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HOT OIL

HOT OIL. Production of petroleum in violation of state or federal regulations or in excess of quotas became a serious problem, particularly in Texas, as soon as attempts were made to stem the overproduction and consequent price decline that followed the development of the vast East Texas oilfield, discovered in October 1930. Adoption of a proration plan by the principal oil states in 1931 caused such a frantic rush of drilling that the governors declared martial law in the Oklahoma and East Texas fields and sent national guardsmen to shut down the wells. To evade the state proration laws and the federal regulation of interstate oil transportation imposed under the National Recovery Act, many independent producers resorted to trickery to increase their output. Their methods included tapping underground pipes or reservoirs, loading trucks by moonlight, disguising oil trucks as moving vans, piping oil to moonshine refineries, and using dummy refineries that shipped oil labeled as gasoline. One producer kept at the top of a derrick a lookout who shut off the illegal flow whenever investigators approached; another built a concrete blockhouse over his controls; several provided guns and cash for private guards delegated to deal with state agents, or cheerfully paid $1,000 fines that represented only a fraction of a day's profit. The flow of hot oil reached its peak in late 1934 and early 1935. In this period illegal production from the East Texas field alone was estimated at 55,000 barrels a day by the Railroad Commission of Texas, at 90,000 to 150,000 barrels by some oilmen and federal officials. This throwing of excess oil on the market, which caused sporadic price wars and threatened to wreck production control, brought an investigation by a congressional committee. Enforcement of quotas was achieved gradually after a new interstate compact, drawn in Dallas in February 1935, was ratified by the legislatures of the oil states and strengthened by passage of the Connally Act, which reimposed federal control of interstate oil shipments after court invalidation of that provided in the recovery act.

BIBLIOGRAPHY: 

Gerald Forbes, Flush Production: The Epic of Oil in the Gulf-Southwest (Norman: University of Oklahoma Press, 1942). Wayne Gard, "Hot Oil from Texas," American Mercury, May 1935. Samuel Barrett Pettengill, Hot Oil (New York: Economic Forum, 1936).

Wayne Gard

Citation

The following, adapted from the Chicago Manual of Style, 15th edition, is the preferred citation for this article.

Wayne Gard, "HOT OIL," Handbook of Texas Online (http://www.tshaonline.org/handbook/online/articles/doh04), accessed December 21, 2014. Uploaded on June 15, 2010. Published by the Texas State Historical Association.