Those responsible for providing Sinclair's crude oil requirements often felt like Alice in Wonderland: no matter how rapidly they brought in new oil field production, refinery throughput increased at a faster rate, so that proportionately crude oil supplies were out of balance. From 1920 to 1932, for example, crude oil production tripled, but sales quadrupled. Mr. Sinclair needed all available funds, and all he could borrow, to build refineries and to build or acquire pipelines and marketing facilities. These items alone cost $300 million in cash and corporate stock between 1916 and 1933. The company's oil procurement policy was to buy--often as low as ten cents a barrel--in glutted new fields, then draw from storage when supplies were dear. An example: in 1924 Sinclair owned four million barrels of stored crude oil which had cost an average $1.53 a barrel. In addition, Sinclair Crude Oil Purchasing Company (50 percent owned by Sinclair) had 42 million barrels in storage. In 1926, when the price of mid-continent crude oil was $2.29, eight million barrels of the hoard were drawn off.

Another device was to race to the discoveries of others, buy proven leases from speculators and develop them rapidly. Some of Sinclair's best properties were acquired in this way. In 1926 every available landman was rushed to Seminole on news of a successful wildcat and in the next year the company produced seven million barrels of oil there. Similarly, Sinclair brought the second flowing well to the Oklahoma City field in 1929. Four months after the location by others of East Texas oil in 1930, Sinclair was in production and in 1931 took 4.5 million barrels of crude oil from the new field. Aggressive buying without costly wildcatting recovered all his purchase money in any field in two years, Mr. Sinclair told his bankers; after that, "everything is gravy."

This hand-to-mouth expediency was highly profitable when huge new flows inundated the mid-continent every few years, causing price upheavals from month to month and from field to field. But once the great finds had all been made, the older fields were stabilized, often under rigid withdrawal regulations. Additional production required enormous exploratory and development investment. Sinclair now was in trouble. During the decade 1935 to 1944, when all other major oil companies doubled their oil reserves, Sinclair's totals stood still, despite large increases in New Mexico and Wyoming, The average domestic yield of 26 million barrels yearly was about one-third of refinery throughput. Fortunately, 10 million barrels a year of imports from the Venezuela properties obscured the crisis during World War II. Wartime price-fixing also permitted the purchase of 38-gravity mid-continent crude for $1.17 a barrel, which was cheaper than exploration and development.

In 1949, with Mr. Sinclair retired as president, the crude oil shortage was acute. Sharp cutbacks in allowables under proration were effective in Texas and Oklahoma, where Sinclair produced 60 percent of its domestic supplies. These regulatory actions so curtailed productivity that Sinclair was able to produce only one barrel of oil for every three barrels of refinery throughput. The post-war open market price of crude oil shot to $1.62 a barrel in 1946 and $2.57 by the end of 1948. So Sinclair was paying an average $380,000 a day for 148,000 barrels of oil, on which the producer rather than Sinclair earned the profit.

As a partial offset to the crude oil squeeze, production of natural gasoline was pushed energetically, for blending with pipeline runs. The product was not subject to proration since it came from the wells with natural gas. Unfortunately, this supply also shriveled, from 109 million gallons in 1928 to 91 million in 1949. Sinclair also concentrated its exploration in Wyoming, Montana and Colorado which did not prorate production.

Only a genius for tight operation kept Sinclair competitive. To survive, Sinclair was required to refine, transport and market with the utmost efficiency, since its raw material costs were comparatively higher. This was the biggest problem Mr. Sinclair passed to his management heirs.

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