One of Two Things

Lumbering into the annual stockholders meeting of his substantial ($362,000,000) Consolidated Oil Corp., Oilman Harry Ford Sinclair last week declared: "Either one of two things must happen. The price of finished products must go up or the price of raw material go down. I do not believe that this industry can continue to sell its finished products below the cost of raw materials."

Immediate reason for Harry Sinclair's pronunciamento was a small loss on Consolidated's operations in the first quarter (figures not made public). Since last year when the Government convicted a batch of the major oil companies under the Sherman Act, fear of further anti-trust suits has kept oilmen from attempting to do anything about relieving the market of distress gasoline stocks, which have reached an unwieldy total. Refiners now get an average of .7 cents a gallon less than they did last year. Crude production, however, has been kept within reasonable bounds by State proration laws and the official price is comparatively high. Consequently, the spread between the prices of crude oil and of gasoline is not enough to meet the cost of refining.

To integrated companies (such as Standard Oil of New Jersey, Texas Corporation, Gulf Oil), this is not vital. If their refining operations show a loss, it is merely a bookkeeping matter provided that their crude oil production is efficient, shows a greater profit, for they still have net earnings. To Consolidated Oil which has to buy approximately half the crude oil it refines--and to other refiners without their own crude oil supply--the difference between the prices of crude and of gasoline is serious.

For them Harry Sinclair spoke a great truth when he said finished products must go up or raw materials down. Last week many feared the latter would happen. In Illinois, Arkansas, Louisiana, producers began to cut prices as much as 10-c- a barrel below the $1.02 figure established when the last cuts took place in October.

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