrels from October and oils run to stills during the recent month totaled over 13.4 million barrels. Refined products included 106 million gallons of gasoline, 18 million of kerosene, almost 8 million of lubricants and nearing 380 million of gas and fuel oils. As to stocks, there were over 6 million barrels of domestic crude, 11.8 million of partly refined crude, well over 174 million of gasoline, almost 24 million of kerosene, nearly 12.5 million of lubricants, and just shy of 600 million of gas and fuel oils.
There are a few mentions of holiday celebrations by oil companies, including the recently merged Richfield and United firms (now Atlantic Richfield or ARCO), with the paper recording,
This jolly gathering was held Saturday [the 22nd] following the close of business, with the big sales room [in new company headquarters in the A.G. Bartlett Building at Spring and 7th streets in downtown Los Angeles] as the gathering point where Santa Claus dispensed gifts from a brightly illuminated tree amid much hilarity, as accompanying rhymes and verses were read. These gifts were limited in price but the toy shops of Santaland proved that price did not interfere with the fun extracted therefrom.
The 150 employees present enjoyed a lunch provided by the Elite Catering Company and “cards, music and dancing [were held] through the long corridors” of the 12th floor offices of the firm. Elite also provided the eats for the holiday party thrown on Christmas Eve by Superior Oil Company, founded in 1921 by William M. Keck, developer of gushers at Huntington Beach, Torrance, Coalinga and nearby Kettleman Hills, among others, and creator of the well-known foundation bearing his name.
It is worth noting that the federal Energy Information Administration shows that California’s oil production has dropped dramatically in the last three decades, even as it has ramped up significantly elsewhere in the country, with 42.5% coming from Texas alone and 13.3% from New Mexico and almost 9% from North Dakota. Golden State yields were around 1 million barrels daily through much of the 1980s, but are less than a third of that today, with 307,000 reported from September (updated statistics are due on Friday.) What 2024 will bring nationally and statewide will be interesting to see given current conditions in the oil market and amid increasing climate change concerns.