Oil Glut and Oil Crisis

Times staff writer Donald Woutat’s recent articles on the current world oil glut and the future oil crisis were excellent (Part I, Dec. 25-27). They accurately describe the turmoil in the oil and gas industry as well as the problems that consumers will face in years to come.

The major integrated companies are taking advantage of low crude oil prices to maximize their downstream refining and marketing profits. Although average oil prices in 1988 were lower than they were in 1986 following the collapse of world oil prices, average gasoline prices were higher. This helps explain the record profits being posted by the larger companies!

In sharp contrast, the thousands of independent producers who produce one-third of the United State’s domestic oil and gas are struggling to survive. This is especially critical in California where a typical heavy oil crude sells for only $9 per barrel, below the average $9.50 per barrel it takes to produce it!

The severe depression in oil patch foretells of continued steep declines in U.S. production, increased imports from unstable areas of the world, and the future world oil crisis.

The petroleum industry, the state and federal governments, and energy-thirsty consumers need to take a critical look at where we are headed. Cyclical low and high energy prices will continue to send shock waves through our economy until a responsible long-range national energy policy is adopted. From our perspective, what is needed most are more stabilized oil prices that will restore the balance of profit centers for the entire oil and gas industry. The consumer should not be affected since as the end user he determines the true fair market price.

JAMES C. (CHRIS) HALL

President

Calif. Independent Petroleum Assn.

Fountain Valley