By: Special Committee Investigating Petroleum Resources Date: 1945
Source: Investigation of Petroleum Resources. Hearings Before a Special Committee Investigating Petroleum Resources, United States Senate, Seventy-Ninth Congress, First Session. Washington: U.S. Government Printing Office, 1946, 1, 6, 7, 8, 33, 35–36, 66, 69, 94, 118–19, 161, 197, 275, 285, 319, 324, 502.
About the Author: This special committee of the U.S. Senate investigated the condition of U.S. petroleum reserves and the likely future petroleum needs of the United States in June 1945. A variety of experts representing petroleum corporations and experts from the American oil industry testified before the committee.
The world's first commercial oil well was drilled in Pennsylvania in 1859—an event that set in motion the nearly century-long American domination of the petroleum industry. Although the original Pennsylvania oil fields were eventually exhausted (today we recall a distant echo of the past with the names Pennzoil and Quaker State) by 1900, newly-discovered oil fields in Texas and California guaranteed continued American petroleum preeminence.
In July 1941, the United States, the world's leader in petroleum exports, slapped a crippling embargo on Japan. That country, totally dependent on imported oil, soon responded by bombing Pearl Harbor. By 1945, the United States was at a crossroads regarding its future energy policy. Soon the nation would no longer be capable of supplying its own rapidly increasing oil requirements. Even if it could, with the discovery and extraction of enormous petroleum reserves in the Middle East and other parts of the world, the era of American global oil domination would soon be over. In June 1945, a select committee of the United States Senate held hearings to investigate this potential problem.
The testimony offered at the June 1945 hearings raised vexing issues that still plague Americans to this day—the debate over offshore drilling, the production of synthetic fuels, the need for strict energy-conservation measures, and the role of private corporations in the search for new sources of oil. However, in hindsight it is clear that the policy makers and oil company executives present at the hearings did not appreciate the seriousness of these issues. Despite assurances during the testimony that America could always rely on its huge coal deposits, looming on the horizon was a predictable dependence on foreign sources of energy. Little was ultimately done to avoid this dependence, and it proved to be a dangerous policy. In the decades to come the United States would often be dragged into the turmoil of Middle East politics because of its need to protect oil supplies. Meanwhile, a new and serious environmental issue was also surfacing:air pollution caused by the ever-increasing burning of fossil fuels. By 1947, Time magazine had coined the word "smog" to describe the brown haze that choked many American cities.
Primary Source: Investigation of Petroleum Resources [excerpt]
SYNOPSIS: In 1945, the U.S. Senate held hearings to investigate the current and future state of America's most important energy source, oil. A parade of expert witnesses from the oil industry painted a largely optimistic picture of the situation, failing to recognize the depth and seriousness of the possible problems they foresaw.
[In the excerpt below, speakers are identified by their last name or title. Their full names and positions are as follows: Senator Joseph C. Mahoney (committee chairman), Senators Brewster, Hatch, Moore, and Johnson, Henry S. Fraser (chief counsel to the Special Committee Investigating Petroleum Resources), Antonio M. Fernandez (Representative from New Mexico), Captain C.P. Franchot and Brigadier General H.L. Peckham (United States Naval Reserve), J. Edgar Pew (Vice President, Sun Oil, Chairman of committee on Petroleum Reserves for the American Petroleum Institute), Mr. J.C. Hunter (President, Mid-Continent Oil and Gas Association), Mr. Hallanan (President, Plymouth Oil), Mr. A.C. Matlei (President, Honolulu Oil of San Francisco, CA), Mr. E.L. DeGolyer (Consulting Engineer, DeGolyer and MacNaughton), Mr. Michael W. Straus, Mr. H.D. Miser (Government employee, in charge of section of geology of fuels, geological survey, Department of Interior).]
The Chairman: The committee will come to order.
This session of the Senate Special Committee Investigating Petroleum Resources has been called this morning to open the hearings to which the representatives of the oil industry have been invited to present evidence on all aspects of the petroleum industry.
Everybody attending this meeting is well aware of the fact that the United States has contributed extraordinary quantities of its petroleum resources to fight the war, not only for the operation of our own Army and Navy but for the military operations of our allies, and even for civilian purposes. We all also know that petroleum is one of the most essential, if not the most essential, commodity for industry, so that as we look forward to the coming peace for which we all earnestly pray, we want to be certain what our resources of oil will be.
The committee has invited representatives of the industry to come here today and tell their story. As a matter of fact we went further than that. We invited the industry to organize a committee on its own part to present this evidence. Out of the feeling that nobody knows better than the industry what the conditions in the industry are, we hope to be able to sit down here across the table, lay all the cards on the table, and find out what is best to be done in the future.…
Mr. Pew:… we find that within a few years after the discovery of the Drake well in 1859, periodic alarms have been raised that we could not satisfy for long the national need for petroleum. There has hardly been a 5-year period since that time in which someone—and most often someone in the Government—has not made dire predictions that our oil resources were nearing exhaustion. Yet, almost invariably immediately upon the heels of such alarms new discoveries have been made and new methods developed for the extraction of crude oil from the earth. The demand for petroleum products constantly has increased. Today, under the stress of war, it is 25 times greater than at the beginning of this century. Yet, the domestic industry, with negligible help from the outside world, has always met this demand in the long run. Price and demand have been the regulators of supply. So definite and firm is this pattern that it demonstrates beyond all doubt that the reason for any brief period of shortage is not any latent weakness in the resource but is to be found in other factors.
Strangely, pessimists and prophets of exhaustion constantly have dogged the heels of this industry. All the cries of alarm that we have heard in the last 2 or 3 years are but repetitions of similar dire predictions laid down through the years. All of the latter were proved false by time, and so shall the present pessimistic statements. A quick glance at these past prophecies, however, will enable us to view the present predictions in better perspective.…
Particularly during the period of the First World War and immediately thereafter, just as during the present war, there was a flood of pessimistic forecasts. In 1915 Dr. Ralph Arnold, a noted geologist of that day, set off the alarm with a forecast that we had only 5,763,000,000 barrels of oil in the ground at the end of the previous year.…
The blackest forecast of all came in 1919 from David White, Chief Geologist of the United States Survey, placing oil remaining available in the ground on January 1, 1919, as 6,740,000,000 barrels. White contended that "the peak of the production of natural petroleum in this country will be reached by 1921." He foresaw the exhaustion of American resources within 17 years at the 1919 rate of production, namely, 380,000,000 barrels annually.…
The United States Geological Survey, in cooperation with the American Association of Petroleum Geologists, estimated that as of January 1, 1922, the reserves of oil recoverable by methods then in use totaled 9,150,000,000 barrels, of which, they stated, 5,000,000,000 barrels "may be classified as oil in sight." These reserves, the report added, were, "enough to justify the present requirements of the United States for only 20 years if the oil could be taken out of the ground as fast as it is wanted."
The Geological Survey asserted that the United States was, "already absolutely dependent on foreign countries to eke out her own production and, if the foreign oil can be produced, this dependence is sure to grow greater and greater as our own fields wane."
Very obviously all these predictions were wrong. I have cited them not to ridicule the prophets, for they had neither the facilities nor the information to make accurate prognostications such as we have today. I cite these now proved erroneous predictions solely to demonstrate the hazards inherent in speculating about the extent of our oil resources. In recent years there has been less speculation and greater reliance on known facts, scientifically developed and demonstrated.…
The result has been an abundant supply of petroleum that has made this Nation great, and that has been primarily responsible for its high standard of living in peace and its supremacy in the present highly mechanized war. Other nations possess similar or greater resources than we do, but have left them dormant and useless, either because the sole right of exploration and development has been lodged in the Government or other restrictions have hampered their peoples.
Even though the United States possesses a minor part of the area of the world where geologists believe oil can be found, there has been produced in this country 64 percent of the world's cumulative oil production; last year 65 percent of the world's production came from the United States, it was reported; and, we have in this country now approximately 39 percent of the estimated world-known crude oil reserves. Moreover, Americans have discovered and developed a large quantity of the oil found outside of our national borders, even after the areas involved had been tested and abandoned by foreigners.
American supremacy in the finding of oil does not come from any peculiar genius on the part of our people. Rather, it results from our system of enterprise and opportunity which provides incentives that spur the initiative and ingenuity of Americans to search for oil. By and large, Americans have been free to drill wells wherever they thought oil might be found; they have been free and have had incentives to develop and produce the oil they discovered. Destroy these freedoms and incentives and you kill the spirit that has been responsible for our achievements in this field.…
Senator Brewster: You feel, then, that as far as the United States is concerned, there is no occasion for us to be particularly excited or interested in the oil reserves of foreign areas, that they are not things that will be of any tremendous consequence to us in the foreseeable future?
Mr. Pew: As far as I know the situation—and we do not have any foreign production—oil over there is, to an extent, controlled in this country. I do not mean the majority of it, but enough of it is controlled in this country to the end that we have such oil available for use here when and if we need it, if it can be brought in here under either war conditions or otherwise. It is just as available now as it ever was.
Senator Brewster: One of our very definite questions before we get through is going to be, first, the oil reserves of the Western Hemisphere, which I assume we will all agree would be available, and the other question is the oil reserves of the Middle East.
As you know, this whole question was precipitated by the suggestion that the 50,000,000,000 barrels that were asserted to be in the Middle East was a matter that might be of very considerable concern to us hereafter, and it was on that basis that a considerable change in our whole foreign policy was proposed, that we ought to recognize that as one of the essential factors to our defense. I think before we get through it will be anticipated that we will want an opinion from the oil industry, at least, as to how far we ought to go in extending the interest of our foreign policy into the Middle East reserves. We are gratified as to the enterprise of American businessmen and geologists, as you pointed out, in discovering these reserves after others had failed, but we have to settle the question of whether those are vital to our defense.
Mr. Pew: Senator, I would say there has been a study of the foreign policy, and suggested foreign policy, by the oil committee of the PIWC, I believe it is, the details of which I am not in a position to discuss and would not know. Just speaking personally, I would say as long as we can get to that oil we have enough hold on it. If we were in trouble over there and could not get to it we would probably have just developed such oil for our enemies.…
Report of the Foreign Operations Committee of the Petroleum Administration for War
I. Factors that Create an International Oil Problem
… 2. Interest in oil is universal. All countries are consumers of petroleum, most countries are importers, many countries are exporters. Oil is used in every part of the world and is essential to all industrial activities. It is also the chief support of the newer forms of transportation, as exemplified in the motorcar, the truck, the diesel boat, and the airplane.
3. The known oil resources of the world are limited and concentrated. Five great regions contain an overwhelming proportion of the world's oil. These are: the United States, the Soviet Union, the Middle East, the Far East, and the Caribbean area. The Middle East and the Caribbean area together probably contain more known oil than the rest of the world.
4. Oil exploration and discovery present extraordinary difficulties, requiring rare and specialized abilities. Undiscovered oil is a present asset to no one; if it is to serve an economic purpose, its discovery must be facilitated. Most of the oil so far discovered in the world has been found either by American enterprise or by techniques developed in the United States.
II. Special Interest of the United States in Oil
… 3. The economy of the United States probably faces partial dependence upon foreign oil resources. Long an oil exporter on balance, the United States may face a significant change in its status. Evidence points to the imminence of a shift from a condition in which this country has surplus oil for export to one in which the Nation will become a net importer of oil. This expected change will make the economy of the United States partly dependent upon foreign oil resources.
4. The national security of the United States is dependent upon adequate world oil developments. The security of the United States military power is enhanced by having adequate and strategically located sources of oil supplies throughout the world in the hands of American nationals.
III. Immediate Problems of Pressing Urgency
- Changed conditions require changed policies. The war has brought about radical changes in the status of the United States in respect to the oil resources of the world.
(a) The United States is faced with the prospect of shifting from the status of a net exporter to that of a net importer of oil, thus bringing into view the possibility of partial dependence upon foreign sources of supply.…
- A foreign oil policy must be established at once if the interests of the United States are not to be sacrificed.
Mr. Hunter: In World War I, straining to the ultimate, we produced only 90,000,000 more barrels in the last year than in the first year. In World War II, we produced 464,000,000 barrels more oil in 1944 than in the opening year, 1938. How did we do it? I can find no answer but, primarily, conservation—conservation developed through years of progress in State regulation; cooperative regulation with the oil industry during which restraint to non-wasteful producing rates has built up the potential capacity to produce.…
The truth of the matter is that we are nowhere near running out of oil, and, but for the inordinate demands of war, we would today have a surplus of producing capacity that would have to be restricted in order to prevent physical waste and to conserve the supplies for the time when they would be needed. There are those who believe that this country should begin to hoard its oil, either in underground reservoirs or in storage tanks above ground. They question the ability of the country to meet its oil problems for the future and have a mistaken belief that we can protect the security of the Nation by freezing the situation we have today in terms of oil resources. This has never been the way to solve the problems of the petroleum or any other industry. We live in a dynamic and constantly changing world, and we only learn to deal with its problems by allowing them to develop in their normal and natural course. We are not in danger of running out of oil overnight. We are certain that we have supplies for many years to come, and that in the interval we will find more supplies, and, if given opportunity, we will develop new techniques that will provide additional supplies from other sources.…
Our country is particularly dependent upon oil for its way of life. We have by far the greatest proportion of the automobiles in the world, and we use 30 times as much oil per capita as the remainder of the world. This oil is a tremendous source of energy that carried us around the country in automobiles and railroads, and that drives thousands of machines in power plants and factories. It does work for us that could not be done if the rest of the world's population were our slaves, and it does that work very cheaply. The public has reason, therefore, to be tremendously interested in an abundant supply of petroleum as cheaply as possible and in the advantageous use of those supplies without waste. In this the industry and the public are in complete accord. Our task is to utilize petroleum efficiently to maintain and improve the standard of living with which it is so intimately related.
We have had an abundance of oil, not because this country was blessed with greater resources by nature than others but because of the inherent initiative of the people and the freedom to carry on their business as they chose. Foreign countries are known to have larger potential reserves of oil, but due to government restrictions and other handicaps they have not developed their resources to the same extent that we have. We were first to learn how to find oil efficiently and use it effectively, and Americans carried that knowledge to the far corners of the globe. As their resources are developed, they, too, may gain the benefits of this black gold that provides such tremendous amounts of energy at low cost. They will need the major part of their own resources, if they are to develop progressive economy and better standards of living.
In part, some of their reserves may be available to us, if needed, but we cannot depend on foreign reserves as a safeguard in time of war. Unless we can insure access to reserves by military control, ownership will be of no benefit whatever. If the United States Government, instead of American companies, had owned the oil resources in the Dutch East Indies and Saudi Arabia, those resources would not have been any more accessible today.…
National Policy Essential
Mr. Hallanan: A national oil policy resting upon the solid foundation of whole-hearted cooperation and mutual confidence between the oil industry on the one hand and the Government and people whom it serves on the other hand, is just as essential to the security and prosperity of the Nation as its policy of national defense. In this time—and for all the future we can visualize—oil is the most vital and integral part of any national defense program and it is likewise linked to the operation of our domestic economy with equal importance as an essential product. Indeed, oil is the one commodity which must be available in abundance if the Nation is to be secure, both from enemies without and from economic stagnation and disintegration within. We have learned in the recent years that for our own security we must be prepared to supply the requirements of other nations and peoples.
In 1919, Henri Berenger, French industrialist and oil commissioner of his country during the First World War, made a prophecy that has been borne out by the experience of the war in which we are presently engaged and which is just as true today as when it was uttered 26 years ago. He said: "He who owns the oil will own the world for he will rule the sea by means of the heavy oils, the air by means of the ultra refined oils, and the land by means of petrol and illuminating oils.…"
Mr. Matlei: Our present proven oil reserves are only a part of the answer to our future oil supply. Much of our future production will come from fields not today discovered. This is historically the story of the development of oil. Today we are producing in excess of 400,000 barrels daily from fields not discovered in December 1941. New areas must be explored and much time, money, and effort expended by the oil industry in the search for new fields in the United States as well as in foreign lands. Individual initiative, private capital, and free competitive enterprise have enabled the petroleum industry to present the aspect of a "far-flung productive organism, capable, self-reliant, imbued with ideals of service, highly complex, yet integrated, practitioner of mass production, cost conscious, alive, growing, and dynamic"—an industry producing from less than 7 percent of the earth's surface 67 percent of the world total oil production. Its technology is world renowned. No foreign government, by direct engagement in, or regulation of, its oil industry, has had a success comparable to that of the privately owned and operated oil industry of the United States. Our national oil policy must recognize, protect, and hold harmless from unnecessary encroachment of bureaucracy that economic unit and preserve it intact.…
Mr. DeGolyer: I am not a pessimist with regard to the oil supply of the United States. We do not know how great the ultimate production of our country will be, how much oil remains to be found, but I presume that no one will dispute the conclusion that it is a finite amount—that we are dealing with a wasting asset.
The great problem is that of how much remains to be discovered, but the greater problem still is that of at what rate we will be able to find it—of its "findability,"…
We do not know how much oil remains to be found in the United States. I believe that great quantities will be discovered. Mr. Wallace Pratt, whose book, Oil in the Earth, has been placed before your committee by Mr. Monroe Cheney, estimates the quantity still to be discovered at approximately 50,000,000,000 barrels. His implied assumption is that on acre-averages oil occurs in sedimentary rocks of proper type throughout the world in approximately equal amounts. This, I doubt. All other mineral deposits are notoriously of unequal distribution throughout the world, and this is particularly so for coal, the mineral nearest to petroleum in origin.…
General Peckham: American companies should continue and increase their ownership and production of foreign oil. Aside from the financial benefits to these companies, such ownership and production would give the United States a greater participation in world oil affairs.…
In determining the amount of foreign oil which should be imported into the United States, careful consideration must be given to the effect upon domestic production. Importation which would depress the domestic market price for crude oil to the extent that the capital and resources of domestic companies would be depleted with resulting injury to the domestic industry would be unwise for reasons hereafter stated.…
Mr. Straus: When it will become necessary to adopt synthetic fuels as the backbone of our gasoline operations in the United States, I do not know. That depends upon world economics, international developments, and world exploration beyond our control and probably beyond the control of any group represented here today. But we believe that the national interest requires a sure source of gasoline within the domestic confines of the United States, subject to the control of the United States and independent of any factors beyond our control. We will be ready with such a source of gasoline. A new great synthetic fuel industry in the United States is within our grasp when we need it. With this work on synthetic fuel development the unknowns are falling away one by one.…
And we also know where within the United States there are proven deposits of over 3,000,000,000,000 tons of coals and lignites which would be sufficient to supply all existing demands for these fuels, plus enough coal and lignite to give us all the gasoline at our present rate of consumption that we need for at least the next thousand years.
Mr. Fraser: What then?
Mr. Straus: That is to be handled by other people, I believe.
Mr. Fraser: There have been empires in the history of the world which have lasted for more than a thousand years, and I would hate to contemplate that within a thousand years the Republic of the United States will pass from the scene.
Mr. Straus: Of course, a thousand years isn't much when we are talking about petroleum and petroleum development.…
Mr. Miser: The United States has for many years produced about three-fifths of the world's petroleum. It is thus drawing on its supplies at a rapid rate. How much longer these supplies can meet fully our normal needs is not certain. It is certain, however, that the discovery rate of petroleum will some day decline to the point where our crude petroleum supplies will not meet fully our normal needs. Although our country may not face such a petroleum shortage for some years, adequate future supplies of petroleum products must at all times be assured for the security and welfare of the Nation. Sources of these products are not alone the crude petroleum in this and other countries but also substitute sources which include oil shale, coal, oil-saturated sands, and natural gas. The domestic deposits of these substitute sources are large and are capable of providing ample petroleum products for many centuries. The Nation must be equipped with adequate information concerning the extent, character, and reserves of these resources and concerning processes for large-scale recoveries of petroleum products from them. This is necessary so that they may be utilized promptly when the Nation is required to turn to them to augment domestic and imported supplies of crude petroleum.
O'Connor, Harvey. The Empire of Oil. New York: Monthly Review Press, 1955.
Randall, Stephen J. United States Foreign Oil Policy, 1919–1948: For Profits and Security. Montreal: McGill-Queen's University Press, 1985.
Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York: Simon & Schuster, 1991.