Cartelization or Cooperation?

When British and U.S. Government oil experts sat down in 1944, with U.S. State Department blessings, and agreed on a broad policy to stabilize markets in the postwar world, the U.S. oilmen were worried. President J. Howard Pew of Sun Oil Co. attacked the agreement as a "blank check" to the Government that would involve the domestic oil industry in a "vicious cartel system."

The Senate refused to ratify the agreement. Since then, the source of the anti-cartel rumblings has changed. Last year the Federal Trade Commission prepared a secret 900-page study of the situation. Last week Missouri's Senator Tom Hennings, probably prodded by independent oilmen, exploded the whole question into the open, thus forcing the Attorney General to order a grand jury investigation. Said Hennings: "Prices are predetermined and fixed by the Big Seven* under an ingenious basing point system [which] runs under the direct supervision of central authorities in London and New York with the precision of a fine Swiss watch."

Gulf Price System. The basing point system, said he, is the so-called "Gulf Price" system, which fixes the world price of oil at U.S. Gulf ports plus transportation charges to where it is sold. The price of Middle Eastern oil, when sold in Europe, the FTC reportedly charged, is a Gulf-plus price, even though it is cheaper to produce than U.S. oil. Last year U.S. Navy vessels refueling in Mediterranean ports had the same complaint. Last week Assistant Secretary of State for Economic Affairs Willard L. Thorp told a congressional committee that world oil prices are fixed to correspond to the basing point system of U.S. prices.

The loudest wail during the past year has come from MSA officials.They charged that by agreeing to set the price of oil to Europe at the U.S. Gulf rate, three of the seven companies have overcharged MSA countries some $50 million since 1949 on shipments of Middle East oil. Three weeks ago MSA banned such purchases, announced that from now on the U.S. would buy no more oil for Europe in its foreign aid program.

"Loose Talk." To all the charges last week, Standard Oil of New Jersey's President Eugene Holman made a blanket denial. Said he: "We hope the investigation will, once and for all, put a stop to loose and irresponsible talk about this company's foreign business. We do not believe there is an international oil cartel--certainly we are not party to one."

Socony's President Brewster B. Jennings said that Socony's expansion into the Middle East came at the instigation of the U.S. Government or with its approval. Added Holman: "We have informed interested Government agencies, including the Department of Justice, of important steps as they have been taken."

*Standard Oil of New Jersey, Standard Oil of California, Texas Co., Socony-Vacuum Oil Co., Gulf Oil Co., British-owned Anglo-Iranian Oil Co., and Royal Dutch Petroleum Co.

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