13. General Specifications can not be Drawn to Advantage for Fuel Oils.-Individual conditions and requirements at the points of consumption influence to a large degree the specifications for viscosity, flash point, and sulphur content. Definite specifications can be drawn for a fuel oil which will meet practically all requirements, but it can readily be seen that such specifications will exclude much of the fuel oil now available, and for most purposes the requirements need not be severe. Hence, it is advised that in purchasing fuel oil the individual requirements be studied and that as lenient specifications as possible be written which will insure an oil that will be satisfactory for the conditions for which it is intended.

CHAPTER XVII

FUEL OIL PRICES AND OIL PRODUCTION

By October 1920, as this Second Edition of "Fuel Oil and Steam Engineering" is about to go to press, the authors have come to the realization of the fact that the price of California fuel oil has more than doubled since the first edition of this book appeared just two years ago. Since, then, the constantly depleting storage of oil by the large production companies is making marked inroads into the possible supply of fuel oil in the near future, a discussion of this is of vital interest to the subject matter of this

FIG. 75.-Water softening plant at the Sierra and San Francisco Power Company's 27,000 kw. oil burning station. The use of pure water free from scale forming matter is the first requisite toward keeping boilers clean.

book in that economy production in the power plant depends directly upon the prices of this commodity prevailing in the open market and the ability of the operator to obtain fuel supply.

For the following able discussion of this matter we are indebted to J. E. Woodbridge, formerly chief engineer of the Sierra and San Francisco Power Company.

The exercise of prophecy in the field of prices is beset with pitfalls, as has been shown by the totally unexpected price revolution of the last five years. However, as all business must be planned in part on future price probabilities, we are obliged to make the best attempt we can at an estimate of their trend.

In the matter of fuel in the state of California, the most pertinent data for prediction as to future prices are the trend of the last few years, including the recent history of production and consumption, with other relevant information, such as the influence of the war, probable future additional sources and markets.

PRICE FLUCTUATION

Except for the continuity of the thought, we need hardly inform readers of this book that the price of delivered fuel oil in California has advanced during the last five years from approximately 60¢ to approximately $1.85 per barrel, the two approximations covering slight variations with locality. The figure which directly influences the production of oil in California, and constitutes the basic element of all prices to consumers is the market price offered by the large distributing organizations to the producers in the oil fields. The price offered by the Standard Oil Company of California for fuel oil, that is oil having a specific gravity between 14° and 17.9° on the Baume scale, has gone through the following changes during the last six years.

On October 3, 1914, this price dropped from 40¢. per barrel to 371⁄2¢.

The price doldrums of 1915 were due to the large number of gushers brought in during the years 1913 and 1914, which resulted in a production so much in excess of consumption that a stock of approximately 60,000,000 barrels of oil (nearly a year's consumption) was accumulated early in 1915. The price advances during the subsequent three years were largely due to war demands and the depreciation of our currency,

which made oil field development difficult and expensive. In particular, the large jump of May 1, 1918, was made at the request of the National Fuel Administrator. The price advance and other factors so stimulated production and controlled consumption that stock increased during a portion of 1918 and 1919 by 3,000,000 barrels. Many who have not looked further into the fuel-oil situation have reasoned, from the above, that we may rest easy as to the price of this raw material in the immediate future. However, it does not behoove power companies to "sleep at the switch." Let us, therefore, look a little deeper into the prospect.

DECREASING SUPPLY

On the occasion of the last price change of March, 1920, the California Railroad Commission criticized the Standard Oil Company of California, in response to which President Kingsbury of that company answered in part as follows:

"The Pacific Coast supply of fuel oil and of petroleum products is rapidly approaching exhaustion. Since May 1, 1915, crude oil stocks in California have decreased from over 60,000,000 barrels to 28,738,921 barrels on March 1, 1920.

"The available supply of crude oil in stock is today less than 13,000,000 barrels.

"The balance of the stocks are taken up in the factor of safety of 10,000,000 barrrels, which the Petroleum Committee of the State Council of Defense found essential to the safety of Pacific Coast industries, and in the oil in pipe lines and tank bottoms which the same committee estimated at 6,000,000 barrels not available for use.

"At the present rate of consumption and of production the available stocks will be exhausted in about twelve months, at which time consumers of California fuel oil will be cut off from between 25,000 to 30,000 barrels per day."

"In 1918 the average daily consumption was 279,576 barrels; in the last half of 1919 it was 292,278 barrels; in January, 1920, 301,000 barrels and in February, 1920, 304,120 barrels.

"Superimposed on these figures is the fact that 7,000 barrels of fuel oil a day which formerly went to Arizona from California are now supplied from Texas and Mexico. The existing shortage, therefore, has developed in face of the fact that 2,500,000 barrels of fuel oil a year have been restored to the California supply.

"Added to these considerations are the demands of the navy and the United States Shipping Board.

"The former estimates its 1920 requirements on the Pacific Coast at 2,950,800 barrels, against 1,532,650 barrels in 1919. The Shipping Board has invited bids for 1920 for 4,000,000 barrels.

"The United States Shipping Board is establishing oil fueling stations

throughout the world, and will supply these points from the cheapest markets. Thus California will be drawn upon or spared in the relation that California prices bear to prices elsewhere. Even at the new price this oil market is lower than many other points with which this market is in competition.

"The inevitable result will be that the Pacific Coast will be further drained of its supply by buyers who seek the cheapest market.

"Shipping Board vessels already have sought cargoes of fuel oil which formerly were obtained in Mexico, so that the Mexican cargoes could be released for the Atlantic coast.

"There is further the fact that improved refining processes will increase the volume of refined products extracted from crude oil and thus reduce the resulting residuum for fuel oil.

"The company is now installing at a cost of $10,000,000 new processes by which it is estimated that more refined products, incuding gasoline, will be recovered from crude oil in such quantities that the company's production of fuel oil within a year will be necessarily lessened about 30 per cent. or 20,000 barrels a day."

Further light on the probable price trend is obtainable from the following table of production and consumption of crude oil of all gravities in and from the California fields during the last seven years.

* Consumption is here taken as production plus withdrawals from storage or less additions to storage, as the case may be.

Examining the column headed "production," the gusher peak of 1914, amounting to over 103,000,000 barrels from approximately 6000 wells will be noted. A significant fact is that less oil was produced in 1919, in spite of a price three times as high as that of 1914. In the meantime the number of wells has in