Showing posts with label Apollo. Show all posts
Showing posts with label Apollo. Show all posts

Wednesday 9 March 2022

A.




“So anyway, if you are coming out 
of an Irish pub at 11:30 
and you're on your way home, 
the PĂșca may suddenly decide 
to descend upon you.

Generally, he grabs you by the collar 
and yells "Got yer erse, mate!", 
and drags you off into a parallel universe, 
just like you hear about in Quantum Physics, 
or a set of parallel universes, 
and you meet all of the great Irish heroes, 
Finn McCoel, Cahaugllen, Niall of the Nine Hostages, 
Patrick Columbus, Brian Confucious... 
Luke Skywalker, Obi Wan Kenobi... 
Zeus, Apollo, the Devas, 
the Pans, the Satyrs... 

Billions, and billions of years 
of adventures in alternative realities.

And when the PĂșca gets done playing with you, 
he puts you back on the road.

And it's only one minute after you left the pub, in ordinary time."

Monday 11 January 2021

Mental Gender






Emblema XLIX. 
Infans Philosophicus tres agnoscit patres, ut Orion. 
‘Like Orion, the Philosophick Child acknowledges thee fathers.’ 

Mythographers relate that Orion had not one but three fathers

 
  Most accounts tell how Jupiter, Mercury, and Neptune granted the wish of their host Hyrieus to give him a son. 

Accordingly, the gods urinated in the skin of a heifer which was then buried. 
Nine months later, Orion (the name is a pun on the Greek ouron, urine) was born. 

Here, Maier names Orion’s fathers as 
Apollo, Vulcan, and Mercury
but, as usual, circumstances contrary to nature 
must in alchemy be understood to be the cloak of hermetick allegory

The Stone’s first father is Apollo: a celestial occult virtue (of The Sun) which fecundates the Matter of the Philosophers and gives her a son who will, ultimately, grow even more splendid than His Father. 

Vulcan, symbol of Fire, is its second father (or mentor). 

Its third is Mercury, who lends it his own volatile Matter (or Mercury). 

To those three must be added the figure on the left, who is the attentive Artist, 
and as it were the fourth father

Towering above the others is Mars, whose presence is indispensable : 
Without his action, the Body would not be dissolved. 

He is the symbol of the metal which, joined to the mineral Matter, 
attracts the magnetic influence of Phanes: 
Light, Spirit, Fire, personified in Apollo” (p104).








CHAPTER XIV

MENTAL GENDER

Students of psychology who have followed the modern trend of thought along the lines of mental phenomena are struck by the persistence of the dual-mind idea which has manifested itself so strongly during the past ten or fifteen years, and which has given rise to a number of plausible theories regarding the nature and constitution of these "two minds." The late Thomson J. Hudson attained great popularity in 1893 by advancing his well-known theory of the "objective and subjective minds" which he held existed in every individual. Other writers have attracted almost equal attention by the theories regarding the "conscious and subconscious minds"; the "voluntary and involuntary minds"; "the active and passive minds," etc., etc. The theories of the various writers differ from each other, but there remains the underlying principle of "the duality of mind."

The student of the Hermetic Philosophy is tempted to smile when he reads and hears of these many "new theories" regarding the duality of mind, each school adhering tenaciously to its own pet theories, and each claiming to have "discovered the truth." 


The student turns back the pages of occult history, and away back in the dim beginnings of occult teachings he finds references to the ancient Hermetic doctrine of the Principle of Gender on the Mental Plane-the manifestation of Mental Gender. And examining further he finds that the ancient philosophy took cognizance of the phenomenon of the "dual mind," and accounted for it by the theory of Mental Gender. 


This idea of Mental Gender may be explained in a few words to students who are familiar with the modern theories just alluded to. 


The Masculine Principle of Mind corresponds to the so-called Objective Mind; Conscious Mind; Voluntary Mind; Active Mind, etc. And The Feminine Principle of Mind corresponds to the so-called Subjective Mind; Sub-conscious Mind; Involuntary Mind; Passive Mind, etc. 


Of course the Hermetic Teachings do not agree with the many modern theories regarding the nature of the two phases of mind, nor does it admit many of the facts claimed for the two respective aspects—some of the said theories and claims being very far-fetched and incapable of standing the test of experiment and demonstration. We point to the phases of agreement merely for the purpose of helping the student to assimilate his previously acquired knowledge with the teachings of the Hermetic Philosophy. Students of Hudson will notice the statement at the beginning of his second chapter of "The Law of Psychic Phenomena," that: "The mystic jargon of the Hermetic philosophers discloses the same general idea" i.e., the duality of mind. If Dr. Hudson had taken the time and trouble to decipher a little of "the mystic jargon of the Hermetic Philosophy," he might have received much light upon the subject of "the dual mind"—but then, perhaps, his most interesting work might not have been written. Let us now consider the Hermetic Teachings regarding Mental Gender.

The Hermetic Teachers impart their instruction regarding this subject by bidding their students examine the report of their consciousness regarding their Self. The students are bidden to turn their attention inward upon the Self dwelling within each. Each student is led to see that his consciousness gives him first a report of the existence of his Self-the report is "I Am." This at first seems to be the final words from the consciousness, but a little further examination discloses the fact that this "I Am" may be separated or split into two distinct parts, or aspects, which while working in unison and in conjunction, yet, nevertheless, may be separated in consciousness.

While at first there seems to be only an "I" existing, a more careful and closer examination reveals the fact that there exists an "I" and a "Me." These mental twins differ in their characteristics and nature, and an examination of their nature and the phenomena arising from the same will throw much light upon many of the problems of mental influence.

Let us begin with a consideration of the Me, which is usually mistaken for the I by the student, until he presses the inquiry a little further back into the recesses of consciousness. A man thinks of his Self (in its aspect of Me) as being composed of certain feelings, tastes likes, dislikes, habits, peculiar ties, characteristics, etc., all of which go to make up his personality, or the "Self" known to himself and others. He knows that these emotions and feelings change; are born and die away; are subject to the Principle of Rhythm, and the Principle of Polarity, which take him from one extreme of feeling to another. He also thinks of the "Me" as being certain knowledge gathered together in his mind, and thus forming a part of himself. This is the "Me" of a man.

But we have proceeded too hastily. The "Me" of many men may be said to consist largely of their consciousness of the body and their physical appetites, etc. Their consciousness being largely bound up with their bodily nature, they practically "live there." Some men even go so far as to regard their personal apparel as a part of their "Me" and actually seem to consider it a part of themselves. A writer has humorously said that "men consist of three parts—soul, body and clothes." These "clothes conscious" people would lose their personality if divested of their clothing by savages upon the occasion of a shipwreck. But even many who are not so closely bound up with the idea of personal raiment stick closely to the consciousness of their bodies being their "Me" They cannot conceive of a Self independent of the body. Their mind seems to them to be practically "a something belonging to" their body-which in many cases it is indeed.

But as man rises in the scale of consciousness he is able to disentangle his "Me" from his idea of body, and is able to think of his body as "belonging to" the mental part of him. But even then he is very apt to identify the "Me" entirely with the mental states, feelings, etc., which he feels to exist within him. He is very apt to consider these internal states as identical with himself, instead of their being simply "things" produced by some part of his mentality, and existing within him—of him, and in him, but still not "himself." He sees that he may change these internal states of feelings by all effort of will, and that he may produce a feeling or state of an exactly opposite nature, in the same way, and yet the same "Me" exists. And so after a while he is able to set aside these various mental states, emotions, feelings, habits, qualities, characteristics, and other personal mental belongings—he is able to set them aside in the "not-me" collection of curiosities and encumbrances, as well as valuable possessions. This requires much mental concentration and power of mental analysis on the part of the student. But still the task is possible for the advanced student, and even those not so far advanced are able to see, in the imagination, how the process may be performed.

After this laying-aside process has been performed, the student will find himself in conscious possession of a "Self" which may be considered in its "I" and "Me" dual aspects. The "Me" will be felt to be a Something mental in which thoughts, ideas, emotions, feelings, and other mental states may be produced. It may be considered as the "mental womb," as the ancients styled it-capable of generating mental offspring. It reports to the consciousness as a "Me" with latent powers of creation and generation of mental progeny of all sorts and kinds. Its powers of creative energy are felt to be enormous. But still it seems to be conscious that it must receive some form of energy from either its "I" companion, or else from some other "I" ere it is able to bring into being its mental creations. This consciousness brings with it a realization of an enormous capacity for mental work and creative ability.

But the student soon finds that this is not all that he finds within his inner consciousness. He finds that there exists a mental Something which is able to Will that the "Me" act along certain creative lines, and which is also able to stand aside and witness the mental creation. This part of himself he is taught to call his "I." He is able to rest in its consciousness at will. He finds there not a consciousness of an ability to generate and actively create, in the sense of the gradual process attendant upon mental operations, but rather a sense and consciousness of an ability to project an energy from the "I" to the "Me"—a process of "willing" that the mental creation begin and proceed. He also finds that the "I" is able to stand aside and witness the operations of the "Me's" mental creation and generation. There is this dual aspect in the mind of every person. The "I" represents the Masculine Principle of Mental Gender-the "Me" represents the Female Principle. The "I" represents the Aspect of Being; the "Me" the Aspect of Becoming. You will notice that the Principle of Correspondence operates on this plane just as it does upon the great plane upon which the creation of Universes is performed. The two are similar in kind, although vastly different in degree. "As above, so below; as below, so above."

These aspects of mind-the Masculine and Feminine Principles-the "I" and the "Me"-considered in connection with the well-known mental and psychic phenomena, give the master-key to these dimly known regions of mental operation and manifestation. The principle of Mental Gender gives the truth underlying the whole field of the phenomena of mental influence, etc.

The tendency of the Feminine Principle is always in the direction of receiving impressions, while the tendency of the Masculine Principle is always in the direction of giving, out or expressing. The Feminine Principle has much more varied field of operation than has the Masculine Principle. The Feminine Principle conducts the work of generating new thoughts, concepts, ideas, including the work of the imagination. The Masculine Principle contents itself with the work of the "Will" in its varied phases. And yet, without the active aid of the Will of the Masculine Principle, the Feminine Principle is apt to rest content with generating mental images which are the result of impressions received from outside, instead of producing original mental creations.

Persons who can give continued attention and thought to a subject actively employ both of the Mental Principles-the Feminine in the work of the mental generation, and the Masculine Will in stimulating and energizing the creative portion of the mind. The majority of persons really employ the Masculine Principle but little, and are content to live according to the thoughts and ideas instilled into the "Me" from the "I" of other minds. But it is not our purpose to dwell upon this phase of the subject, which may be studied from any good text-book upon psychology, with the key that we have given you regarding Mental Gender.

The student of Psychic Phenomena is aware of the wonderful phenomena classified under the head of Telepathy; Thought Transference; Mental Influence; Suggestion; Hypnotism, etc. Many have sought for an explanation of these varied phases of phenomena under the theories of the various "dual mind" teachers. And in a measure they are right, for there is clearly a manifestation of two distinct phases of mental activity. But if such students will consider these "dual minds" in the light of the Hermetic Teachings regarding Vibrations and Mental Gender, they will see that the long sought for key is at hand.

In the phenomena of Telepathy it is seen how the Vibratory Energy of the Masculine Principle is projected toward the Feminine Principle of another person, and the latter takes the seed-thought and allows it to develop into maturity. In the same way Suggestion and Hypnotism operates. The Masculine Principle of the person giving the suggestions directs a stream of Vibratory Energy or Will-Power toward the Feminine Principle of the other person, and the latter accepting it makes it its own and acts and thinks accordingly. An idea thus lodged in the mind of another person grows and develops, and in time is regarded as the rightful mental offspring of the individual, whereas it is in reality like the cuckoo egg placed in the sparrows nest, where it destroys the rightful offspring and makes itself at home. The normal method is for the Masculine and Feminine Principles in a person's mind to co-ordinate and act harmoniously in conjunction with each other, but, unfortunately, the Masculine Principle in the average person is too lazy to act-the display of Will-Power is too slight-and the consequence is that such persons are ruled almost entirely by the minds and wills of other persons, whom they allow to do their thinking and willing for them. How few original thoughts or original actions are performed by the average person? Are not the majority of persons mere shadows and echoes of others having stronger wills or minds than themselves? The trouble is that the average person dwells almost altogether in his "Me" consciousness and does not realize that he has such a thing as an "I." He is polarized in his Feminine Principle of Mind, and the Masculine Principle, in which is lodged the Will, is allowed to remain inactive and not employed.

The strong men and women of the world invariably manifest the Masculine Principle of Will, and their strength depends materially upon this fact. Instead of living upon the impressions made upon their minds by others, they dominate their own minds by their Will, obtaining the kind of mental images desired, and moreover dominate the minds of others likewise, in the same manner. Look at the strong people, how they manage to implant their seed-thoughts in the minds of the masses of the people, thus causing the latter to think thoughts in accordance with the desires and wills of the strong individuals. This is why the masses of people are such sheeplike creatures, never originating an idea of their own, nor using their own powers of mental activity.

The manifestation of Mental Gender may be noticed all around us in everyday life. The magnetic persons are those who are able to use the Masculine Principle in the way of impressing their ideas upon others. The actor who makes people weep or cry as he wills, is employing this principle. And so is the successful orator, statesman, preacher, writer or other people who are before the public attention. The peculiar influence exerted by some people over others is due to the manifestation of Mental Gender, along the Vibrational lines above indicated. In this principle lies the secret of personal magnetism, personal influence, fascination, etc., as well as the phenomena generally grouped under the name of Hypnotism.

The student who has familiarized himself with the phenomena generally spoken of as "psychic" will have discovered the important part played in the said phenomena by that force which science has styled "Suggestion," by which term is meant the process or method whereby an idea is transferred to, or "impressed upon" the mind of another, causing the second mind to act in accordance therewith. A correct understanding of Suggestion is necessary in order to intelligently comprehend the varied psychical phenomena which Suggestion underlies. But, still more is a knowledge of Vibration and Mental Gender necessary for the student of Suggestion. For the whole principle of Suggestion depends upon the principle of Mental Gender and Vibration.

It is customary for the writers and teachers of Suggestion to explain that it is the "objective or voluntary" mind which make the mental impression, or suggestion, upon the "subjective or involuntary" mind. But they do not describe the process or give us any analogy in nature whereby we may more readily comprehend the idea. But if you will think of the matter in the light of the Hermetic Teachings you will be able to see that the energizing of the Feminine Principle by the Vibratory Energy of the Masculine Principle Is in accordance to the universal laws of nature, and that the natural world affords countless analogies whereby the principle may be understood. In fact, the Hermetic Teachings show that the very creation of the Universe follows the same law, and that in all creative manifestations, upon the planes of the spiritual, the mental, and the physical, there is always in operation this principle of Gender-this manifestation of the Masculine and the Feminine Principles. "As above, so below; as below, so above." And more than this, when the principle of Mental Gender is once grasped and understood, the varied phenomena of psychology at once becomes capable of intelligent classification and study, instead of being very much in the dark. The principle "works out" in practice, because it is based upon the immutable universal laws of life.

We shall not enter into an extended discussion of, or description of, the varied phenomena of mental influence or psychic activity. There are many books, many of them quite good, which have been written and published on this subject of late years. The main facts stated in these various books are correct, although the several writers have attempted to explain the phenomena by various pet theories of their own. The student may acquaint himself with these matters, and by using the theory of Mental Gender he will be able to bring order out of the chaos of conflicting theory and teachings, and may, moreover, readily make himself a master of the subject if he be so inclined. The purpose of this work is not to give an extended account of psychic phenomena but rather to give to the student a master-key whereby He may unlock the many doors leading into the parts of the Temple of Knowledge which he may wish to explore. We feel that in this consideration of the teachings of The Kybalion, one may find an explanation which will serve to clear away many perplexing difficulties—a key that will unlock many doors. What is the use of going into detail regarding all of the many features of psychic phenomena and mental science, provided we place in the hands of the student the means whereby he may acquaint himself fully regarding any phase of the subject which may interest him. With the aid of The Kybalion one may go through any occult library anew, the old Light from Egypt illuminating many dark pages, and obscure subjects. That is the purpose of this book. We do not come expounding a new philosophy, but rather furnishing the outlines of a great world-old teaching which will make clear the teachings of others-which will serve as a Great Reconciler of differing: theories, and opposing doctrines.

Friday 7 July 2017

The Roman Diana and Apollo


NOTE THE HIGH DEGREE OF NASTY, VINDICTIVE MURDEROUS BRUTALITY AND ENVY RELATIVE TO HELENIC DIANA/ARTEMIS

Diana
Moon goddess. Roman. Living in the forests, She is A Huntress and Protector of Animals, also The Guardian of Virginity. Generally modeled on the Greek goddess ARTEMIS, She had a sanctuary on the Aventine Hill in Rome and, under Roman rule, took over The Temple of Artemis at Ephesus.

Arduinna
Goddess of forests and hunting. Romano-Celtic(Continental European). Known only from inscriptions and figurines in the Ardennes region. Depicted riding on the back of a wild boar and presumed to be a guardian deity of boars. Identified by the Romans with the goddess DIANA .

The sixth king, Servius Tullius (578–534 B . C .), organized Roman society by rank and divided the population into classes. Men who owned property had political power and could join the military. He also established the earliest and most important shrine of the Latin deity Diana on the Aventine Hill. Diana was concerned with the affairs of women and later became associated with the Greek goddess Artemis, who was the goddess of the moon and hunting.



Apollo
Apollo was a god of many things and was one of the most worshipped of the Greek and Roman gods. He was god of the shepherds, god of light and truth, god of healing, god of prophecy, god of music, and god of archery. His most important daily task was to harness his four horses to his chariot and drive the sun across the sky.

Apollo was the son of Jupiter and the goddess Latona, known as the “hidden one.” Apollo’s twin sister was the goddess Diana. Apollo and Diana were very protective of their mother and quick to defend her.

One day, Queen Niobe of Thebes, the principal city in Boeotia, an early Greek territory, bragged to Latona that she was a superior woman because she had given birth to fourteen children and Latona had only given birth to twins.

Angered by The Queen’s smugness, Apollo and Diana decided to make The Queen childless so that their own mother would be the better woman. The Queen had seven boys and seven girls — so Apollo killed the boys, and Diana killed the girls.

Although Apollo was known to have had many romances, some legends say that he never married. He was, however, one of the first gods to fall in love with a member of the same sex — a handsome Spartan prince named Hyacinthus, who was also loved by Favonius, god of the west wind. Hyacinthus returned Apollo’s love, but he would not return the affection of Favonius. So one day when Apollo and Hyacinthus were out in a field throwing the discus, Favonius blew the discus toward Hyacinthus’ head. It struck the young prince in the skull and killed him. 

In the pool of blood that formed beside his head, Apollo made a flower spring forth from the earth: a hyacinth.

Other legends claimed that Apollo loved a beautiful young woman named Daphne, who would not return his love. Daphne, in fact, became irritated by the god’s persistent attentions. When Apollo refused to leave her alone, she asked her father, the river god Peneus, for help.

Because water gods always had the power of transformation, Peneus transformed his daughter into a beautiful laurel tree. Apollo then claimed the laurel tree as his own, and laurel leaves became his symbol.

According to another legend, Apollo eventually married a nymph named Larissa. The couple was very happy, and Apollo believed that, at last, he had found true love. But one day his favorite bird, the crow (who, at that time, had pure white feathers), came to him and told him that his beautiful wife had been unfaithful to him. Apollo flew into a rage and shot Larissa with one of his sharp arrows. Although he had not intended to kill her, Larissa was fatally injured and Apollo could not make her return to life. Angry that he had lost the woman he loved, Apollo turned on the crow that had delivered the news and changed his white feathers into black. Then, he forbade the crow to ever fly among other birds.

Apollo’s symbols are a lyre, which represents harmony, and a bow, which represents his power to destroy. Apollo was known to be kind and forgiving, but mean and vicious, as well.




Thursday 13 October 2016

Flavian Apollo

How the Flavian Emperors commissioned the project of Flavius Josephus to write The Gospels

Caesar's Messiah: The Roman Conspiracy to Invent Jesus 
Flavian Signature Edition
Authored by Joseph Atwill 

Was Jesus the invention of a Roman emperor? The author of this ground-breaking book believes he was. "Caesar's Messiah" reveals the key to a new and revolutionary understanding of the origin of Christianity, explaining what is the New Testament, who is the real Jesus, and how Christ's second coming already occurred.
The clues leading to these startling conclusions are found in the writings of the first-century historian Flavius Josephus, whose "Wars of the Jews" is one of the only historical chronicles of this period. Closely comparing the work of Josephus with the New Testament Gospels, "Caesar's Messiah" demonstrates that the Romans directed the writing of both. Their purpose: to offer a vision of a "peaceful Messiah" who would serve as an alternative to the revolutionary leaders who were rocking first-century Israel and threatening Rome.
Similarly, "Caesar's Messiah" will rock our understanding of Christian history as it reveals that Jesus was a fictional character portrayed in four Gospels written not by Christians but Romans. This Flavian Signature edition adds Atwill's latest discoveries of numerous parallel events in sequence which ultimately reveal the identity of the true authors of the Gospels.

In his book Caesar's Messiah, Atwill outlines a revolutionary discovery: the series of events in Jesus' ministry described in the Gospels are exact, sequential parallels to the the battle campaign of Titus Flavius, as recorded by Josephus in War of the Jews.  From this revelation, Atwill unravels one of the best kept secrets of our modern era--that the origins and intentions of Christianity are far different than we have been led to believe.

An ICC world-ranked chess player, Atwill was classically trained from his youth in Greek, Latin and Biblical studies at St. Mary's Military Academy in Japan.   Atwill went on to study computer science as an undergraduate and cofounded software companies Ferguson Tool Company and ASNA with early IBM programmer David Ferguson. 

In 1995, after selling his shares and exiting the industry, Atwill returned to his studies of early Christianity through the newly discovered Dead Sea Scrolls.  It seemed incredible that two diametrically opposite forms of messianic Judaism emerged from Judea at the same time.  One sect was waging a religious war against the Romans, seeking a Messiah that would lead them to military victory. Simultaneously, the followers of Jesus were supposedly organizing a religion based around a Messiah that told them to “turn the other cheek” and “give unto Caesar what is Caesar’s.”

The key came in Josephus’ War of the Jews, which describes Titus’s destruction of Jerusalem in 70 CE.  The military campaign exactly paralleled over 40 moments in the ministry of Jesus described in the Gospels; an inconceivable coincidence.

As Atwill presents in Caesar's Messiah, the Flavian Roman imperial family created Christianity to pacify the militaristic opposition to their rule. Even more incredibly, they placed a literary satire within the Gospels to mark their handiwork.  This symbolic framework is the hidden history of Western civilization. In his follow-up book, Shakespeare's Secret Messiah, Atwill shows how this typology was understood and employed by Marlowe and Shakespeare, and what it means for the future of the Christian world.

Books by Joseph Atwill include Caesar’s Messiah, Ulysses Press 2006,the best selling work of religious history in the US in 2007. Its German translation Das Messias Ratsel, Ulstein 2008, achieved #1 Best Seller status. The German magazine Focus published a cover article of Atwill's work in Issue #52 December 25, 2008. Caesar's Messiah Flavian Signature Edition was released in 2011, followed by a documentary in 2012, also titled Caesar's Messiah. Atwill's latest book, Shakespeare's Secret Messiah, was released in 2014 with an Introduction by Jerry Russell, PhD.

"This relief from the Arch of Titus depicts Roman soldiers carrying treasures from the Temple of Jerusalem, including the Menorah. The city was besieged and destroyed by Titus in 70."



This in-depth investigative documentary traces the secret history of Christianity and the Bible like never before. Scholars shed new light on translation errors, misinterpretations, political changes, and archeological discoveries that have unraveled the many mysteries of Christianity which has evolved into over 200 religious sects, each with differing beliefs. This film does not debate the issue of faith. However, after watching this film, you may never look at the history of Christianity and the Bible in the same way again.

Thursday 18 October 2012

Great Speeches Consigned to History's Inside Jacket Pocket: Failure to Re-achieve Lunar Escape Velocity, Tranquility Base, 1969


To : H. R. Haldeman
From : Bill Safire
July 18, 1969.
IN EVENT OF MOON DISASTER:
Fate has ordained that the men who went to the moon to explore in peace will stay on the moon to rest in peace.
These brave men, Neil Armstrong and Edwin Aldrin, know that there is no hope for their recovery. But they also know that there is hope for mankind in their sacrifice.

These two men are laying down their lives in mankind's most noble goal: the search for truth and understanding.
They will be mourned by their families and friends; they will be mourned by their nation; they will be mourned by the people of the world; they will be mourned by a Mother Earth that dared send two of her sons into the unknown.
In their exploration, they stirred the people of the world to feel as one; in their sacrifice, they bind more tightly the brotherhood of man.

In ancient days, men looked at stars and saw their heroes in the constellations. In modern times, we do much the same, but our heroes are epic men of flesh and blood.

Others will follow, and surely find their way home. Man's search will not be denied.

But these men were the first, and they will remain the foremost in our hearts.


For every human being who looks up at the moon in the nights to come will know that there is some corner of another world that is forever mankind.

PRIOR TO THE PRESIDENT'S STATEMENT:
The President should telephone each of the widows-to-be.

AFTER THE PRESIDENT'S STATEMENT, AT THE POINT WHEN NASA ENDS COMMUNICATIONS WITH THE MEN:
A clergyman should adopt the same procedure as a burial at sea, commending their souls to "the deepest of the deep," concluding with the Lord's Prayer.

Tuesday 9 October 2012

Milton Friedman on the American Oil Industry, 1967

...but Milton Friedman, who can hardly be accused of being a socialist, wrote a whole article on the subject in the June 26, 1967 issue of Newsweek:

"Few US industries sing the praises of free enterprise more loudly than the oil industry. Yet few industries rely so heavily on special governmental favors. These favors are defended in the name of national security. A strong domestic oil industry, it is said, is needed because international disturbances can so readily interfere with the supply of foreign oil. The Israeli-Arab war has produced just such a disturbance, and the oil industry is certain to point to it as confirmation of the need for special favors. Are they right? I believe not.

"The main special favors are:

"1. Percentage depletion. This is a special provision of the Federal income tax under which oil producers can treat up to 27.5% of their income as exempt from income tax -- supposedly to compensate for the depletion of oil reserves. This name is a misnomer. In effect, this provision simply gives the oil industry (and a few others to which similar treatment has been extended) a lower tax rate than other industries.

"2. Limitation of oil production. Texas, Oklahoma, and some other oil-producing states limit the number of days a month that oil wells may operate or the amount that they may produce. The purpose of these limitations is said to be 'conservation.' In practice, they have led to the wasteful drilling of multiple wells draining the same field. And the amount of production permitted has been determined primarily by estimates of market demand, not by the needs of conservation. The state regulatory authorities have simply been running a producers' cartel to keep up the price of oil.

"3. Oil import quotas. The high domestic prices enforced by restriction of production were threatened by imports from abroad. So, in 1959, President Eisenhower imposed a quota on imports by sea. This quota is still in effect. Currently it is slightly more than 1 million barrels a day (under one-fifth of our total consumption).

"Foreign oil can be landed at East Coast refineries for about $1 to $1.50 a barrel less than the cost of domestic oil. The companies fortunate enough to be granted import permits are therefore in effect getting a Federal subsidy of this amount per barrel -- or a total of about $400 million a year .

"These special favors cost US consumers of oil products something over $3.5 billion a year. (Gibert Burck, Fortune, April, 1965). This staggering cost cannot be justified by its contribution to national security.

"The following points indicate the basis for this judgment:

"1. Restricting imports may promote the domestic industry, but why pay a $400 million subsidy to oil importers? A tariff of $1.25 a barrel would restrict imports just as much -- and the US Government rather than the oil importers would get the revenue. (I do not favor such a tariff but it would be less bad than a quota).

"2. Oil from Venezuela -- after the U.S., the largest oil producer in the world -- is most unlikely to be cut off by international disturbances threatening our national security. Yet it too is covered by the import quota.

"3. Restrictions on domestic oil production at least have the virtue that domestic production could be expanded rapidly in case of need. But such restrictions are an incredibly expensive way to achieve flexibility.

"4. The world oil industry is highly competitive and far-flung and getting more so. The Mideast crisis has let large oil-producing areas undisturbed. Moreover, the Arabian countries themselves cannot afford to refuse to sell for long. Only World War III is likely to produce severe disruptions of supply -- and then the emergency is likely to be brief.

"5. If all the special favors to the oil industry were abandoned, prices to the consumer would decline sharply. Domestic production also might decline -- but then again, if the industry were freed of all the artificial props that raise costs and stifle initiative, production might rise rather than decline. In either event, a vigorous and extensive domestic industry would remain, protected by the natural barrier of transportation costs.

"If domestic production did decline, we might want to insure against an emergency by stockpiling oil, paying for holding reserve wells in readiness, making plans for sharp reductions in nonessential consumption, or in other ways. Measures such as these could provide insurance at a small fraction of the $3.5 billion a year the US consumer is now paying.

"The political power of the oil industry, not national security, is the reason for the present subsidies to the industry. International disturbances simply offer a convenient excuse.(57) Indeed, the American oil industry enjoys extraordinary political power. When Kennedy entered the White House, the American fiscal system, and in particular the system of the depletion allowance, had enabled a few operators in the oil industry like H. L. Hunt to amass in only a few years the kind of fortune it had taken Rockefeller a half-century and a great deal of patience to accumulate.

If a person had enough capital, speculation in oil operations carried virtually no risk. He could take capital which normally would have been taxed at the rate of 90% and invest it in new oil wells. A speculator with $900,000 in this tax bracket could drill nine wells (at an average cost of $10,000). The odds were that one well out of nine would be productive. The eight dry wells would have cost him $10,000 each, all tax-free, and the ninth would earn him a fortune. With a little perseverance, any speculator could make a million.

Pools or joint ventures enabled citizens with more modest revenues, but whose income was still partly taxed in the 90% bracket, to do the same thing. These persons would purchase fractional interests in an oil well. Some of them never even got to see "their" well, but every tax dollar they invested represented a gain of approximately 25% on their capital. In the war and immediate post-war period, investment in the petroleum industry was one of the most obvious and attractive ways of reducing personal income tax liability. For the non-professionals this system was still, to a certain extent, a speculation, but the same was not true of the big companies, which employed experienced geologists and commanded unlimited capital.(58)

These special privileges constituted an international anomaly, and they cost the nation several billion dollars every year.(59) It has been estimated that the abolition of these favors would have enabled the government to avoid the 1951 tax increase that applied to taxpayers earning as little as $4,000 a year. The oilmen, conscious of the importance of these privileges, have always claimed that their abolition would hinder new explorations. But the fantastic number of wells drilled in the United States represents a waste of natural resources.

In 1963, the oilmen advanced other arguments.(60) They noted that the market for American crude had grown from 1 billion barrels in 1930 to nearly 2 billion in 1950 and almost 3 billion in 1963, and they made known their "concern" about a future shortage. Their cautious and seemingly pessimistic prognostics, however, were not confirmed by more independent-minded experts. Professor A. I. Levorsen of Stanford University had declared in 1949 that world oil reserves were sufficient to cover the world's needs for the next five centuries, and other scientists estimated that only l/1,000th of the surface of the earth and sea had been explored thus far.(61)

The oilmen also complained that it was becoming harder and harder to find oil in sufficient quantity to make it as easily extractable and as profitable as in the past. Between 1956 and 1967, it took twice the number of new field wildcats to make one profitable discovery compared with 10 years earlier.

These arguments became the theme song of the National Petroleum Council, the only lobby representing c private interests that enjoys official standing. The NPC was founded in 1946 and is composed of representatives of the front offices of the big companies. It elects its own President. In reality, it is the NPC that defines the oil policy of the federal government, in the spirit of John Jay's maxim: "The country should be governed by those who own it."(62) The President of the United States has no business interfering.

A half-century ago, the oilmen lacked the influence in the White House that they had over Congress. They regarded the President with suspicion. For them, the country had been going to the dogs since McKinley. The power of the oil lobby was a concern to every President who entered the White House after the accession to power of Jersey Standard and its little brothers and sisters. In 1920 President Harding was elected with the massive backing of the oil industry. Two members of his Cabinet were oilmen (Hughes of Standard and Fall, an associate of Sinclair). Coolidge, and after him Hoover, did nothing to displease the oil magnates. On the day of Franklin D. Roosevelt's death, a San Antonio oilman threw a huge party to celebrate. Roosevelt, nevertheless, had not been particularly aggressive towards the oil industry. The pre-war climate was hardly favorable, and the war, which was still going on at the time of his death, had brought a boom in the oil business.

In 1950 President Truman examined the depletion allowance system, and the oilmen learned that the President felt that an exoneration that withheld such amounts from the Treasury was not equitable. That same year Hubert H. Humphrey, then a political neophyte and regarded as a liberal, introduced an amendment to the tax bill that would reduce the depletion allowance. The amendment was rejected. It was re-introduced in 1951 but rejected again by a margin of 71 to 9. In 1952 President Truman turned again to the problem, but any decision he might make was at the mercy of Congress, and Harry Truman liked the quiet life. Nevertheless, during his last days in office he adopted one of Roosevelt's ideas and declared that the continental shelf (an extension of the American coastline) was part of the national reserves and should be placed under the control of the Department of Defense. The value of the oil beneath the sea had been estimated at $250 billion, and Truman felt it would be madness to let this oil, which was vital for national defense, fall into private hands, obliging the government to buy it back at high prices.

In 1952 Eisenhower received heavy financial backing from the oil industry in his campaign against Adlai Stevenson. Ike knew how say thanks. When Truman's bill came up before Congress, the House rejected it in favor of a measure recognizing the property rights of the states over any oil discovered within ten and a half miles (twelve for Texas and Florida) of their coastline. The federal government was left with only a right of preemption over the resources of its former territory .The bill was later voted into law by the Senate.(63)

In 1954 Senator Humphrey's timid offensive was taken up by Senators Douglas (Illinois) and Williams (Delaware), both of whom introduced amendments concerning the depletion allowance. Senator Douglas noted that in 1953 one company with a net income of $4 million had paid only $404 in taxes, that another had paid nothing on a revenue of $5 million, and that a third company with profits of $12 million had received a $500,000 subsidy. The amendments were rejected.

On March 27, 1957, Senator Williams again introduced an amendment that would reduce the depletion allowance from 27.5% to 20% .He explained to Congress that this privilege had been instated during the First World War, when it amounted to only 5%. Later it had been increased to 12.5%, then to 25%, and finally to 27.5%. Originally it had been a discovery depletion, permitting the recovery of the investment, "but the present 27.5% oil depletion rate obviously gives a special tax advantage to the oil industry above that enjoyed by other taxpayers." He added that when the present rate of 27.5% had been adopted in 1926, the corporate tax rate had been approximately 14% .The depletion allowance therefore did not represent a huge sum of money. But in 1957, "with our present corporation rate, this 27.5% gross sales deduction, or depletion allowance, represents a tremendous tax-free bonanza.(64)

"The importance of percentage depletion is more glaringly emphasized in connection with the operations of foreign companies," he continued. "The Treasury Department has submitted three examples as to how this works. Corporation A with total earnings of approximately $200 million reported a United States tax liability of $103,887,000. They paid foreign taxes which are deductible from United States taxes in the amount of $103,323,000, leaving a United States tax liability of $564,000. This company has a total allowable depletion allowance of $91,879,000.

"Corporation B reported an income of approximately $150 million. Their total allowable depletion was $123,977,000, and they reported a United States tax liability of $78,961,000. The taxes reported as paid to foreign countries by Company B amounted to $98,319,000, and the credit allowed for foreign taxes paid was $77,087,000, leaving a United States tax liability after foreign tax credit of $1,874,000. Corporation C reported an income of approximately $33 million. The total allowable depletion of Corporation C was $44,895,000. The United States tax liability of this company was $17,325,000, and foreign taxes paid were of the same amount, with credit being given for the full total, leaving Company C with no United States tax liability."

Senator Williams cited and inserted in the Congressional Record the testimony of Mr. Paul E. Hadlick, general counsel of the National Oil Marketers Association, to the Senate Finance Committee. Mr. Hadlick had prepared a list of the incomes and taxes paid by the 23 largest oil companies. His figures indicated that Humble Oil had paid $30 million in federal income taxes on a net income of $145 million, that Socony Vaccuum Oil had paid $51 million on a net income of $171 million, that Standard Oil of California had paid $40 million on an income of $174 million, and that the Texas Company had paid $47 million in taxes on an income of $181 million.

Senator Barrett (Wyoming) retorted that "the depletion allowance is based upon the great risk involved in drilling and discovering oil," and he drew Senator Williams' attention to the fact that "our first line of defense will rest in air power, but the planes will not be able to deliver the bombs without high octane gasoline and plenty of it, I might say."(65) Senator Carlson (Kansas) declared: "Those of us who are familiar with the reserves in the stripper well are in a position to know that the producers must have the 27.5% depletion allowance and any other encouragement they can get, or the United States will lose millions of barrels of oil, which will never come out of the ground." Senators Monroney (Oklahoma) and Martin (Pennsylvania) joined in the chorus. Senator Williams quoted a statement by the Secretary of the Treasury in 1937: "This is the most glaring loophole in our present revenue law." Nevertheless, he noted, depletion had not been discussed during the 1937 hearings, and the committee had made no recommendation in its report on the subject "because of lack of time."

"Mr. President," Senator Williams continued, "today we hear the same argument: lack of time." Senator Williams spoke for another 15 minutes and then called for a vote. Senator Johnson (Texas) suggested the absence of a quorum. But there was a quorum, the vote was held, and the amendment was rejected.

Senator Douglas of Illinois then introduced his amendment, which maintained the percentage of 27.5% on revenues not exceeding $1 million, but lowered it to 21% for revenues of between $1 and $5 million, and to 15% for revenues exceeding $5 million. Senator Aiken (Vermont) supported the Douglas amendment. "I believe that when these enormous depletion allowances are given to one segment of our economy, it means that other people must dig into their pockets to make up for them," he said, adding that in 1955, "the total depletion deductions were approximately $2,800,000,000. Since the corporate tax would have been 52%, this resulted in a tax saving of $1,500,000,000 to the oil companies. "My amendment," he continued, "would save approximately $700 million for the Treasury. I wish to emphasize again that it would not hit the small driller. The weight would fall almost entirely upon the big companies." He went on to cite examples of oil companies that didn't pay a cent of taxes (on $7 million in income), or 1% of taxes (on $1,800,000 in income), or 6% (on $95 million in income), while in other industries companies were taxed at the rate of 52%.

The parade of lobbyists for the oil industry began. Senator Long (Louisiana) declared: "I must oppose this amendment. I submit that in many respects it works out to be the absolute epitome of unfairness and injustice. This is an amendment which proposes to say: Oilman Rich can earn and receive $1 million a year and still retain the 27.5% depletion allowance. On the other hand, Grandma Jones who does not have the importance or prominence of an independent oil and gas man owns $200 worth of stock in an oil company, and she receives an income of $20 a year from that ownership . . . I would like to protect Grandma Jones' little $20 dividend."

Senator Johnson (Texas) again suggested the absence of a quorum. The legislative clerk called the roll. Eighty-seven Senators were present. There was a quorum. Senator Douglas then asked for the yeas and nays, but his request was not sufficiently seconded. The yeas and the nays were not ordered, and the amendment was rejected. The Senate turned to the examination of an amendment concerning transportation taxes, which were considered too high for the Western states.

The following year, on August 11, 1958, Senator Williams introduced his amendment once again. He was obliged to wait for four hours until there were enough Senators present. He reminded them of what Senator La Follette had said in 1942: "In my opinion this percentage depletion is one of the worst features of the bill, and now it is being extended. We are vesting interests which will come back to plague us. If we are to include all these things, why do we not put in sand and gravel; why do we not provide for the depletion the farmer suffers through erosion of the soil of his farm?"

Senator Taft had followed up Senator La Follette's remark with one of his own: "I think with the Senator from Wisconsin that the percentage depletion is to a large extent a gift . . . a special privilege beyond what anyone else can get." Senator Dirksen (Illinois) made a long speech declaring that the problem of national defense needs and the precarity of oil supplies in the Middle East "is worth infinitely more than a question of whether the oil companies get a few million dollars more or a few million dollars less . . . the oil companies," he added, "which have given their best to the country."

Senator Williams acknowledged that "it is always popular to defend the little fellow, but what is small about a man with a million dollar income?" He noted that in 1955 depletion deductions for all corporations had totaled $2,805,500,000, and that 67% of these deductions had benefited companies with net assets of more than $100 million. He asked why the deduction for oil depletion wasn't the same as that for metal (15%) or coal (5%). He concluded: "One of the really major loopholes in the tax code is the method by which capital gains may be applied to oil and gas properties," and he produced a document which explained exactly why the leaders of the oil and natural gas industry were opposed to a reduction in the tax rate for the highest income brackets.(66) Such a reduction, which was supported by the majority of the nation's corporations and taxpayers, would mean a decrease in the incomes of the oilmen.

Senator Williams' amendment was put to a vote and defeated by a margin of 63 to 26. A similar but less liberal amendment introduced by Senator Proxmire (Wisconsin) was also defeated, this time by a majority of 58 to 43. Senator John Kennedy (Massachusetts) voted against the Williams amendment and in favor of Senator Proxmire's amendment. When the vote on the second amendment was announced, Senator Johnson (Texas) remarked, "Mr. President, I do not think we should ask the Senate to stay any later this evening."

The oilmen and their representatives in the Senate were all the more concerned about these amendments because 1957 had been a record year for oil production in the Middle East, and everything indicated that the expansion would continue. (In fact, Middle East production rose from 6 billion barrels in 1958 to 9.7 billion barrels in 1963.) In 1959 President Eisenhower imposed import quotas on foreign oil. The sales price of domestic American oil, which had been steadily rising since the end of the Depression and had dropped in 1959, held steady in 1960.(67)

On June 18, 1960 Senator Douglas re-introduced his amendment. He noted that the total depletion allowances taken could amount to $4 billion that year. He presented his Congressional colleagues with 20 pages of documents, remarking that if the other Senators were unable to hear him (for there were only three other people on the floor), they could perhaps read them. The following day, June 20, his audience was larger. Senator Douglas described his amendment as "a very moderate attempt to reduce the greatest tax racket in the entire American revenue system. It is probably safe to say," he continued, "that the depletion allowances given to the gas and oil industry now amount to well over $2.5 billion a year. I have put into the Record time and time again the records of 28 oil companies -- which I do not name, and which I identify only by letter, but which I could name -- that show that there was one company which in 5 years had net profits of $65 million and not only paid no taxes, but received $145,000 back from the Government. There are many other corporations which have a similar favored record.

"My proposal is a modest one. I do not propose to abolish the depletion allowance. I do not propose to reduce it across the board. I merely propose to introduce a moderate, graduated reduction. On the first $1 million of gross revenue there would be no reduction whatsoever. That would remain at 27.5%. On gross income from $1 million to $5 million, the depletion allowance would be 21 percent. On gross income in excess of $5 million, the depletion allowance would be 15 percent. This is a very moderate proposal.

"Mr. President, this issue has faced the Senate and the Nation for at least a decade. It is now before us again. We must make our decision as to what we shall do. It is time that we put our fiscal system in order. In our fiscal system some people pay too much because others pay too little. The time has come when we should deal with this issue. The depletion allowance can continue without any time limit. It occurs after depreciation has been allowed and fully taken account of. As long as the oil and the gas run, the depletion allowance can continue to be taken. There are cases in which the amount of the depletion is many, many times the total original cost, which bear in mind has already been deducted under the depreciation practice. I think the Senators are aware of the issues at stake. I wish to say to the gas and oil industry, which has been fighting this amendment for years, that if they are once again successful in beating this amendment, as they may well be, there is likely to arise in the country a storm of indignation."

But indignation is not a common emotion in the Senate. Senator Douglas' amendment would have resulted in a $350,000,000 loss to the oil industry. A vote was held, and the amendment was defeated by 56 to 30.(68) Senator John Kennedy (Massachusetts) voted in favor of it.(69)

At the 1960 Democratic Convention, the representatives of the oil states, headed by Sam Rayburn, supported the candidacy of Lyndon Johnson, but Kennedy won the nomination. In the spring of 1961, Mr. Morgan Davis(70) remarked during a private luncheon, "It's impossible to get along with that man."

As a Senator, John Kennedy had not been popular with the oilmen, but they weren't afraid of him. They knew that his father Joseph had invested a large part of his fortune in the oil business, and they couldn't conceive that his son, even if he were to become President, would dare take a position that would go against his own and his family's financial interests.(71) H. L. Hunt expressed the same opinion when he confided to Playboy in 1966, "Catholics are known for being anti-Communist, and I had never seen any evidence of fiscal irresponsibility in the Kennedy family."

The oilmen were wrong. The new President decided to broach the issue. Although he didn't go as far as John Ise,(72) he felt, like Roosevelt, that the control of the national economy should not be allowed to continue in the hands of the few, but should be enlarged to include millions of citizens or be taken over by the government, which in a democracy is responsible to the people. But he knew also that any re-examination of the principles of profit-making and free enterprise from the moral, social or even national point of view would be rejected not only by the oilmen, but also by a good many other citizens as an attack on the American way of life. In the past, such attacks by the administration and the Justice Department had been defeated.(73)

The only chance for a modification of the structures of the Oil Empire lay in a major crisis, internal or external -- an economic crisis or a war. But President Kennedy was working for peace and economic expansion, and he knew that his objectives could not be attained unless the principles of the American autarchy were re-examined and their destructive action brought progressively to a halt.

A year after he entered the White House, in 1962, the new President studied the reports of his advisers and decided to act. He had reacted with violence to the dictates of the steel industry; in the case of oil, he laid his plans more cautiously. On October 16, 1962, a law known as the Kennedy Act removed the distinction between repatriated profits and profits re-invested abroad in the case of American companies with overseas operations. Both were henceforth subject to American taxation. The law also sought to distinguish between "good" earnings resulting from normal commercial operations, and "suspicious" revenues siphoned off at some point in the commercial circuit by subsidiary companies located in tax havens abroad.

This measure was aimed at American industry as a whole, but it particularly affected the oil companies, which had the largest and most diversified overseas activities.(74) At the end of 1962, the oilmen were estimating that their earnings on foreign invested capital, which in 1955 had equaled 30%, would fall to 15% as result of these measures.

But Kennedy's second measure was far more important and infinitely more dangerous. It affected not only the companies with overseas investments, but all companies which, in one way or another, benefited from the privileged status of the oil industry. It called into question both the principle and the rates of the fiscal privileges, the improper use of tax dollars, and the depletion allowance. If adopted, it would undermine the entire system upon which the Oil Empire was based.

On January 24, 1963, in presenting his bill to Congress, President Kennedy declared, "Now is the time to act. We cannot afford to be timid or slow." For him, the fact that it was going to be difficult made it all the more necessary to act. But the Oil Empire wasn't the steel industry. Its leaders were of a different mettle. Ludwell Denny had said, "We fight for oil." By tangling with the oilmen, Kennedy was commencing the last year of his life. He considered his fiscal measures as the first step in a vast national reform.

As George Washington said to Henry Lee on October 31, 1786, "Precedents are dangerous things." The oilmen thought so too. "Think" is the motto of the businessman. Once they had determined what had to be done, they set about choosing their battleground and meticulously laying their plans.


1. The evolution of world oil production between 1860 and 1966 was as follows:

1860 1930 1966
USA 476,000 b 861 million b 2.9 billion b
USSR 135 million b 1.9 billion b
Venezuela 140 million b 1.2 billion b
Middle East 42 million b 3.3 billion b
Rest of the world 21,000 b 2.2 billion b

2. Of the 20 largest oil companies in the world with an annual turnover in the neighborhood of $57 billion, 14 are American ($42 billion), one is Anglo-Dutch and another British ($1 billion), and one is Belgian ($700 million). But American influence extends even to these foreign companies.

Company Country Turnover
(in millions of dollars)
Standard Oil (NJ) USA $12, 191
Royal Dutch Shell GB-Holland 7,711
Mobil Oil USA 5,253
Texaco USA 4,427
Gulf Oil USA 3,781
Shell Oil USA 2,789
Standard Oil (Ind.) USA 2,708
Standard Oil (Calif.) USA 2,698
BP GB 2,543
Continental Oil USA 1,749
Phillips Petroleum USA 1,686
Sinclair Oil USA 1,377
Union Oil California USA 1,364
CFP France 1,140
ENI Italy 1,093
Signal Oil and Gas USA 847
ERAP France 806
Petrofina Belgium 704
Ashled Oil and Refining USA 699
Industry Oil USA 695

3. In the period between 1930 and 1966, energy consumption doubled every 15 years, and oil consumption rose from 19 to 60%.

In 1938, the world consumed only 2.1 billion barrels of petroleum products. By 1971 it will be consuming 14 billion barrels per year, and by 1980 28 billion barrels.

4. In Europe, despite the increasing use of natural gas (which in 1965 provided 4% of all the energy consumed, as compared with 0% in 1950) and the advent of atomic energy (0.4% in 1966), oil consumption has risen steadily (from 10% in 1945 to 45% in 1965), while coal consumption has steadily dropped (38% in 1965, as compared with 75% in 1945).

5. The temporary outlets of the COMECOM pipeline are located at Neutspils and Klaipeda in the Baltic states, East Berlin, Most (Czechoslovakia), Vienna, Budapest, and Trieste (Italy).

6. 95% of the population of Saudi Arabia is still illiterate. The country has 750,000 slaves. Trade unions are prohibited by law, and the death penalty is inflicted with the bastinado.

If the royalties paid to the Sultan of Kuwait were divided equally among his people, each Kuwaiti citizen would have an annual income of more than $1,500, giving Kuwait one of the highest standards of living of any underdeveloped country. Instead, the average annual income in Kuwait is $100. 98% of the population is illiterate, and 85% suffers from tuberculosis.

An exception to this rule is the Sultan of Bahrain, who contributes a large portion of his royalties to the state treasury. In his territory, most dwellings have running water, sanitary conditions are satisfactory, and public education is developing rapidly. Nevertheless, the Sultan of Bahrain is the poorest of the Middle East rulers. In 1955 he received only $8.5 million in royalties, as compared to $36 million paid to Qatar, $84 million to Iran, $223 to Iraq, and $280 each to Saudi Arabia and Kuwait. Iran is relatively prosperous, but Iraq is continually shaken by corruption, political intrigue and assassinations.

7. American investments abroad rose from $1.4 billion in 1943 to $10 billion in 1958 ($5.1 billion of which was reported) and to $28 billion in 1967 ($15 billion of which was reported). In 1967, American investments in Europe totaled $10 million in the mining industry, $290 million in miscellaneous industries, $640 million in the chemical industry, $795 million in the machinery industry, and $1,200 million in the oil industry.

8. Frank W. Abrams, past President of Jersey Standard, jointed with General Motors, US Steel and several other corporations to form a committee for economic aid to education in an effort to stave off what he considered a future threat to industrial investments.

In 1955 Senator Fulbright cited a brochure edited by Socony Mobil for job-hunting students which warned them that their "personal opinions" could cause them difficulties in their career. His criticism, together with a protest from the Princeton Alumni magazine, caused the brochure to be withdrawn, but the paternalistic and totalitarian attitude of the oil companies continued unchanged.

9. Figures released by the Chase Manhattan Bank show that between 1934 and 1950, the 30 largest oil companies moved more than $121 billion, with net profits of $12 billion and taxes of $4 billion. These companies had taken out so few loans that only $700 was paid out in interest. $12 billion appeared on the balance sheets in the form of stock depreciations, amortizations, and reserves. Of the $12 billion in profits, $7 billion was reinvested and $5 distributed to stockholders.

10. The Rockefeller family's holdings are now limited to 15%, but the 100 most important stockholders (out of a total of 300,000), most of whom are descendants of John D. Rockefeller and his partners, own more than 40% of the shares.

11. One of its "little sisters," Socony Mobil (actually Standard Oil of New York) has assets of nearly $5 billion, and Standard Oil of Indiana has nearly $4 billion in assets. In 1966 Jersey Standard earned $1,090,944,000 in profits, two-thirds of which came from its overseas subsidiaries. Of the latter, Creole of Venezuela, for example, generally earns profits of around 30% . Creole and Lago, Standard's second Venezuelan subsidiary, together with Imperial of Canada, Imperial Petroleum in Latin America, Esso Standard, and its other foreign subsidiaries, earned more than $800 million in profits in 1966.

12. The first oil well was drilled by Edwin Laurentine Drake. better known as Colonel Drake, who discovered oil at 69 feet at Titusville on September 8, 1859. Nevertheless, he was fired in 1864 by his employer, Seneca Oil, and given the paltry sum of $731 in compensation. The state of Pennsylvania showed its gratitude by granting him an annual pension of $1,500.

13. Today, Royal Dutch Shell is the most important private industrial concern in Western Europe, and perhaps in the world (with the exception of the United States).

14. Shell has a policy of forming a national company in every country where it operates.

15. The British government invested approximately two and a half million pounds, and got back several billion pounds on its investment. It was represented on the Board by two administrators and exercised its veto only on political and naval questions, never interfering with commercial policies.

16. The Turkish Petroleum Company (which wasn't Turkish at all) owned oil fields in Mesopotamia. Before World War I it was divided up between Anglo-Iranian (50%), Royal Dutch (20%), and the Deutsche Bank, whose share of 25% was seized by the British at the start of the war. For having allied itself with Germany, Turkey was dismembered in 1918, and Britain appointed the rulers of the former Ottoman colonies. But the war booty was divided up under the cover of the League of Nations mandates. Germany's share of 25% was handed over to the Compagnie Francaise des Petroles in exchange for an indemnity and French permission to install a pipeline across its Syrian and Lebanese mandates.

17. It is difficult for us today to imagine a time when United States foreign policy was based on the rivalry between Shell and Standard, when Shell was refused the right to participate in bids for federally-owned concessions, and when writers prophesied war between Great Britain and the Union.

18. The remaining 5% went to the broker, Gulbenkian.

19. Moreover, the companies mixed the Iraqi oil with oil from Iran and Saudi Arabia, making it difficult to determine the actual cost.

In 1939 Jersey Standard felt that it had gotten back all of its original Iraqi investment. Nevertheless, Iraqi production was held back in favor of production in Saudi Arabia and Iran, where the royalties paid were very low (4 shillings per ton of crude in Iran, plus 20% of the profits).

20. At the beginning of the war, the difficult position of the Allies in the Middle East led Roosevelt to consider government participation in Aramco, in the same way that the British government had held a majority in Anglo-Iranian since 1914. But Standard of California and Texaco kept delaying the talks, and once Rommel was defeated, the two companies even refused to consider admitting the government as a minority stockholder. They felt, and there was little evidence to contradict them, that they already enjoyed government protection.

The companies of the Aramco-Caltex group managed to avoid American taxes on their wartime profits by founding new companies in the Bahamas and Canada.

21. Dutch Shell is richer and more influential than the l of the Netherlands. Two other Dutch companies, Phillips and Unilever, have international standing. These three it difficult for the government of the Netherlands to independent economic policy.

22. Iranian assets of Anglo-Iranian have been estimated at $1 billion.

23. The CIA's action is accounted for not only by the singular nature of the American intelligence agency (see Chapter 15, Spies), but also by the fact that the Pentagon and the ion in Washington feared that with the Abadan refinery closed down, the Air Force might run short of fuel in the event of World War III. Such a shortage had already occurred during the Korean War.

24. They estimated Anglo-Iranian's gross profits since 1914 at $5 billion, $500 million of which had gone to the Admiralty in the form of low-cost fuel oil, $350 million to the stockholders, $1.5 million to the British treasury, and $2.7 million to the corporation for depreciations and new investments.

To these sums they compared the royalties paid to Iran: before 1920, none; from 1921 to 1930, $60 million; between 1931 and 1941, $125 million, mainly in the form of military equipment which was later used against them by the British and the Russians.

In 1951, Iran received 18 cents on every barrel of oil (a barrel equals 42 gallons and weighs an average of 306.6 pounds). In comparison, Bahrain received 35 cents, Saudi Arabia 36 cents, and Iraq 60 cents.

The Iranians also complained that nearly all the gas from their wells was burned by Anglo-Iranian, when it could have been put to the benefit of the population.

25. The Compagnie Francaise des Petroles, which by the terms of the Red Line agreement had a right to its share, was granted 6%.

26. In 1966 the Consortium was forced to yield to new demands from the government of Iran and surrender one-fourth of its concessions (the 1954 agreement provided for the surrender of one-fifth in 1979). It was also obliged to increase production by 13% in 1967 and 1968. The Arab blockade in June, 1967 enabled it to go well over this figure.

27. The Big Five managed to pacify the most voracious of the independents by each sacrificing 1% of their shares. The 5% distributed was sold in April 1955 to the following companies: Atlantic Richfield, Tidewater Oil, Aminoil, Atlantic Refining, Getty Oil, Continental Oil, Signal Oil and Gas, Standard Oil (Ohio), and American Independent Oil. Harvey O'Connor states that each company paid $1 million for its shares, which few years later were earning them $850,000 a year. Such a good investment was also a kind of indemnity, but the independents continued to demand a share for themselves in the Middle East.

In 1947 Aminoil (American Independent Oil Company), an association of independents made up of Phillips Petroleum, Hancock, Signal, Ashland, Deep Rock, Sunray, Globe, J. S. Abercrombie and the promoter, Ralph K. Davies, had been given a bone to gnaw in the form of a neutral zone between Arabia and Kuwait theoretically reserved for the nomads. But the Sultan demanded high royalties, and 10 years later the reserves were estimated at only 50 million tons. It looked like the independents were stuck with the leftovers, but in 1966 the neutral zone was producing 133 million barrels.

28. Biafra is the latest battleground of the oil companies -- American, British and French.

29. Twelve years later, giant tankers of up to 1 million tons designed to detour around the Cape have apparently condemned the Suez Canal to a position of minor importance.

30. Gulf and Jersey Standard increased their Venezuelan production, while Texaco expanded its operations in Indonesia and Canada. In this way, they were able to sell their oil at higher prices while maintaining stable production costs.

31. Jersey Standard was admitted to the Sahara, then French territory, following a request from French Premier Guy Mollet for a $100 million loan from Washington which was eventually granted by the Chase Manhattan Bank. (Jersey Standard is a member of the Chase group.)

32. On the surface, ENI continued to respect the 50-50 rule, but by associating with an Iranian company, INOC, it actually granted 75% of the profits to Iran. In the midst of the negotiations concerning ENI's concession in the rich Koum basin, the Iranian Prime Minister was overthrown.

33. In 1932 Andre Maginot, a French Minister who had founded the Union Petroliere Latine, was poisoned. His death was also the death of the UPL.

34. Between 1950 and 1962, the American share in world production dropped from 69.8% to 57.9%, and its share in refining from 65% to 52.1%. Jersey Standard, which in 1958 accounted for 10.8% of all production, had dropped to 10.3% in 1961.

35. In 1938 Mexico expropriated Royal Dutch Shell, Standard Oil, and several other foreign companies which refused to grant wage increases demanded by the oil workers union (which amounted to $1.7 million per year). Mexican President Cardenas founded Pemex, a state company which was boycotted at first by its powerful neighbors. The British government even broke diplomatic relations with Mexico. It was not until the Second World War that the Consortium forgave the Mexicans. Today Pemex pays the Mexican government nearly a billion pesos a year in taxes, while before the nationalization the amount paid by private companies operating in Mexico never exceeded 44 million.

In 1963 Mexico, once considered incapable of exploiting her own resources, was producing 115 million barrels (16 million tons), and oil was her most important source of revenue. These expropriations ensured her prosperity if not her economic independence for the Mexican economy is still closely bound to that of the United States.

36. Shell was the first oil company to operate in Venezuela. In 1922 it was joined by Standard of Indiana, followed by Gulf. In 1932 Standard of New Jersey took over Standard of Indiana's operations at Maracaibo and began offshore drilling. In 1937 Venezuela accounted for 40% of world production. Gulf was obliged to make concessions to Jersey, whose local subsidiary Creole became the giant of Venezuela. In 1938 Jersey, Gulf and Shell formed a pool to exploit their reserves and naturally applied Texas prices. In 1943 the companies were obliged to split their profits 50-50 with the Venezuelan government. In 1948 the "Democratic Action" government that had come to power in 1945 demanded a revision of this agreement, but was overthrown by a military junta backed by the United States. Between 1949 and 1954, Creole reduced its personnel from 20,500 to 14,400 persons while increasing its production by 35%. In 1949 the company earned net profits of $336 million.

The revenue paid by the oil companies covered three-quarters of the Venezuelan national budget (the government's revenues from other sources were lower in 1956 than Creole's profits). But Venezuela produces only half the grain, milk and meat, and only one-third of the vegetables, that she consumes. The wide plains of Orinico support fewer cattle today than during the revolution of 1812. From their mountain conucos or their huts on the latifundia, nine-tenths of the Venezuelan population can watch the distant lights of fabulous Caracas.

37. In January, 1957, Anthony Nutting, a member of the British Cabinet, suggested a form of internationalization -- a kind of "Schuman plan" for Middle East oil.

In March, 1957, Walter J. Levy wrote in Foreign Affairs:

". . . The demands and responsibilities which have devolved on our international oil companies go far beyond the normal concerns of commercial operations. Public and private responsibilities become increasingly intertwined. Our existing arrangements for government-industry relationships in this new uncharted area appear to be inadequate to cope with the broad range of new problems."

On April 10, 1957, Lord Henderson suggested before the House of Lords that her Majesty's Government "take the initiative, through the United Nations, to get an International Oil Convention for the Middle East which would ensure a just distribution of oil to consumer countries, as well as a fair deal for the oil-producing countries. 'Oil politics' have been a disturbing factor in the Middle East situation over many years," the British peer added.

And Walter Lippman wrote in November of the same year:

"We should, it seems to me, have it clearly in mind that we are on the threshold of a new situation in regard to the oil in the Middle East. This is often taken to mean that the Arab countries, infiltrated by the Soviet Union, may attempt to ruin Western Europe by depriving it of access to the oil.

"Theoretically, that could happen if we take the simple view that Russia may conquer and occupy the oil countries. But in fact, this is not likely to happen, since it would precipitate a world war. What is likely to happen is that the Arab countries, using Soviet influence as a lever, will attempt to force the Western oil companies to a radical revision of the existing contracts. The Middle Eastern countries have no interest in cutting off the export of oil to Europe. On the contrary, it is their vital interest that the trade should continue. What they will seek, both the oil-bearing countries around the Persian Gulf and the transit countries like Syria and Egypt, is a bigger share of the profits of the oil business.

38. The British continue to work the unprofitable coal mines of Wales, the Midlands, Yorkshire, Nottinghamshire, and Lancashire, immobilizing some 700,000 workers, and British explorations in the North Sea area are carried out in collaboration with the big American firms.

British fiscal legislation is far less favorable to the oil industry than American legislation. Britain's energy policy consist of penalizing the use of oil in order to protect her coal industry. British tax legislation does not appear to have contributed significantly to the overseas expansion of British oil companies, and it offers no special privileges designed to stimulate new explorations by British firms.

39. On February 4, 1968, ERAP signed an agreement with the Iraq National Oil Company (INOC) giving the French company onshore and offshore exploration rights on a 10,000 square kilometer concession along the Persian Gulf. Mr. Jean Blancard, Vice-President of ERAP, declared that the agreement "follows in the footsteps of history. The era of traditional concessions, when the oil power established their hegemony over huge areas, is a thing of the past."

At the same time. another French company. the Societe Nationaledes petroles d'Aquitaine, was competing with the Freeport Co. for the right to work an Iraqi sulfur deposit which would make it the second largest producer of sulfur in the world.

Also in Iraq, the Compagnie Francaise des Petroles was negotiating for the North Rumeila concession which the Iraqi government had seized from the Iraq Petroleum Company.

The economic and political differences between France and the United States are partly the result of French oil policy.

40. The only company producing any significant quantity of oil in France thus far has been an American firm, Esso Rep, which is 90% controlled by Jersey Standard (Esso Standard 89%; Finarep 1%). Esso Rep has an annual production of 21 million barrels.

The most important French oil company, the Compagnie Francaise des Petroles, founded by Raymond Poincare, is not a state concern. Mr. Jeanneney, French Minister of Industry, declared in 1960 that "state control of the CFP is extremely theoretical" and that "the interests of the 'oil franc' are not always given priority." In actual fact, according to well-informed sources, control is held by a number of different companies acting for Royal Dutch Shell.

ERAP, the state-owned company, has not quite caught up with the CFP, but it already holds first place among the state-owned companies in continental Europe, and it is evident that the French government is anxious to see it expand.

41. The European companies concerned by this report were: Ente Nazionale Idrocarburi (ENI, Rome), Entreprise de Recherches et d'Activite Petrolieres (ERAP, Paris), and several German companies belonging to the Deutsche Mineraloel-Explorations-gesellschaft MBH (DEMINEX).

42. Ten European companies (ERAP, ENI, C. Deilman Bergbau GmbH, Preussag AG, Deutsche Schachtbau und Tiefbohr GmbH, Saarbergwerke AG, Schlolven Chemie AG, Union Rheinische Braunkohlen Kraftstoff AG, Wintershall AG and Gelsen- kirchener Bergwerks AG) followed up this report with one of their own that was nothing less than a declaration of war on the Consortium. It concluded:

"If the Common Market is to have an energy policy, the oil and natural gas sector, which constitutes the most important element in this policy, must not escape the action of the Common Market. To prevent this from happening, the Common Market must create conditions which enable this policy to exist through legislation and regulations adapted to the circumstances, and it must safeguard the instruments of this policy, in other words the companies of the Common Market."

43. A German, firm, Saarwerke, and an Italian company, ENI, have received permission from the French government to install a distribution network in France. Other measures and agreements are currently under discussion.

This new European energy policy explains a great deal, and in particular De Gaulle's position with regard to the Israeli-Arab conflict of 1967. De Gaulle is neither pro-Arab nor pro-Zionist; he is merely a realist.

44. Twenty-two companies account for 65% of all the oil produced and 87% of all the oil refined in the United States. Nine thousand other companies account for the rest.

In 1963, oil and natural gas provided 75% of all the power consumed in the United States (as compared with 60% in 1950). Their combined value was eight times that of all the ferrous and non-ferrous metals (iron, copper, lead, zinc, gold, silver, bauxite, manganese, tungsten, titanium, and uranium) mined in the United States.

45. An Oil Exchange did exist in the 19th Century, but in 1895 Standard Oil of New Jersey announced that henceforth it would set its prices itself. At that time, Jersey Standard was buying 80% of all the oil produced in Pennsylvania and controlled all of the pipelines (which enabled the companies to enforce their production quotas and the quotas set by the states).

46. There are 200,000 sales outlets for petroleum products in the United States, mainly service stations. To all appearances there is open competition, but actually the big oil corporations control 85% of the market. Service station managers are bound by contract to the big companies, which supply their gasoline and cover their operating and advertising expenses.

47. Contrary to what is true in Europe, in the United States any oil discovered belongs to the owner of the land on which it is found. Generally, the owners lease their rights to the companies. In 1963 the oil companies paid nearly $2 billion in leasing rights to property owners spread over one-tenth of the area of the United States, principally in Texas. Since 1859 these leases have cost the companies an estimated $40 billion.

48. Ninety percent of the American Oil Empire is concentrated in only seven states: Texas, Louisiana, California, Oklahoma, Wyoming, New Mexico, and Kansas. The combined production of Texas and Louisiana alone accounted for 55% of American domestic production in 1963. Most of the oil companies based in Texas have important investments in Louisiana, which is closer to the Eastern market: Louisiana, where the most important oil fields since Spraberry Fields in the 1930s were discovered in 1956, is also favored by a larger "acreage-to-well" ratio than Texas. The average well in Louisiana is currently allowed 79% more oil daily than the average well in Texas.

Most of these oil wells produce only two or three weeks per month. In Texas, the number of production days was reduced from 171 in 1957 to 104 in 1960. During the second quarter of 1960, the oil wells in Texas were worked an average of only 9 days per month, and during these 9 days they were limited to two-thirds of their maximum output. The producers estimated their losses at $6 million per year, but prices remained stable. On the other hand, the number of people employed was reduced by 25% (from 164,904 in 1958 to 124,922 in 1963) and the corresponding expenses dropped from $967 million to $880 million Nevertheless, despite this reduction in output, nearly 200 new wells are drilled every day (43,300 in 1950, 58,200 in 1956, and 43,600 in 1963).

49. Petroleum engineers have their own techniques of conservation, which can be resumed as follows:

1) the elimination of gushers and uncontrolled flows that waste gas pressure

2) the limitation of the number of wells to the minimum required by the geological structure of the oil field. Too many wells reduce the gas and water pressure, while too few result in the loss of a certain amount of oil

3) the regulation of the output of each well so as to maintain a uniform pressure throughout the oil field

4) the maintenance in each well of a sufficient proportion of gas to oil to ensure a continuous flow (Harvey O'Connor, The Empire of Oil)

50. The figures given by Fortune for the year 1967 are:

Oil: $64,943
Mining: $54,023
Automobiles: $25,016
Aviation: $19,179
Textiles: $18,404

51. Standard Oil of New Jersey earned $758 million in 1961 and $840 million in 1962; Gulf Oil earned $338 million in 1961 and $340 million in 1962; Socony Mobil earned $210 million in 1961 and $242 million in 1962; Standard Oil of Indiana earned $153 million in 1961 and $162 million in 1962.

52. The net cost of oil as it comes out of the well in the Middle East is around 20 to 30 cents per barrel. The same oil is sold by the Consortium at between $2 and $3 a barrel.

Oil in Kuwait costs approximately 5 cents a barrel (0.12 cents a gallon); oil in Saudi Arabia costs 10 cents a barrel (0.24 cents a gallon); and oil in Libya costs 40 cents a barrel (1 cent a gallon). In March, 1965, Consortium prices for oil leaving these countries was as follows:

Kuwait: $1.59 a barrel
Iran: $1.78 a barrel
Saudi Arabia: $1.80 a barrel
Iraq: $1.95 a barrel
Sidon: $2.17 a barrel
Libya: $2.21 a barrel
Sahara: $2.30 a barrel

The companies charge 60 to 70 cents a barrel for transportation. The considerable increase in the tonnage of today's oil tankers (100,000 and 200,000 tons, and soon even more) ensure even greater profits than those earned by the oilmen in the Fifties and Sixties (a 100,000 ton tanker earns approximately $500,000 gross per cargo).

Excluding these transportation charges (the companies generally use their own fleets of tankers), the profits per barrel of oil are 3 to 4 times higher for overseas than for domestic production.

The net cost to the companies of the Consortium has remained relatively stable since 1954. The retail sales price for gasoline in American service stations in November, 1967 was $9.51 a barrel (plus tax). This gasoline was sold at an average price of 33.33 cents a gallon (which included 10.68 cents in taxes). The break-down of this final price was as follows:

Retails profits: approximately 20%

Taxes: approximately 30%

Transportation, refining, refinery labor, miscellaneous costs and refining costs, transportation from the Gulf to the refinery, delivery to the retailer, storage, and wholesale profits: 20%

Price of the crude: 20%

(But the latter price already included the company's profits on production and transportation.)

The United States is the only important industrial nation in the world where the oil industry makes more on a gallon of gasoline than the government (70% as opposed to 30%). In Europe in particular , these proportions are generally the reverse, to the benefit of the countries concerned.

53. Beneath the Big Five and the twenty-odd large companies are a multitude of independent producers. Concentration has been the rule in the oil industry for the past ten years. Between 1959 and 1963, the big corporations of the Chase Manhattan Group increased their production by 526,000 barrels per day, while the production of other companies dropped by 37,000 barrels.

In 1956 the ten largest companies in Texas produced 41% of all the oil in the state; by 1963 they were producing 51%. The decline of the small producers was due in part to the quota system (proration) imposed by the States (actually by the big companies). In addition, a number of independent producers were bought out by larger companies.

The independents still accounted for half of national production, but pipeline fees considerably reduced their independence.

54. Oil cooperatives are virtually unknown in the United States. The first was the Consumers Cooperative Association of Kansas City, Missouri, founded in 1929 with a capital of $3,000. In 1962, however, the total production of the cooperatives equaled only 200,000 barrels, while a single unit at Baytown, Texas belonging to Humble Oil produced 300,000. The cooperatives own less than 1% of the wells in the United States, and their refiners can handle only a fifth of the oil they produce. Nor do they have a pipeline or other organized means of transportation.

Cooperatives do not aspire to control the market, but in countries where they are sufficiently powerful (such as Sweden, where they account for 12% of the market), they serve as a restraint on the conduct of the other companies.

55. As Walter J. Levy notes: "The companies which are integrated from the well to the service station have obvious competitive advantages over the strictly producing companies, for they can temporarily do without their profits from one sector of their operations."

Standard Oil of New Jersey, for example, is apparently content with a profit rate of approximately 17% which, taking into account its super-profits from its foreign operations, necessarily reduces its profits from its domestic operations and, given its nearly complete control of the market, the profit margins of the independent producers as well.

But the big oil companies conceal some of their profits in companies incorporated in privileged territories. Jersey Standard, for example, uses the International Corporation registered in Liechtenstein. (In the United States, the tax haven for H. L. Hunt and many other oilmen is the state of Delaware.)

56. The depletion allowance is based on the notion that the more oil has been extracted from a well, the less there is left. This, of course, is nothing more than a special version of what is known in industry as depreciation.

If a $100,000 factory operates for ten years, its owner is entitled to deduct $10,000 a year from his gross profits for plant depreciation. In the oil industry, on the contrary, the rate of depreciation applied has nothing to do with the cost of running a well. A well which costs $100,000 and produces $500,000 worth of oil each year for ten years until it runs dry would normally justify a depreciation of $10,000 a year.

An oil company, however, is entitled to deduct 27.5% per year from its gross income, which amounts, in the case cited above, to $137,500 per year, or to $1,375,000 in ten years, on an investment of only $100,000.

The Common Market has considered applying this system to its own industry, but with certain basic differences. Europe, contrary to the United States, needs first to find oil in her own soil. As a result, the Common Market measures would grant a tax reduction to companies carrying out explorations, on the condition that the amount of this deduction be re-invested within five years in new explorations (French PRG system).

57. Not only did the activities of the Consortium hurt the American consumer and the American taxpayer; they also had serious repercussions in underdeveloped countries and affected the international monetary situation.

The Consortium sold its oil from Venezuela, Colombia, Kuwait, Saudi Arabia, Iraq, Iran, etc. exclusively in dollars and pounds sterling. (Even the internal operations of the members of the Consortium were carried out in dollars or in pounds.) As a result, the sales made in "oil dollars" and "oil sterling" swelled the treasuries of the United States and Great Britain, to the detriment of the currencies of the producing and consumer countries, in particular, and to the world financial situation in general.

This system contributed to the disequilibrium in the British balance of payments which led to the November, 1967 devaluation, and has forced the United States to take measures to protect the dollar. The financial difficulties besetting both countries today are symptoms of 20 years of abusive business practices, particularly. in the marketing of raw commodities.

58. The Humble Oil and Refining Co. declared that in 40 years it had sunk $500 million (a figure which represents less than half of its present capital) in deep, dry wells. But although these dry wells cost it $62 million in 1957, the same wells cost the federal government more than half a million in lost revenues, and Humble Oil that year earned $175 million in profits.

59. In Britain, oil companies are not permitted to deduct their losses from unsuccessful explorations from their income from sources other than oil production. If the explorations are successful, the entire cost of the original installation can be written off, but may not be deducted as expenses, and there is no provision for a percentage depletion allowance deductible from revenue from current production.

60. In 1965 the oil industry claimed that American reserves were no more than 31 billion barrels. The Office of Oil and Gas of the Department of the Interior commented, however, that "Reserves so defined are probably on the conservative side" and added:

"A study compiled in late 1964 by the US Geological Survey puts the amount of crude oil originally in place in known deposits as of January 1, 1964, at over 400 billion barrels. The study goes further to conclude that an additional 2 billion feet of exploratory drilling in favorable but as yet unexplored areas would yield an additional 600 billion barrels of crude oil in place. Of this, 73 billion had actually been withdrawn as of the end of 1963. On the basis of these cold figures, it would appear that the US is in no danger of running out of oil for many years."

Additionally, it is now possible to extract oil from deposits of bituminous shale (a ton of bituminous shale yields 30 gallons of oil). The bituminous shale reserves of the United States have been estimated by the UN at 320 billion tons.

61. The average depth of the wells drilled increased from 3.900 ft. in 1950 to 5,000 ft. in 1963 (an increase of 29%).

62. In 1948, the oil shortage revealed the need for a national oil policy. The Secretary of the Interior, J .A. Krug, and his successor, Chapman, wanted to preclude a future shortage by the development of synthetic motor fuels, if necessary with government backing. The N PC opposed this plan. It assured the government that private industry would produce substitutes if the need arose, but insisted that there was no need to constitute stocks of synthetics for the present. The plan was dropped, and protests about the waste engendered by industry production method were stifled.

63. The states of Rhode Island and Alabama contested the validity of this law in the Supreme Court, claiming that Congress had no right to hand over a part of the national wealth to a few privileged states without their consent. They lost the case.

In the meantime, Senator Butler (Nebraska) was already preparing a bill that would recognize state ownership of the bituminous shale deposits in the Rockies.

64. "The tax laws since 1926 have authorized an oil or gas company to deduct 27.5% from the gross income from any property producing oil or gas. This 27.5% depletion allowance or deduction is computed as a percentage of the investment or of the amount of prior depletion deductions. One saving condition was attached, namely: In no case may the deduction exceed 50% of the net income from the property -- something that 1 do not believe happens very often.

"Obviously, over the life of an oil or gas-producing property the depletion allowance will not only exceed the investment or cost, but it will go on and on and possibly exceed the value on date of discovery.

"The committee can, no doubt, secure accurate up-to-date figures from the Treasury Department on what the 27.5% depletion allowance means to every company or individual taking this on tax returns. However, there is in existence some few pieces of information denoting its tremendous size. Recently I tried to secure from Standard & Poor's Corp. reports the amount of Federal income-tax paid by Amerada Petroleum Corp., but I find this item is buried in a classification reading: ' Operational, general expenses, taxes, etc. It is quite obvious that Amerada pays little, if any, Federal income taxes, though in the year 1952 this company made net profits of $16,296,652. In the January 1946 issue of Fortune magazine there appeared a long article on Amerada Petroleum Corp., which is a crude-oil producing company. The article stated in part, 'Amerada's tax situation is a businessman's dream. The corporation quite literally does not have to pay any Federal income tax it does not want to. This is due to the highly reasonable provisions of the internal revenue law designed for producers of crude oil. Amerada pays so little in Federal income taxes that it does not even segregate the tax item in its annual reports. In wartime, though Amerada's profits soared, it made no provision for excess-profits taxes, and from 1943 until 1944 its normal Federal income tax actually declined. In 1944, on a gross of $26 million, a gross profit of $17 million, and a net after all charges of $5 million, Amerada's allowance for its Federal income tax was only $200,000.'

"It is among these strictly producing companies that one can get an idea of the magnitude of the twin subsidy of depletion and write-off of drilling and development costs. The major integrated companies benefit to the degree that they produce oil and gas, though they have other operations upon which taxes are paid.

"In addition to Amerada Petroleum Corp. referred to above, here are a few other examples of companies producing oil and gas:

"Argo Oil Corp. for the year 1952 made net profits after taxes of $3,496,477 and paid Federal income taxes of $91,660.

"Kerr-McGee Oil Industries, Inc. for the year ended June 30, 1952 had net income after taxes of $2,234,688 and paid Federal income taxes of $78,032. For that same period the 27.5% depletion allowance for this one company amounted to $607,611. For the year ended June 30, 1953, this company had net income after taxes of $3,072,723. But in Standard & Poor's there is just a line where the amount of tax is usually indicated, so I do not know what Federal income taxes this company paid for that period. During this latter year its depletion allowance was $858,795.

"The Superior Oil Co. (California) for the year ended August 31.1952 had net income of $11,900,165 and paid Federal income taxes of $200,000."

65. In 1963 the Department of Defense purchased 278 million barrels of oil (1963 production equaled 2.75 billion barrels).

66. This was a paper written by Paul Haber, JD, Ph. D, entitled, "Write-offs, Cost Depletion and Percentage Depletion -- An Appraisal." It said in part:

"Our Federal tax system is supposed to be based on the principle of progressive taxation or 'ability to pay' -- the higher the net income, the higher the rate of tax. In the case of taxpayers who engage in the business of crude oil, however, this principle is made to work in reverse -- the higher the net income from the production and sale of crude oil, the lower the rate of tax . . .

"Drilling for oil is like playing dice with the Treasury: 'Heads I win, tails you lose,' with the Treasury always on the losing end. As a matter of fact, high tax rates are a boon to the crude oil industry rather than a burden, because the higher the rate of tax the lower the net cost (the after-tax cost) of the drilling operation. This explains why the American Petroleum Institute does not support the National Association of Manufacturers in its fight to reduce the top tax bracket from 90 percent to 40 percent. If the rate were reduced to 40 percent, the search for crude oil would falloff tremendously, because the taxpayer's share of the cost of the search would have been increased from 10 percent (100 percent less 90 percent) to 60 percent (100 percent less 40 percent). As a matter of fact, the phenomenal growth of the crude oil industry dates back to the year 1940, the year in which the wartime rates were first brought into the statute."

67. It dropped again during President Kennedy's last year in office. The evolution of domestic prices (per barrel) was as follows:

1958: $3.07
1959, 1960, 1961 and 1962: $2.97
1963: $2.93

(A barrel of oil cost $1.02 in 1939, $1.37 in 1946, $1.90 in 1947, and $2.57 in 1948.)

68. The vote was as follows:

Yeas -- 30

Aiken
Carroll
Case (NJ)
Clark
Dodd
Douglas
Ervin
Gore
Hart
Jackson
Javits
Keating
Kennedy
Lausche
Long (Hawaii)
McCarthy
McNamara
Morse
Muskie
Pastore
Proxmire
Russell
Smathers
Smith
Symington
Wiley
Williams (Del.)
Young (Ohio)

Nays -- 56

Allott
Anderson
Bartlett
Beall
Bennett
Bible
Brunsdale
Bush
Butler
Byrd (W. Va.)
Byrd (Va.)
Cannon
Capehart
Carlson
Case (S. Dak.)
Chavez
Cooper
Cotton
Curtis
Dirksen
Dworshak
Ellender
Engle
Fong
Frear
Fulbright
Gruening
Hayden
Hickenlooper
Hill
Holland
Hruska
Johnson (Tex.)
Johnson (SC)
Jordan
Kerr
Kuchel
Long (La.)
McClellan
McGee
Mansfield
Martin
Monroney
Morton
Mundt
Randolph
Robertson
Saltonstall
Schoeppel
Scott
Stennis
Talmadge
Thurmond
Williams (NJ)
Yarborough
Young (N. Dak.)

Not Voting -- 14

Bridges
Church
Eastland
Goldwater
Green
Hartke
Hennings
Kefauver
Lusk
Magnuson
Murray
O'Mahoney
Sparkman

69. In 1964, the depletion allowance issue came up before the Senate again. On February 3 Senator Lausche (Ohio) offered an amendment that would diminish the depletion allowance privileges by $850 million, which sum could be used to compensate the revenues lost to the government by a tax credit granted to needy families with children in college proposed by Senator Ribicoff (New York). But Senator Lausche's amendment was considered not germane.

On February 6, Senator Williams re-introduced his traditional amendment and was defeated again (by 61 to 33). As Senator Javits was to remark, "This is the sacred cow of sacred cows."

70. Chairman of the Board of Directors of Humble Oil and Refining Co. (1961-63), Director of the First National City Bank of Houston, member of the National Petroleum Council and the American Petroleum Institute.

71. In January 1968, Senators Robert F. Kennedy (New York) and Edward M. Kennedy (Massachusetts) joined with several other Congressmen in urging that import limits be eased for home-heating oil. They were concerned about a threatened shortage and high prices.

72. John Ise, a professor of economics at the University of Kansas and author of The United States Oil Policy, recommended in 1929 the nationalization of all natural resources, including oil. "Private property has undoubtedly brought about more unfortunate consequences in the case of oil and natural gas than in any other domain. It has resulted in overproduction, instability, incessant price fluctuations, a waste of natural resources, capital, and labor, speculation, fraud, foolish extravagances and flagrant social injustice, and, finally, in the establishment of a monopoly," he wrote.

73. Since the Clayton Antitrust Act of 1914 (which outlawed Drice discrimination and exclusive contracts between wholesaler and retailer) and the National Recovery Act of 1933 (which eliminated unfair trade practices and destructive price cutting and established fair codes of competition), the Justice Department had tried unsuccessfully on several occasions to break down the oil monopoly by halting mergers and opposing exclusive contracts, price, fixing, and production restrictions. Congress, and on occasion the Supreme Court, had defeated all its attempts.

74. Previously, while the profits earned abroad by American firms were subject to American taxation, the profits of subsidiary companies which were subject to local taxation (except in the tax havens) were only taxed in the United States when their dividends were distributed to the head companies in the United States. The Kennedy Act abolished this regime for the subsidiaries registered in tax haven countries, which were henceforth subject to American taxation whether or not their dividends were distributed to the head companies in the United States.