Mr. WILSON. Would you know whether it was legal if you did look at it? Senator CONNALLY. I would know as much about it as you do; it is your contract; I never saw it. If you are continuing to lose money Mr. WILSON. We cannot quit and they have no business. But going back to this margin, it costs us 2.75 to do business, and the majors, previous to the time this law went into effect-we were operating under a 4-cent margin, but as soon as the law went into effect, soon thereafter, they cut it right in two and made it 2 cents. Senator CONNALLY. Why don't you buy it from someone else? Mr. WILSON. We cannot. Senator CONNALLY. Can you not buy it at the posted price? Mr. WILSON. Yes; but that posted price only gives you a 2-cent margin. Senator CONNALLY. They do not require you to sell it at any particular figure, do they? Mr. WILSON. No; but you have to meet the competition; you have to sell at the figure the majors set; that is the tank-wagon market. Senator CONNALLY. Do you believe in conservation laws at all? Mr. WILSON. Yes, sir. Senator CONNALLY. And, believing in them, do you believe they should be enforced? Mr. WILSON. Yes, sir. Senator CONNALLY. And if a State has such a law and a group of States has such a law do you think it is wrong for the Federal Government to aid them in enforcing their own laws? Mr. WILSON. No; I do not think it is. Senator CONNALLY. That is all. Mr. WILSON. But, if through enforcement of that law the manipulators are benefited and allowed to throttle fellows who are operating independently, I do not believe that is right. Senator CONNALLY. We are only dealing here with the interstate shipment of oil. Mr. WILSON. But the Connally Act is one of the parts that make up the whole. Senator CONNALLY. Are you against it? Mr. WILSON. I am against the working of the Connally Act. Senator CONNALLY. I though you said you believed in each State making its own laws and that they should be enforced. Mr. WILSON. Yes. Senator CONNALLY. And you said the Federal Government should aid in enforcing the law? Mr. WILSON. Yes. Senator CONNALLY. That is all the Connally Act does. Mr. WILSON. But it controls the price through limiting production. Senator CONNALLY. You are against limiting production through conservation, then? Mr. WILSON. If it were truly conserved, I would not say anything about it. Senator CONNALLY. You heard the testimony they were going to get 4,000,000,000 barrels out of the east Texas field because of conservation? Mr. WILSON. Yes. Senator CONNALLY. And that otherwise they would not have gotten but 2 billion? Mr. WILSON. Yes. Senator CONNALLY. Well, is that not in the interest of the consumer? Mr. WILSON. Yes; but if at the same time the Government would say to these fellows, "We want to save this oil for our own use and we will let foreign oil come in, and when that is exhausted__"" Senator CONNALLY. You are raising a tariff issue with which we are not dealing here. I have been pretty liberal to you marketers and have been trying to give you all of the time you want. Does that conclude the marketers? STATEMENT OF GEORGE A. HILL, JR., HOUSTON, TEX.-Resumed Mr. HILL. May I correct a misapprehension of the last witness? Senator CONNALLY. Give heed, Mr. Wilson, Mr. Hill wants to make a statement. Mr. HILL. I would like to correct in the record the misapprehension of the last witness in relation to our brief conversation after the adjournment yesterday. I realize that gratuitous advice is worth only what you pay for it, but I endeavored to tell Mr. Wilson out of my own experience what I thought was his difficulty. I explained to you, as an independent producer, that where the major companies did not desire to purchase my oil or did not pay a price for it that I deemed to be satisfactory, that I deemed it to be a function of management to go out and find a buyer for my oil at a price satisfactory to my company, and I illustrated to him my successful efforts along that line, in selling my oil to independent refiners, independent buyers, and even to foreign buyers, and I suggested to him that he could not, in Des Moines, Iowa, expect to be in contact with independent refiners that were just as desirous of selling oil to him as he was desirous of purchasing the same, and that the thing for him to do was to leave Des Moines temporarily and contact independent refiners. I hope that he did not understand from that suggestion that I find that there is such a monopolistic grasp upon the industry that deters me, as an independent producer, or any other independent producer, from selling oil to whomsoever he feels, at such prices he feels, and convey the impression that if he would go into the area where the independent refiners manufacture their petroleum products he would not meet, in my judgment, with the difficulty he has been experiencing. That is all I intended to say, and he entirely misapprehended my conversation. Senator CONNALLY. We thank you, Mr. Hill. As a matter of fact, these marketers in all these States could buy from independent producers in Texas or any other oil-producing State through brokers, if they desired, could they not? Mr. HILL. Yes, sir; or directly. Senator CONNALLY. If they did not want to make some direct contact they could have brokers buy for them? Mr. HILL. That would be my opinion, Mr. Chairman. Senator CONNALLY. At this point I want to put in the record some wires. I have a telegram from the National Association of Petroleum Retailers. (The telegram referred to is as follows:) Senator THOMAS CONNALLY, Senate Office Building: CHICAGO, ILL., February 16, 1937. Schuh arriving Washington Wednesday, testify favoring Connally Act permanency. NATIONAL ASSOCIATION PETROLEUM RETAILERS. Senator CONNALLY. I also have one from W. B. Hamilton, chairman, oil and gas committee, West Texas Chamber of Commerce, who regrets he cannot be present and urging reenactment of the act. (The telegram referred to is as follows:) Senator TOM CONNALLY : WICHITA FALLS, TEX., February 16, 1937. I have not recovered sufficient from recent critical attack of flu so that my doctors will permit me to make the trip to Washington at present time. Am greatly disappointed that I cannot appear before your committee personally and testify in favor of making Connally Hot Oil Act permanent. As chairman, I request that position of West Texas Chamber of Commerce regarding this bill be entered on your record. The board of directors and membership in convention have unanimously approved Connally Hot Oil Act and have instructed me as chairman of oil and gas committee to support bill making the Connally Hot Oil Act permanent. The West Texas Chamber of Commerce believes that it is impossible to conserve natural resources of gas and oil in great west Texas fields should Connally Hot Oil Act cease to be effective. This act has been very beneficial to State of Texas and all other oil-producing States and is equally as helpful to consuming public, particularly those residing in nonproducing oil States. The West Texas Chamber of Commerce believes that the only objection that will be made to this measure will come from those who desire to profit from their ability to purchase gasoline and oils made from contraband stolen oil. Regards, W. B. HAMILTON, Chairman, Oil and Gas Committee, West Texas Chamber of Commerce. Senator CONNALLY. I have another telegram from the North Texas Oil & Gas Association, by J. Ed Erwin, executive vice president. (The telegram referred to is as follows:) Senator TOM CONNALLY, United States Senate: WICHITA FALLS, TEX., February 16, 1937. This association, representing nearly 500 independent oil producers and refiners in the north Texas district, wishes to urge the reenactment of your hot oil bill, knowing that it is essential to the welfare of these operators and to the 16,000 wells they own and operate in this district producing 62,000 barrels of oil per day. The continued operation of these wells, most of which are of the stripper class, and the ultimate recovery of all the oil from these oil fields depends utterly upon the continuation of the present conservation program, of which the Connally Act is a most important part, which also inures to the ultimate benefit of the consumer. NORTH TEXAS OIL & GAS ASSOCIATION, J. ED ERWIN, Executive Vice President. Senator CONNALLY. If that is all of the marketers-are you representing some marketers? Mr. BERGFORS. Yes. Senator CONNALLY. Which association do you represent? Mr. BERGFORS. The Oil Men's Association of New England. Senator CONNALLY. We will have to be brief. You can put your statement in the record, but we hope you will be brief in your testimony, since all of you folks cover practically the same ground. STATEMENT OF F. E. BERGFORS, QUINCY, MASS., REPRESENTING THE OIL MEN'S ASSOCIATION OF NEW ENGLAND Mr. BERGFORS. Mr. Chairman and members of the committee, Oil Men's Association of New England was organized over 12 years ago, having about 200 members, of which there are 15 directors. I have the honor of serving as a director. On February 2, 1937, a special meeting of directors was called for the purpose of considering the Connally bill, after which it was voted unanimously to oppose it, directing me to appear here before your committee. I am president of the Quincy Oil Co., having been connected with them off and on and in various capacities since 1903. Quincy Oil Co. is engaged in wholesale marketing and has two ocean terminals in Boston Harbor. We do not believe in carrying on with laws that were intended as an emergency, especially with the emergency passed.. We believe we have more emergencies in New England and probably elsewhere that need attention more than the control of oil. In fact, it could be said that the operation of the Connally Act has created an emergency, especially with oil marketers in New England. First. By effectively eliminated competition for their business. Second. By freezing up their sources of supply that are available. Third. By increasing the cost of petroleum to consumers. Fourth. By assisting some integrated companies in operating at a loss in our marketing branch of the industry by giving them abnormal profits in the producing branch as an offset. In fact, it is immeasurably worse than operating under the old law of survival of the fittest, because under this bill some companies enjoy Government assistance. We believe the purposes of the bill has never been fulfilled and that the reasons for its enactment given by its proponents, namely conservation, a clever subterfuge. How do you expect us in New England to have any faith in the proponents' cry for conservation when we find the same ones doing everything in their power to limit and reduce imports? Conservation is merely the rally word used by the proponents in connection with the bill to fool or allay the consumer who foots the bill-totaing many millions of dollars in favor of a comparatively few producers. Since the effect of the Connally bill has successfully pegged the price of crude at $1, and recently higher, we are afraid there might be no ceiling to the prices they may wish to extract. I know that we oil marketers are paying from 30 to 50 percent more since the operations of the Connally bill for our petroleum products. I know that many of our mills and manufacturers have had to cease doing business because of increased costs, throwing thousands of people out of work-increase in cost of petroleum did its share to produce this result. The Connally Act proponents should be thankful that we had an unusually mild winter on the east coast this winter or this bill would be absolutely doomed even before this hearing. For over a month heating oils and fuel were so scare that on more than one occasion during this period some apartments, homes, and industries using oils for heating or power were reduced from normal to as low as 24 hours' supply. All the oil companies during this period were working heroically borrowing from one another sometimes as little as 2 hours' supply. You can imagine the millions of dollars such conditions cost the marketers, upsetting the entire delivery system organized and geared to operate on the small decimal profit and often on merely an exchange of an old dollar for a new. You can imagine the damage and uproar and excitement that would have followed if these cities and villages had found themselves without power and heat in the middle of winter for even a short period. They would not have appealed to the State of Texas authorities for relief from such conditions but would have organized to eliminate any such system, legal or illegal, that had produced this intolerable condition which had never happened before. If the State of Texas can't control her own so-called excess-produced oil and seeks the aid of the Federal Government through this Connally Act, we believe the Federal Government should have the control of proration and allocation of crude oil-which controls the excess-even going so far as to limiting the profits that can be made in order to avoid abnormal profits which lead to monopolistic practices. In conclusion I want to say that there is no question but that the consumer has absorbed not only the complete cost of higher crude prices but has had to contribute to the increased profits of some integrated oil companies-which anyone can read from their financial statements because of the control they obtained with the assistance of the Government through the operations of the Connally Act in conjunction with other sister petroleum acts. Senator CONNALLY. How much is your differential or spread? Senator CONNALLY. What is it today? Mr. BERGFORD. I do not know. Senator CONNALLY. What was it yesterday? Mr. BERGFORS. I do not know. Senator CONNALLY. What was it day before yesterday? Senator CONNALLY. What was it the day before that? Senator CONNALLY. You are in the business, are you not? Senator CONNALLY. You are president of the company and you certainly know what the company is doing. What was the last time that you knew of the margin, or the difference between the price of gasoline at which you were buying it and the price at which you were selling it; you certainly know that. Mr. BERGFORS. It varies from day to day. Mr. BERGFORS. We might have had a cent and a half, or 1 cent. |