The automotive boom of the 1920's caused such competition in the petroleum industry that gasoline prices were steadily eroded. At retail, the pre-tax price per gallon shriveled from 25 cents in 1918 to 16 cents in 1930. As the great economic depression closed in, many heretofore blue chip oil companies, drained by a decade of expensive expansion amid price cuts, faced ruin.

Sinclair was in no better financial shape than its competitors. From 1920 to 1925 the Sinclair companies earned a net profit of $28,998,000, but only $4,895,000 was retained in the business. The balance of $24,103,000 was distributed as dividends. Thus most of the enormous physical expansion of this period was financed by borrowed capital.

As early as 1927 Mr. Sinclair had begun to compile a scrapbook which stalked two important rivals. They were the giant Prairie, a Rockefeller interest as big as Sinclair Consolidated and a Wyoming enterprise, Producers and Refiners Corporation. Just as the depression began, the new Ajax pipe line through the mid-continent siphoned off most of the Prairie pipeline's traffic, jeopardizing the entire Prairie system. Harry F. Sinclair, who had foreseen this, made the boldest gamble of his life.

During the recession year of 1921, a half interest in the pipeline subsidiary had been sold to Standard Oil Company (Indiana). As the depression of 1930 deepened, Mr. Sinclair sold to the same rival, for $72.5 million cash, the remaining half interest in the pipeline company, along with its 50 percent interest in the Sinclair Crude Oil Purchasing Company. The industry said he had committed suicide. Instead, he saved his company's life. Securing another $33,500,000 through the sale of a new common stock issue, Sinclair retired pressing bank notes. He then braced for the economic depression with cash in hand, ready to buy distressed companies which would dovetail handily into the Sinclair system.

First to fall was Pierce Petroleum Corporation, originally part of the Standard Oil Trust, an important retailer in the southern states. This deal cost no cash, only stock. For the first time in its history, Sinclair that year sold a billion gallons of gasoline.

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