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This paper presents an analysis of the economic forces that govern the functioning of the American petroleum industry, and outlines the changes that are taking place in their incidence. After a general introduction, the study deals with the five structural components of the industry--exploration, production, transportation, refining, and marketing--then takes up a number of special aspects of the business, and concludes with emphasis on the evolving aspects of the new structure introduced by the institutionalization of proration. The field of exploration is accorded rank as a separate economic function, coordinate in importance with production, and it is shown that sustained discovery is dependent upon multiple competitive effort despite revolutionary advances in the tech ique of search. Production, long dominated by the principle of capture, is described as undergoing fundamental modification under the impact of a control mechanism, itself in course of change. Proration is analyzed as a conservation measure and as a device for balancing supply and demand, tending to nullify the adverse effects of the rule of capture; with further developments to this end suggested. The specialized nature of transportation is described and its integrative aspects noted. The refining function is viewed with special regard to the powerful influence of changing technology. The field of distribution is examined as the terminal expression of economic pressures and an incipient schism of the retail function is noted. Throughout, the desideratum of equilibrium is emphasized and mployed as a criterion in judging functional effectiveness. Finally it is pointed out that the oil business is the first great American industry to develop a new method of conducting its business. Its experiment with a new operating form has made some headway toward the practical solution of a complicated problem of unique character.
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