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MONGJrHLG)(
REVIEW
FEDERAL
RES E R V E
Vol. 41, No.4
BANK
o
F
DALLAS
April I, 1956
DALLAS, TEXAS
THE CONSERVATION OF SOUTHWEST OIL AND GAS
E. COLDWELL, Director of Research
Federal Reserve Bank 0/ Dallas
PHILIP
Since the discovery of oil and gas in the United States,
there have been repeated warnings that the supply would be
exhausted within 30 years; in fact, the industry has never
had pI'oved reserves exceeding a 30·year supply. Despite the
increasingly heavy demand for oil and gas, there still remain
proved reserves in excess of 15 years' supply, even at a much
higher consumption rate. Of course, the answer to this seem·
ing paradox is mainly the continued discoveries of new fields
and the more intensive development of older ones. However,
another major reason for the continued availability of gas
and oil is the conservation regulations of the primary producing states.
Conservation is the prevention of waste, both physical and
economic. In other words, conservation means obtaining the
maximum amount of oj! from each reservoir consistent with
the existing economic environment and with the protection
of correlative rights. Conservation practices have fostered
improved means of recovery and prevented wasteful overproduction, with its consequent deleterious effects upon reservoir pressure and ultimate recovery. The physical waste of
oil brought to the surface only to be stored in open pits,
where it is subj ect to evaporation and fire hazards, has been
largely eliminated. Conservation also has stimulated the continuing search for oil and gas by assuring each producer of
a ratable share of the market and by stabilizing and enabling
improved forecasts of the supply and demand factors in that
market.
Although conservation regulations have a marked efT ect
upon the supplies of oil and gas and, consequently, upon
their prices, such regulations are concerned only with the
prevention of physical waste. Upon occasion, conservation
authorities must take into account the cost and price of a
product, particularly in reference to secondary recovery projects and spacing regulations; but, even in these instances,
• the primary focus of conservation is maximum physical
recovery.
lems of the oil industry or to the problem of long. range energy
requirements of the Nation. Oil and gas are depletable assets,
and it is not likely that the total amounts in reservoirs ever
will be recovered. Conservation can only serve to improve
the percentage of recovery; it cannot create new reserves.
Nevertheless, conservation is very important to everyone
in the United States. Until other energy sources, such as
atomic or solar energy, are developed to a high degree of
efficiency, the Nation probably wjJJ draw more than twothirds of its total energy requirements from gas and oil. Thus,
any means by which our reserves can be extended are of
major significance, particularly in view of the recent evidence of a marked reduction in the rate of increase in reserves. In the past decade, although wildcat wells have comprised a larger and larger share of the total number of wells
drilled, there has not been a proportionate increase in the
number of new fields discovered. Furthermore, recent discoveries generally have contained smaller amounts of oil.
Extensions and revisions by development drilling are accounting for a steadily increasing share of additions to reserves. With new field discoveries declining and becoming
more costly, conservation efforts to obtain maximum efficient
recovery should be attracting much more attention.
To the producer or royalty owner, conservation sometimes
means lower levels of current production and income, but it
also means prospects for an extension of the productive life
of a field and greater ultimate recovery. Moreover, there has
developed a price stability not feasible under preconservation
operations. In states where public revenues are tied to oil or
gas production, conservation has stabilized such tax income.
Con servation Agencies
Each oI the five stales lying wholly or partly in the Eleventh
Federal Reserve District has established an agency to enforce
oil and gas conservation and has empowered its agency with
authority to regulate a large porlion of oil industry operaConservation regulations arc effective in promoting beller lions. Oklahoma was the first southwestern state to pass legisrecoycry, but they are not a quick solution to all the prob. lation regulating the production, drilling, and storage of
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
50
MONTHLY BUSINESS REVIEW
oil, although Texas regulation came soon after. New Mexico,
Louisiana, and Arizona followed suit during the 1930's
and 1940's.
The Texas Railroad Commission and the Oklahoma Cor·
poration Commission are· each composed of three elected
officials who serve as full-time commissioners. In Arizona,
conservation activities are enforced by the elected State Land
Commissioner, while in Louisiana the governor appoints the
Commissioner of Conservation. The New Mexico Oil Conservation Commission is composed of the governor, an elected
state land commissioner, and a statc geologist appointed by
the governor.
These state agencies have the power to regnlate nearly all
phases of oil production, including well completions, plugging, abandonment, production, spacing, and stratification of
liquids. The only essential difference in the powers of the
respective commissions lies in the fact that, under certain
conditions, compulsory unitization authority is given to the
Louisiana, Arizona, and Oklahoma agencies, while such
authority is merely permissive for the Texas and New Mexico
agencies. There are substantial differences in procedures,
especially in determining the state allow ables, but the end
results are similar. The principal conservation regulations
will be discussed later.
Supplementing these state agencies in the conservation of
oil and gas are the Federal regnlations governing interstate
movements. Foremost among these are the Connally Hot Oil
Act (under which it is illegal to ship oil which has been produced in violation of state regulations) and the regnlations
of the Interstate Commerce Commission covering the operations of interstate pipelines, tankers, railroads, and truck
carriers.
A purely advisory agency with no regulatory powers, the
Interstate Oil Compact Commission was created by the oilproducing states and sanctioned by Congress to improve the
interchange of ideas and to collect and disseminate information about oil and gas. However, the main burden of regulation and control falls upon the individual state commissions,
and it is through their activities that conservation must become effective.
To gain some comprehension of conservation and its importance to the Nation, it should be noted that there are over
300,000 producing oil wells in the five-state area. Most of
these wclls must be controlled, and reports on production,
bottom hole pressure, gas-oil ratios, and numerous other
aspects need to be evaluated. A steady stream of hearings
and court appeals absorbs a very large amount of the commissioners' time and energy. The commissions also must be
vigilant in guarding the rights of landowners.
The Nation's oil industry is heavily concentrated in the
Southwest, and any action which might conserve the area's
oil should be of major importance to the country. District
states contribute nearly 65 percent of the oil produced in the
United States and hold more than 72 percent of the proved
reserves of the Nation. Moreover, 60 percent of all oil and
PRODUCTION, DRILLING, AND RESERVES OF OIL, 1955
Five Southwestern States and United Slates
Proved reserve. of
liquid hydrocarbons'
Doily overage c:rude
Number of
oil E:roduction l
total well
December 31
(Barrels)
completions'
(ThoUlonds of borr.ts)
r.xos .•••.•.... .•••.•
734.900
225,700
557.100
2.900,600
4,019
1,663
8,411
19.981
4.191.200'
1.161.900
2.370.400
17.97B.900·
Five stote! ••... . •• .•
United Slotes •. •.. . ..
'.418,300
6,806,900
34,075
56.682
25.702.400
35,450.700
Area
Arizona ••••••••••.•• •
Louisiana •••.•.••.•.•.
New Mexico .... ...... .
Oklahoma ••••.•••••• •
1
.. Includes offshore reserves.
SOURCES, I United States Bureau of Mine ••
J Th. Oil and Gor Journal.
• '.tro'-um WeK.
gas wells are drilled in these five states. In the order of their
importance in the production of oil, Texas ranks first
among these southwestern states, followed by Louisiana,
Oklahoma, New Mexico, and Arizona. There was no appreciable amount of oil production in Arizona in 1955. In fact,
Arizona recently has completed iLs first producing well, but
the State has been prepared to regulate oil and gas production
for many years.
Principal Conservation Regulations
While the various state agencies have many different rules
and regulations, five areas of regulation form the backbone
of effective control. Although the various agencies have differing procedures on these regulations, the end results are
comparable.
Spacing
When a new field is developed, the first major question for
commission determination is the proper spacing of wells. In
general, wells should be drilled to drain effectively the maxi.
mum amount of oil, considering the structure of the reservoir
and the pay-out for drilling and development costs. Most state
commissions have set a state-wide spacing rule to govern new
fields until separate field rules can be developed, but there
are numerous exceptions Lo both the state-wide rule and the
field rules.
In Texas the spacing rule - Rule 37 - still provides the
impetus for many hearings and court appeals. The Texas
spacing rule requires that new oil wells be drilled at least
933 feet from the nearest well and 330 feet from the nearest
property line, lease line, or subdivision line. Spacing rules
in the other southwestern states usually allow wider spacing
of ncw wells. Gas wells generally drain a larger area, and
spacing ranges from 160 to 640 acres, with most fields oper·
ating under the wider spacing. Whenever there is an application for an exemption from Rule 37 or from the individual
field rules, the commission must take into account the special
reservoir mechanics and structure, the cost of pay-out on
closer spacing, and the most effective recovery. An exemp·
tion from the state-wide spaci ng regulation means that the
operator has proved that the most effective withdrawal of
oil from the reservoir can be obtained through either wider
or closer spacing. Quite often, applications for exemptions
f
I
MONTHLY IlUSINESS REVIEW
from spacing rules also involve the correlative rights of
individual leaseholders.
Production Control
The conservation agcncy of each state maintains close
supervision and control over the total amount of oil which
ca n he produced in the state. In Texas, production is sched·
uled by a series of actions on the part of the commission.
When a new fi eld is developed, it is assigned a Maximum
Efficient Rate (MER) of production. In other words, for
a particular fi eld the maximum output under which there
will be no wastage of oil whcn the wells are operating each
day in the month is called the MER of the field. When set.
ting an allowable, the Texas commission first determines the
demand for Texas oil during the coming month and then
calculates the number of days each field may operate. Thus,
production is equated with demand. While the procedures of
the various southwestern agencies differ, the net result is a
proration of the allowable among the oil fields and then
among the individual wells.
As mentioned before, some wells are exempt - primarily
wells incapable of producing more than a basic minimum
(in Texas, 20 barrels per day), as well as wells in fields where
water or gas injection is being used to rehabilitate the fields.
Such exempt wells are allowed to produce as much as possible,
on the theory that no well should be closed completely unless
wasteful practices are involved. Of the 5,292 oil fields in
Texas, 418 are exempt from shutdown. The exempt wells
produce nearly one·fifth of the state total. A recent survey
of stripper wells - generally exempt from state allowablesindicates that in early 1955 there were 118,648 stripper wells
in the four producing states of the Southwest, with reserves
equal to nearly one· fifth of the total oil reserves of these states.
Production control is the primary cornerstone of conser·
vation; without it, a well could produce at full capacity, dis·
sipating the energy of the reservoir and flooding the oil mar·
kets. The evidences of physical waste where an oil field pro·
duced at its maximum rate were shown in such fields as the
East Texas Field and the Oklahoma City Field before effective
conservation measures were taken. In each case, too rapid
recovery reduced reservoir pressures and decreased the
chances of a high percentage of recovery. Production con·
trol imposed by the conservation authorities stabilized under·
ground pressure, reducing waste and improving the amount
of recovery. Production control also points toward reducing
waste aIter oil is brought to the surface. In determining the
STRIPPER WELL SURVEY, JANUARY 1, 1955
Four Southwestern Siotes ond United States
Number of
slripper
wells
ProdlXtion
in 1954
(Sarrels)
TeJ:os .. •.. ..•..•.• •
6,103
2,755
54,200
55,590
12,567,526
4,875,438
83,726,134
97,599,326
228,550
74,700
183,614
951,845
137,830
109,280
1,666,215
2,181,029
Four stoles ........
United Stoles .... . .
11 8,648
340,276
198,768,424
432,495,896
1,438,709
2.277.095
4,094,354
7.714,4tO
Area
louisiana .. . .... ....
Ne w Mexico .. .. •.. . .
Oklahoma . . .. ... ...
SOURCE: Interstate Oil Compact Commission.
Tola l
Total
production
reseNes
(Thousands of barrels)
51
allowables for a particular month, the market demand for oil
from a state is considered, Market demand statutes were
repeatedly challenged in the courts; but the commissions'
authority was upheld.
In determining market demand, the commissions ask each
buyer of crude oil to submit, in advance of the state·wide
hearing, their nominations for purchases during the coming
month. The total of snch expected purchases is then compared
with the United States Bureau of Mines forecast of demand.
Other factors considered are the current levels of stocks
and imports and the prospective economic conditions in the
Nation.
After the commission announces its decision in terms of
the number of days which the ratable wells may operate that
month, the individual well owner's share of the state allow·
able is determined automatically. In Texas, complicated for·
mulas involving the Maximum Efficient Rate of production
for a field and the gas·oil ratio of the well (the amount of
gas recovered per barrel of oil produced) are used to establish
the individual well allowable. As might be expected, some
wells cannot meet their allowables; consequently, state·wide
production in Texas averages about 12 percent below the
allowahle.
When new fields are brought in, a discovery allowable is
assigned, which is substantially above the regular allowable
for tl,e state. This extra allowable stimulates exploration and
partly compensates for the heavy costs of exploratory work,
In Texas the discovery allowable for a field remains in effect
for a period of either 18 months following the completion
of the first well or until the sixth well is completed.
Gas Flaring
Inasmuch as oil wells also produce gas, the disposition of
the gas has been a recurring problem. Before World War II,
most such gas (called casinghead gas) was flared, or burned,
at the well. However, as technology improved and valuable
liquid hydrocarbons were extracted, it became apparent that
flaring was wasteful, especially since the uses of and demand
for natural gas were rising rapidly. In some areas, pipeline
connections were needed to distribute the gas. In Texas the
commission issued orders closing down some oil fields until
adequate facilities for processing and distributing this gas
were developed. Some operators began reinjecting the gas
into the reservoir to maintain natural pressure, while others
processed the casin ghead gas, extracting the liquid hydro·
carbons and selling the residue to pipeline companies. AI·
though this type of regulation has been in force for less than
10 years, it has been highly effective in reducing the amount
of flared gas, thus conserving more of our natural resources.
Of 1,679 billion cubic feet of casinghead gas produced in
Texas in 1955, less than 5 percent was flared and nearly 24
percent was marketed.
Secondary Recovery and Pressure Maintenance
The energy necessary to force oil from the ground is proyided by one of four methods or a combination of them. If
a reservoir has gas in the upper part and oil below, the expan·
52
MONTHLY BUSINESS REVIEW
sion of the gas exerts pressure like a giant piston, forcing the
oil up the well. This is called a gas·cap expansion drive. Sometimes, water coming from below oil exerts sufficient pressure
to bring up the oil, thus creating a water drive. If neither
of these drives can supply sufficient pressure, the gas in solu·
tion may be used as the primary force. This is known as a
solution gas drive. Finally, there is occasionally an oil reser·
voir in which gravity plays an important part in expelling
the oil. Of the four methods, the most efficient is the water
drive, which permits 50 to 85 percent recovery. Gas.cap
expansion can produce 50 percent recovery, but a solution
gas drive usually allows only 10 to 25 percent recovery.
After many years of production or excessively rapid pro·
duction, the natural pressure which originally forced up the
oil may become too weak to continue the job. By injecting
water or gas into these older fields, oil operators have found
that a renewed pressure can be developed, which will permit
greater recovery. The use of such injections to build up an
older field is ealled secondary recovery. Using them when
the field is young is known as pressure maintenance.
In theory, the Texas commission does not have the author·
ity to require either secondary recovery operations or pres·
sure maintenance. However, in practice, if the commission
believes that oil recovery can be substantially improved, it
may shut down a field until more efficient recovery is evidenced. This action is, in effect, a compulsory order for sec·
ondary recovery.
Since such operations can be conducted only on a very
large scale, either for an entire field or for a substantial part
of it, the operators and royalty owners must agree among
themselves to adopt the secondary recovery methods. This
procedure is facilitated by unitization, but lease flooding is
common in some areas, notably the shallower fields in Oklahoma. Under unitization, an entire field is the basis of operation. In Arizona, Oklahoma, and Louisiana, unitization may
be made compulsory, while in Texas and New Mexico, it is
only permissive.
Plugging, Abandonment, and Stratification Control
In addition to controlling the drilling and output of a
well during its serviceable life, the commissions are empow·
ered to regulate the means and method of its abandonment.
When it has been determined thaI a well should be aban·
doned, the operator is required to file with the commission
a notice of abandonment and an outline of the type of plugging which is planned. This plugging is necessary to prevent
the migration of liquids from their own strata. For example,
salt water could move into pure water sands, thus contam·
inating the waler for human use. Stratification of liquids
means plugging in such a way that each liquid or gas will
remain in its original formation.
During past years, before plugging control was enforced,
many oil wells were abandoned without attempts to seal their
strata effectively. Subsequ ently, when the older oil field s were
reworked through secondary recover y methods, these older
wells had to be cleaned out and resealed to prevent the escape
53
MONTHLY BUSINESS REVIEW
SURVEY OF UNITIZED OIL FIELD CONSERVATION PROJECTS, JANUARY 1, 1955
Three Southwestern States and United States
RECOVERABLE OIL
Original
stock tank
Production
In 1954
(Borrels)
Number
of unils
Area
Louisiana ..•• . .........•••. .. ..
Oklohomo ••..•.••..•.•..••.••.
Texas . ..... ......•......... . .
Three states . ................
United States . .........•••..•
Without unit operation
With unit operation
Estimated
reserves
oil in place
(Thousands
Thousands
Percent
of barrels)
of borrels
Percent
(Thousands
in place
Thousands
of borrels
in place
of borrels)
83
38
48
28,260,667
20,064,079
70,957,019
1,448,132
2,441,449
6,185,565
518,626
572,696
1,677,824
35.8
23.5
27.1
809,746
943,117
3,022,877
55.9
38.6
48.9
476,073
425,915
2,487,322
169
278
119,281,765
208,427,588
10,075,146
18,636,477
2,769,146
5,127,181
27.5
27.5
4,775,740
8,637,164
47.4
46.3
3,389,310
5,270,894
SOURCE, The Oil and Go. Journal.
of underground pressure. Moreover, there have been some
instances of contamination of a water supply because of failure to plug an oil well properly. Because of the importance of
water in the economy today, many states recently have passed
legislation strengthening the powers of the conservation commissions in the control of contamination practices.
efficient rate of production, and no reserve capacity was
available. There is no doubt that some importation is necessary to supplement tbe production of United States wells.
However, many people in the oil industry believe that domestic producers should have full access to tlle market, rather
than be faced with unrestricted imports which might supplant United States production.
Conservation Problems
Regardless of the length of time it has been in effect,
major problems are involved in the application of nearly
any type of governmental regulation to a competitive enterprise. Thus, there are problems facing the conservation commissions today. Most of these problems relate to production
control, either directly or indirectly.
One of the outstanding problems concerns the failure of
the courts to define the equity of individual holders of oil
and gas leases, although the courts have tried to give each
leaseholder the oil in place under his lease. For example, when
a commission develops its allowable for a month and distributes that allowable to the individual fields, there is usually
a formula for the distribution of a field allowable to individual wells, based upon the number of wells and the acreage
drained by those wells. The Texas commission most frequently uses a formula for well distribution of the field allowable based upon 25 pcrcent for the well and 75 percent for
the acreage; however, where a large number of small tracts
are involved, the commission has increased the proportionate
share of the well and decreased that for acreage. Such a forlI1ula is written into each set of field rules.
Any of these formulas appear to be acceptable, having
el'olved over many years of commission determination. However, where individual operators get together to create a unit
operation, the basis for distributing the allowable quite often
is considerably different from the normal field rules. Until
the courls directly rule upon the equity of the individual
leaseholder, these varying formulas are likely to continue.
~
Another major problem of conservation commissions concerns the effect of imports upon the allow abIes of the states.
Since the close or World War IT, the United States has been
a net importer of crude and refined products. In fact, in
1947 the Texas oil industry was operating at its maximum
With the development of the vast Middle East oil fields
and those in South America and Central America, large
quantities of oil have become available to the world, often
at prices favorable to their importation into the United
States. Furthermore, most of this exploration and production
has been conducted by United States oil firms.
There are many arguments for the importation of oil, as
well as equally strong arguments against it. Individuals favoring importation believe that the United States should conserve its own resources when foreign oil is available and
thus be able to supply our military needs from within, should
an emergency arise. Other arguments in favor of imports
involve the need for heavy burning oils, the demand for various refined products during the winter season, and the generally lower cost of foreign oil contrasted with southwestern
oil when delivered at east and west coast refineries.
Those opposing importation counter with the argument
that thc industry will stagnate and that large reserves will
not be available unless exploratory work is encouraged. Opposition to imports also is based upon the current availability of
unused capacity and the need to stimulate further exploratory activities in this country. Such encouragement of exploration is said to be impossible unless production and payout are maintained on a reasonable basis.
Thc commissions in the major producing states of the
Southwest balance their determination of allow abies with
the market demand Ior oil; yet, that market demand may be
satisfied by either domestic or foreign oil. In 1955 the Office
of Defense Mobilization requested the major oil companies
to limit their importations to the ratio which existed between imports and production during 1954. However, because oUler companies entered the import field and Because
new fields were discovered which exerted pressure upon the
available markets, imports rose nearly 19 percent in 1955,
54
MONTHLY BUSINESS REVIEW
compared with a 7.percent gain in domestic production. When
domestic production is at high levels, the pressure for import
reductions is minimized; but when allowables are reduced
because of lack of demand, many believe that the reductions
should be made through lower imports.
and pipeline proration of wells where outlets are restricted.
Even though such problems require a considerable amount
of the commissions' time and energy, they are, essentially,
problems of a temporary nature and their long. run signifi.
cance is relatively small compared with those discussed above.
Because the southwestern states contribute such a large
share of total oil production in the United States, fluctuations
in the oil allowables of these states quite often are viewed
as the balance wheel of the industry. To prevent economic
and physical waste, the commissions reduce allowables when
a surplus of oil exists. Yet, many states in the Nation do
not attempt to control oil and gas production; consequently,
their wells run at maximum capacity. Therefore, some indus·
try sources take the view that foreign oil and oil from those
states where market prorationing does not exist are being used
to supplant regulated production of the southwestern oil in·
dustry. The commissions have been extremely sensitive to
such criticism and, in controlling production, have been lib·
eral in their determination of allowables, rather than restrict
the local industry to provide a market for oil produced in
other areas.
Summary
Still another problem connected with the determination of
allowables is the charge that commission activities in set·
ting allow abies are really price· fixing and tend to create state·
wide monopoly control. It is admitted that control over sup·
ply has a bearing upon the prices charged for oil and oil
products; but since commission control exists only from the
well through the pipeline, it is said that refiners have the final
word upon the supply available to the market. As long as
production is maintained at a level consistent with existing
demand and as long as stocks are at reasonable working
levels, commission determination of an allowable is not
likely to be governed by a desire to influence prices. An equi·
table proration or allowable control is a prime necessity for
good conservation.
Still another significant problem connected with conserva·
tion of oil and gas concerns the future development of second·
ary recovery and unitization proj ects. Some estimates indio
cate that, of the 93,000,000,000 barrels of oil found to date in
Texas, 15,000,000,000 have been recovered, 15,000,000,000
more will be obtained under primary recovery methods, and
an additional 10,000,000,000 could be obtained through pres·
ently known methods of secondary recovery. In other words,
it is estimated that more than 50,000,000,000 barrels of oil,
or over 50 percent of the total supply, are unrecoverable under
existing technological and operational procedures. This does
not mean that there is a willful waste of nearly 60 percent of
our oil reserves. Instead, like the energy in the atom, oil tech·
nology has not advanced sufficiently to allow the extraction of
this oil. To obtain a greater share of this vast pool of oil is
the challenge of conservation today. The commissions of the
southwestern states need to encourage secondary recovery
projects further in order to insure that as high a percentage
of the oil in each reservoir will be recovered as is consistent
with the current and prospective economic and technical en·
vironment.
There are many other problems of conservation, such as
those connected with the correlative rights of the individual
Conservation of oil and gas in the Southwest has made
excellent progress in the past 25 years. Conservation has
transformed the oil and gas industry from an industry which
was essentially operating without controls, with wasteful
overproduction from a market standpoint, and with physical
waste of both oil and gas into one with a code of orderly
development, in which production has been stabilized and
most wasteful practices removed. In addition, conservation
activities have encouraged further exploratory work and,
with the vast research programs of the industry, also have
encouraged the development of newer methods of recovcry,
which give promise of a considerably higher percentage of
recovery than was thought possible less than two decades ago.
It is significant that the industry no longer challenges the
basic authority of the commissions nor, to any serious extent,
the primary cornerstone of market demand proration. The
majority of both major oil companies and independents are
learning to live with conservation practices; while there are
many complaints when state· wide allowables are reduced
because of a lack of market demand, the various groups no
longer attempt a court challenge of the authority.
Despite all of this progress, conservation still has a wide
field for further improvement. The guidance of commission
regulation toward greater use of secondary recovery methods
and, where feasible, unitization of oil and gas fields would
seem to be the next major step; but throughout this pro·
cedure, the correlative rights of the individual must remain
a prime consideration. In fact, the basic question appears to
be how far conservation regulation can he extended into the
areas of unitization and secondary recovery without compro·
mising seriously the basic private rights of individuals and
companies or without impairing the competitive drive toward
further exploratory activities.
It would appear, also, that a basic determination on the
part of the industry and regulatory authorities of the proper
level of oil imports needs immediate attention. Imports of oil
are still less than one· fifth of domestic production; and al·
though imports have increased substantially in recent years,
the demand for oil in the energy.impoverished areas of the
world, together wtih the rapid increase in the use of oil in
this country, may again occasion a shortage of oil rather
than a surplus. Consequently, it would seem to be more logi.
cal to concentrate upon the improvement of recovery from
existing fields, the development of new domestic fields, and
the elimination of physical waste in anticipation of continued
demands for oil and gas as the primary sources of energy
in the United States.
It will he many years before the technology of solar or
atomic energy can be developed sufficiently to enable either
of these to replace the current dominant position of oil and
MONTHLY BUSINESS REVIEW
gas. While this Nation apparently is in no danger of an immediate exhaustion of its oil and gas fields, the expanding
requirements of the next 20 years may necessitate a heavy
extension of its reserves and further emphasis upon every
means of conservation which either are presently known or
will be developed in that period.
In summary, while it is recognized that commission regu·
lation has taken many significant steps toward improving
the recovery and conservation of oil and gas, it also is recognized that many other steps will be required before recovery
in most of the oil fields of the United States will even exceed
50 percent of the oil in place. The real challenge of conservation is the encouragement of industry technology and application of improved methods which will lead toward a higher
percentage of recovery from each reservoir.
ELEVENTH FEDERAL RESERVE DISTRICT
GZm Oollos Head Offie. Tardlor,
mIIIl Houlton Sronch T,,, ito ry
1-:·:·;·:·:1 SOli Anlonlo aronch Turllor),
~ EI POlO Sroncll TtrrU or y
55
56
MONTHLY BUSINESS REVIEW
REVI EW OF BUSINESS , AGR ICULTURAL, AND FINANCI AL CONDITIONS
Consumer buying at Eleventh
District department stores during February was 11 percent
above the year-earlier level
but 2 percent below the high
volume of January. Nondurable goods showed a
better sales record than durable goods. Department
store inventories increased 9 percent during February and at the end of the month were 13 percent
larger than a year ago. Furniture store sales rose 3
percent from January and were 4 percent more than
in February 1955.
During the early part of March , /ight to heavy
freezes damaged fruit, vegetables, and some field
crops in parts of the District. Moisture is needed in
south Texas and most western areas of the District.
Farm land values remain firm in most District states.
Recent high levels of production and refining
were not sustained in late March and early April as
the oil industry moved out of the winter healing season with comfortable stocks of crude and refined
products. However, gasoline stocks are considered
high. The mild cut in Texas oil allowables for April
will hold production at approximately the lateMarch level.
Nonagricultural employment in the District states
during February, at 3,991 ,600, reflected a small
decrease from January, as trade employment continued its seasonal decline. Manufacturing employment increased to 74 8,600, with durable goods
industries providing the ma jor gains.
Although department store sales
in the Eleventh Federal Reserve District rose noti ceably in late February and the first part of March, the
increase was a little less than is
usual for this time of year. Sales for February, after adjustment for normal seasonal differences, failed to maintain the
high volume of the previous 2 months. The dollar volume of
February sales was 2 percent lower than in January but was
11 percent higher than in February last year. The decrease
in sales from January was partially the result of some unfavorable weather during the early part of the month, while the
increase over a year earlier may have been due, in part, to
the one additional trading day in February this year.
The adjusted sales index - which makes allowances for
variations in the number of trading days, as well as for normal
seasonal influences - decreased from 144 in January to 139
in February. The previous record high for February was 131
in 1955.
For the first time since November 1954, sales of nondurable
goods during February showed a larger year-to-year percentage increase than sales of homefurnishings. Sales of small
wares and women's and misses' ready-to-wear apparel were
13 percent higher than in February 1955; sales of piece goods
and household textiles, men's and boys' wear, and women's
and misses' reaay-to-wear accessories were up 12 percent.
The homefurnishings departments registered a year-to-year
sales increase of 9 percent; the principal gain was in sales of
major household appliances, which increased 24 percent.
Sales of furniture and bedding were up 2 percent, while sales
of domestic floor coverings and of radios and television sets
RETAIL TRADE STATISTICS
(Perc entage chonge)
HET SALES
The value of construction contracts awarded in
the District during February was up 35 percent
from the previous month. Residential construction
accounted for most of the increase with a sharp gain
of 57 percent, while " all other" awards were up 19
percent. Compared with a year ago, total awards
were up 61 percent during February.
2 mo. 1956
Line of trade
by area
DEPARTMENT STORES
Total Beven,h District. •• • . ••• . • • .
Corpus Chrisli •••••• •• •••• ••• .• .•
Dalla ••• • • •••••••••• • • • • •• •• •••
EI Paso •• • • . ••••• . •• • . ••.• . ••••
Fort Worth • • •• . • .. ••••••• ••• •••
Houston •• ••••••• • • • • • • • •••••••
San Antonio ••• .. •• •• • •••.••••••
Shreveport. La ••• • •• • •• . •••• • •••
F. b.
Jan.
1955
1956
11
_2
10
11
1
13
13
7
•4
-5
0
-6
-11
16
13
11
-6
1
1
4
-1
Austin •••••••••••••••••••••••..
-6
Dallas •••...••.••.••...••••••.. -16
24
Houston •••••••••••••••••••••••
Lubbock ••••• •• ..•.•••• .. •.• . ••
- 9
San Antonio •••••••••••••••••••• -12
Shreveport, La •••••.•..••• . . . •. •
6
Wichita foil" •••• .. •••..••.•••••
12
Othe:rcitie:I ••••••.••.••••••••••
35
3
-26
27
_1
25
-42
-10
-16
-30
24
Waco •• . .•.... •• •. ••......•. ..
Other ci ties •••••• • •••• • • •• • .•••
FURNITURE STORES
Gross loans at District weekly reporting member
banks declined narrowly in the 4 weeks ended
March 14. During February, daily average free reserves at all member banks were $ 17,683,000. The
United States Treasury has successfully concluded its
refunding operation which involved about $9,500,000,000 of maturing securities.
STOCKS'
Toiol Beventh District ••• •••••••••
Ama rillo •• •• .••• • ••.•• •• ••• ••••
HOUSEHOLD APPUAHCE STORES
Total Eleventh District •• •• .•• • ..•.
Dallas • •• • ••• • ••• •• .. •• • ••• •• ••
, Stocks at end of month.
0
3
-11
-1 2
compo with
2 mo. 1955
6
7
•1
6
9
2
8
12
8
•
Feb. 1956 from
Feb.
Jan.
1955
1956
"1315
9
12
5
3
12
14
7
13
20
21
8
6
13
12
10
11
9
11
-6
- 17
,.
30
23
5
9
1
1
-2
5
5
- 6
14
8
11
3
- 1
25
-2
MONTHLY BUSINESS REVIEW
INDEXES OF DEPARTMENT STORE SAtES AND STOCKS
(I947·~9
=
100)
UNADJUSTED
Area
ADJUSTED'
Feb . Jan. Dec. Feb. Feb. Jan. Dec. Feb.
1956 1956 1955 1955 1956 1956 1955 1955
57
destroyed. Scattered frosts and blowing sand damaged cotton
in the Coastal Bend area and western portion of the Lower
Valley of Texas. Corn was damaged slightly in the Coastal
Bend but is expected to recover; most sorghums escaped
injury.
SAlES-DoUy average
Eleventh District • •• . •• . •..••
Dallas ........... , ...... . .
Houston • ••••.••••••••.•••
STOCKS-End of month
EJnonth District • . .. .. ... . ..
I
111
114
121
114
109
129
247r
236
266
IO!r
107
112
139
134
157
lS4p 140
U3r
135r
158p 158
144
136
163
147r
131r
139
158
126
145
159r
140r
Adjusted for seasonal variati on.
r-Revised.
p-Pr.liminary.
were down 2 percent and 13 percent, respectively, from those
of a year earlier.
Commercial vegetables in the Lower Rio Grande Valley
and south Texas were injured, with the major part of the
damage resulting from blowing dust. Cantaloupes, tomatoes,
early watermelons, and some cucumbers in southern vegetable
areas of Texas were damaged, and the quality of some mature
cabbage and lettuce was lowered. Most tomatoes in east
Texas were in hotbeds and cold frames and escaped serious
damage.
Department store instalment credit outstanding declined 5
percent, or more than seasonally, from the end of January, but
balances at the end of February continued about 11 percent
above a year ago. The instalment account collection ratio in
February, estimated at 13 percent, was the same as in Jan·
uary and was 1 point above February last year. Charge
accounts outstanding declined seasonally during February
and at the month end were 14 percent below the January level
although 6 percent above a year earlier.
In the High Plains south of the Canadian River, where
moisture was more adequate, wheat made fair development
despite the high winds and dust. However, the crop continues
on the downgrade in areas north of the Canadian River and
in some counties in the Low Rolling Plains where moisture
is short, and farmers continqe emergency soil erosion prac·
tices. In other areas, small grains are making good develop.
ment, although some green bug infestations have been
reported. Rain is needed in most areas to insure optimum
development of small grains.
ReA ectin g largely the receip t of Easter and spring merchan·
dise, the dollar value of inventories at reporting District
department stores increased 9 percent during February and
at the end of the month was 13 percent larger than on the
corresponding date in 1955. Total orders outstanding at the
end of February were 9 percent smaller than at the close of
January and were 2 percent below those at the end of February
last year.
Range and pasture feed in the eastern third of the District
is improving, but in western areas, ranges are short and
supplemental feeding continues. In the southern Plateau and
dry southwestern counties of Texas, livestock were turned
into some grain fields to salvage remaining forage as hopes
of making a grain crop dwindled.
Furniture store sales during February rose 3 percent, or
contraseasonally, from January and were 4 percent above
February 1955. Accounts receivable at the end of the month
were 12 percent higher than on the same date last year, while
the volume of collections rose 11 percent. Inventories were up
seasonally 1 percent from the end of January and were 11
percent hi gber than a year earlier.
Total new car registrations in February in four major
metropolitan arcas of the District- Dallas, Fort Worth,
Houston, and San Antonio - rose almost 3 percent above
January but were 12 percent less than in February a year
ago. Cumulative registrations at thc four cities for the first
2 months of thi s year showed a 5·percent decrease from thc
same period in 1955.
In all of the range states of the District for which data
are available, range feed conditions as of March 1, 1956,
were poor to fair but were slightly improved from the same
time a year ago, according to the United States Department
of Agriculture. As a result of supplemental feeding, most
livestock in the District states remained in generally fair con·
dition and were in somewhat better condition than on the
corresponding date in 1955.
The Texas acreage of commercial vegetables for spring and
summer harvest, as of March 1 (or shortly before the low
temperatures occurred), is estimated to be 1 percent above
last year's acreage and 3 percent above the 6·year (1949·54)
average. Production of winter vegetables is indicated to be
10 percent larger than in 1955 and 24 percent above average.
liVESTOCK RECEIPTS
A dry norther during the early
part of March resulted in freezing
temperatures in south Texas and
northern Louisiana and light frosts
in the Lower Rio Grande Valley of
Texas. Li:;iJt to hcavy damage to peach, pear, and plum trees
occurred in the eastern part of Texas and northern Louisiana,
and tender yegctablcs in early gardens were virtually
(Number)
FORT WORTH MARKET
Clen
1956
Feb.
1955
Come •.....•.• .
40,519
10,197
67.92.4
59,622
43.679
14,266
57,540
55,582
Feb.
Cal.,., ........ .
Hog ••••...•... .
Sheep ......... .
1 fl1Clud.s goats.
SAN ANTONIO MARKET
1956
feb .
1956
Feb.
1955
Jan.
1956
53.096
15,290
87,551
74,243
19,220
8,217
4.375
112,60"
16.339
10.035
3,283
'7,392
27,677
14,553
3,335
112,067
Jan.
MONTHLY BUSINESS REVIEW
58
by farmers at mid·February was unchanged from a month
earlier.
FARM COMMODITY PRICES
Top Prices Paid in Local Soulhwest Markets
Comparable Comparable
Week ended
Unit Mar. 21, 1956
Commodity and marlcet
COTTON, Middling 15 /1 6.In(h, Dallas ••••
WHEAT, No.1 hard, Fort Worth .. .......
OATS, No.2 white, Fort Worth .. .. . .....
CORN, No.2 yellow, fori Worth .........
SORGHUMS, No.2 yellow, Fort Worth ....
lb.
bo.
bo.
bo.
cwl.
HOGS. Choice. Fort Worth .... . .... .. . ..
SLAUGHTER STEERS, Choice, Fort Worth .••
SLAUGHTER CALVES, Choice, Fort Worth ••
STOCKER STEERS, Choice. Fort Worth .. • . •
SLAUGHTER SPRING LAMBS, Choice,
(wi.
Fort Worth ••••••••••••••.••....••.•
BROILERS, south Texas .•.•..............
cwl.
.3565
2.58\4
.87
1.68Y2
2.30
14 .50
19.50
20.00
20.00
$
(wt.
ewl.
ewl.
lb.
week,
week.
previous
month
previous
$
21.50
.24
.3550
2.S1 VZ
.863,4
1.64Yl
2.25
12.50
19.00
19.50
19.00
.22
year
$
.3280
2.67
.97'A
1.76Yz
2.62
17.00
25.00
22.00
22.50
23.50
.30
Total wool production in the District states in 1955 is esti·
mated at 61,130,000 pounds, or 1 percent below production
in 1954, according to the Department of Agriculture. Declines
were 7 pcrcent in Arizona and 1 percent in both New Mexico
and Texas. Wool production in Louisiana and Oklahoma in
1955 was 11 percent and 7 percent, respectively, more than
in 1954. The value of sales of 1955·crop wool in the District
states is estimated at $25,733,000, or 24 percent below a year
earlier.
Production of mohair in Arizona, New Mexico, and Texas
during 1955 total cd 16,700,000 pounds, or 17 perccnt above
the previous year's output. The value of mohair sales
amounted to $13,779,000, or almost a third higher than
in 1954.
The 1956 early spring lamb crop in the principal early
lamb.producing states of the Nation is estimated to be 2
percent less than in the previous year, as a result of the
smaller number of breeding ewes. The 1956 lambing per·
centage (lambs saved per 100 ewes) is about the same as
the 1955 percentage. In Texas the 1956 early spring lamb
crop is estimated to be smaller than a year earlier. This
decrease is the result of a 4·percent dccline in the number of
breeding ewes in the State on January 1 this year and a smaller
percentage of ewes lambing early.
In the District states, cash receipts from farm marketings
in 1955 totaled $3,245,930,000, compared with $3,395,·
772,000 in the prcvious year, for a decline of 4 percent. Crop
receipts are estimated at $1,897,307,000, or 6 percent lower
than in 195<1,; and livestock receipts are placed at $1,348,·
623,000, or 2 percent below those in the preceding year.
Farm land values in each of the Eleventh District states as
of November 1, 1955, were 2 to 4 percent higher than at the
same time in 1954, according to a recent report of the Depart.
ment of Agriculture. However, between July 1 and November
1 last year, farm land values declined 1 percent in New Mexico
and Texas, although they increased 1 percent in Arizona and
2 percent in Louisiana and Oklahoma. Land values in the
Nation increased 1 percent in the July·November period and
on November 1, 1955, were 5 percent above those on the cor·
responding date a year carlier.
Loan developments at Eleventh
District weekly reporting member
banks in the 4 weeks ended March
14 were characterized by a relatively
mild seasonal decline. The banks
decreased their gross loans $15,394,000 as an $11,425,000
reduction in interbank loans and a 89,046,000 decline in com·
mercial, industrial, and agricultural credits more than offset
increases in the other loan classifications. In the correspond·
ing weeks of last year, gross loans declined $22,320,000, with
the principal decreases again being recorded in commercial,
industrial, and agricultural loans and in interbank credits.
Loans to brokers and securities dealers rose $1,440,000,
and other securities loans increased $859,000 during the
4·week period. Real·estate crcdits were up $1,266,000, while
the banks added $1,512,000 to the "all other loans"
classification.
CONDITION STATISTICS OF All MEMBER BANKS
The index of prices received by Texas farmers on February
15 was 249 percent of the 1910·14 average, or 3 points above
the mid.January index but 21 points (8 perccnt) below a year
earlier. Comparcd with the preceding month, the all· crops
index was 3 points higher, and the livestock products index
increased 4 points. In the Nation the index of prices received
CASH RECEIPTS FROM FARM MARKETINGS
Five Southwestern Stales
Eleventh Federal Reserve District
lin millions of dollars)
Item
feb,29,
1956
Feb. 23,
1955
Jan. 25,
1956
ASSETS
Loo ns and discounts ... ....... , ..........•.....
United Siotes Government obligations ........ ... .
Other securities . .... . .............. , .... , ... .
Reserves with fed.ral Reserve Bonk .... . . . , ..... .
Cash in vault •.... .............. , ..... , •. ....
Balcncu with bonks in the United Stale l . . .... .. . .
Balances with banks in fo reig n countries •..•... ...
COih items in process of collection ... . .. .. ... ... .
Other Qssetl•............ . . .............. ....
$3,885
2,327
569
940
129
910
2
412
201
$3,513
2,505
547
960
127
1,076
2
422
185
$3,930
2,357
567
963
141
1,003
3
446
198
TOTAL ASSETS-, ... , ........•.........•..•
LIABILITIES AND CAPITAL
Demond deposits of bonh ... .. , ... .....• ......
Other demand deposits .•.. ......... .... .......
Time deposits ................ " .. , .•.••......
9,375
9.337
9,608
940
6,284
1,337
1,003
6,420
1,177
1,052
6,424
1.317
(In thou la nds of dollarsJ
December
Januory-December
Area
1955
1954
1955
1954
Arizona .••.•.......... .
Louisiana .•............ .
New Mexico . •••.. •......
OkJahoma ............. .
Texas .....• . •• .•. .•... .
$ 57,419
.49.549
21,664
45,102
2 12,991
$ 57,226
50.068
22.34.9
38,124
235,744
$ 337.270
361.5.45
167,729
494,465
1,884,921
$ 370,485
371,760
188,175
552,27.4
1,913,078
Total deposits .. ... .. .......... . .. ... , .... .
Borrowings· . . .. , . , . , ........•.... ...•.... • .•
Other liabilities e . ..... .. , .......... . ........ .
Total capital occounh e . ... ....... ,., ....••.. . ,
8,561
8.600
35
84
695
23
84
630
8,793
48
80
687
Total ...... .. , • ... ... .
$386,725
$403,511
$3,245,930
$3,395,77 2
TOTAL LIABILITIES AND CAPITALe .•• .... .. ...
9,375
9.337
9,608
SOURCE: United States Deportment of Agricullure.
e-Estimated.
MONTHLY BUSINESS REVIEW
CONDITION STATISTICS Of WEEKLY REPORTING
MEMBER BANKS IN LEADING CITIES
59
GROSS DEMAND AND TIME DEPOSITS Of MEMBER BANKS
Eleventh federal Reserve District
Eleventh Federal Reserve District
{Averoliles of de.ily flgures. In thousands of dollars}
[In thousands of dollars)
Item
March 14,
1956
March 16,
1955
COMBINED TOTAL
Feb. 15,
1956
Gross
demand
Dale
ASSETS
Commercial, industrial, and agricultural loons ••• $1,524.'53 $1,426,168 $1,533,499
Commercial and induslriolloons 1•••••••••• , 1,482,956
1,486,171
Agric:u1turolloans 1 •••••••••••••••••••••••
loans to broken and dealers In securities ••••••
Other loans for purchasing or carrying securities
Real-ellote loons ••••••••••••••• • ••••••••••
loons to banks ••••••••••••••••••••••••••••
AU other loans • •• •••••••••••••••••••••••••
41,497
21,819
128,884
208,812
9,650
555,562
16,784
10-1,223
174,378
8,655
.-19,567
47,328
20,379
128,025
207,546
21,075
55-1,050
Gross loans .••.•••..•••••••• • ••••••••••
Less reserves ond unallocated charge-offs ••
2,4.49,180
2,179,775
22,579
2,464,574
30,896
2,157,196
2,433,678
85,362
62,452
274,182
872,678
262,746
58,018
40,004
Net loans .••.••••• • ••••••••••• • ••• •• • ••
U. S. Treasury bills •••••••• •• ••• •• •• ••••••••
U. S. Treasury eertiReates of indebtedness •• ••••
U. S. Treasury notes ••••••• •• ••• •• •• '" •••••
U. S. Government bonds {inc. gtd. obligations) •••
Other securities •••• • • • • • • •• •••••• •••••••••
Total invelfmenh ••• • ••••••• ••• • ••• ••••••
Cosh items in process of collection ••••••• • ••••
Balances with banks in the United States •••••••
Balances with banks in foreign countries •••••••
Currency and cain • •• •• • •• • •••• • •• •• •••••••
Reserves with Federal Reserye Bonk •••• • ••••••
Olher assets ..............................
TOTAL ASSETS ... . ...... ..... ........
31,817
--2.417,363
--63,079
39,079
238,842
814,643
240,861
-1,396,504
407,36.4
.462,563
1,7 83
45,528
539,087
146,419
-5,416,611
--1,557,420
333,134
459,627
1,342
43,793
554,379
127,188
5,2J.f.079
2,890,223
53,205
204,663
850,125
17,009
61,.473
2,843,533
79,572
178,294
855,783
15,.417
63,743
814,842
242,773
1,393,756
426,819
425,161
1,.4.44
45,164
537,2-15
141,624
2,856,919
57,219
186,898
854,299
16,932
59,220
Total demand deposits •••••••••••••••••
4,036,342
Time deposit'
Indlyiduals, partnerships, and corporalions....
United Slates GoYernment ••••••• • ••••••••
Postal savings ••••••••••••••••••• ••• ••••
Stole, and political subdivilions ••••••••••••
Bonks In the U. S. and foreign countries ••••••
4,031,487
---
709,008
12,079
<152
129,005
955
650,580
13,361
<152
110,821
602
714,377
12,079
<152
138,801
1,955
Total time deposits ••••••••••••••••••••
851,499
TOlol deposits ••••••••••••••••••••••
Bill, payable, rediscounts, elc. •••••••••••• •• •
All other liabilities •••••••••••••••••••••••••
Total capitol accounts •••••••••••• • •••••••••
4,928,197
13,000
63,955
TOT At UA81UTIES AND CAPIT At ••• , ....
5.416,611
--5,234,079
Gran
demand
Tl",.
$565,389 $3,608,886 $443,108
652,808 3,824,638 517,364
736,233 3,715,063 524,516
747,023 3,822,788 528,182
764,200 3,884,210 544,860
763,407 3,923,584 557,372
3,464,715 767,155 3,793,191 566,214
F.b. 195..... . $6,886,847 $1,008,497 $3,277,961
F.b.1955 .. .. 7,329,237 1,170,172 3,504,599
Oct. 1955 ... . 7,304,808 1,260,749 3,589,745
Nov. 1955 .. . . 7,409,551 1,275,205 3,586,763
Dec. 1955 .. .. 7,541,113 1,309,060 3,656,903
Jon. 1956 •••• 7,592,370 1,320,779 3,668,786
Feb. 1956, •• ,
7,257,906
1,333,369
1955, total deposits decreased $17,021,000, demand deposits
having been withdrawn while time deposits were increased,
Between February 15 and March 14, the weekly reporting
member banks reduced their rediscounts and other borrow.
ings by $18,500,000, the total at the end of the period being
$13,000,000. On the corresponding date in 1955, total
borrowings were only $100,000,
In February the daily average of gross demand deposits at
all Eleventh District member banks equaled $7,257,906,000,
reflecting a $334,464,000 decline from the preceding month,
The month·to·month decline in gross demand balances at
reserve city banks totaled about $204,000,000 and at country
banks, more than $130,000,000. Daily average demand de·
posits of the member banks were lower than in February
1955, but time deposits showed an increase.
---867,664
-775,816
--4,812,158 4,899,151
100
60,386
361,435
TIme
COUNTRY 8ANKS
5,404,891
-4,076,698
411,459
Gross
demand
238,119
LIABILITIES AND CAPITAL
Demand daF.0sits
Individuo s, partnerships, and corporalio,,,••••
Unit ad States Government •• • •••••••••••••
Siaies and political subdivisions ••••••••••••
Bonk, in the United Slatas •••••••••••••••••
Bonks in foreign countries •••••• • ••••••• • ••
Certified and ofRcers' ,hecks, etc••••••• ••••
RESERVE CITY 8ANKS
BANK DEBITS, END·Of·MONTH DEPOSITS
AND ANNUAL RATE Of TURNOVER Of DEPOSITS
31,500
64,333
409,907
(Amounts In thousand. of dollars)
DEBITSl
5,404,891
1 Prior to January", 1956, agrleulturalloons were not reported .eparately. Comparable
year-earlier figure I will be shown 01 they become available.
February
Area
During the 4 weeks, the banks increased their investment
portfolios $2,748,000 to a total of $1,396,504,000. They added
$5,061,000 to bill holdings and $723,000 to holdings of
Treasury notes, while disposing of $925,000 of Treasury certificates, $199,000 of Government bonds, and $1,912,000 of
other securities. On March 14, each of these classes of investment accounts was below the level recorded a year earlier,
While collection items declined $19,455,000 during the 4
weeks, all of the other cash accounts increased, led by the
$37,402,000 increase in correspondent balances with domestic banks. Total assets rose $11,720,000, compared with a
$47,624,000 decline in the comparable 1955 period.
Depositors added $29,046,000 to their accounts in the 4
weeks, Demand deposits were up $45,211,000, as individuals
and businesses increased their balances $33,304,000 and
local government deposits rose $17,765,000. Time accounts
were reduced $16,165,000 as a result of decreases in interbank balances, individual and business balances, and local
government balances. During the similar 4-week period of
DEPOSITS1
Percentage
change from
1956
Feb.
Jon.
1955 1956
Annual rate offurnover
Feb.29i
1956
Feb.
Feb.
Jon.
1956 1955 1956
ARIZONA
Tucson •••••••••••••• $ 147,868
25 -11
$ 102,592
17.3
15.1
19.1
LOUISIANA
Monroe •••••••••••••
Shreveport ••••••••••
56 /889
52,0416
23 ..,650
24 -21
11 -14
189,782
13.3
14.6
12.6
13.1
16.3
16.9
24,089
-6 -22
27,043
10.4
10.2
13.1
55,728
106,826
115,603
107,328
105,952
22,409
981 ,23 8
132,917
14.5
15.2
14.2
14.0
18.0
7.2
24.1
11.6
14.8
15.2
17.5
15.4
15.1
19.8
9.1
27.0
22.0
HEW MEXICO
Rosw.II •••••••••••••
TEXAS
Abilene • •••••••• ••••
Amarillo • •••••••••••
Ausijn • ••••••••• ••••
Beaumont ••••••• ••••
Corpus Christl ••••••••
Corsicana •••••••••••
Dallas ••••••••••••••
EI Paso •••••••••••••
fort Worth ••••••••••
Galyeston •••••••••••
Houdon ••••••••••••
lar.do •••••••••••••
lubbock ••••••••••••
Port Arthur ••••••••••
Son Angelo • ••••••••
Son Antonio •••••••• •
Texarkana s •••••••••
Tyler ••••••• • •••••••
Waco •••••••••••• ••
Wlc:hita Falls ••••••••
69,599
137,649
135,619
128,264
160,149
13,415
1,978,379
231,709
568,2,48
73,225
2,005,983
20,340
122,884
52,207
40,581
449,234
17,544
67,150
81,662
91,290
TOlal-24 elties •••••••• $6,908,645
18
0
9
15
5
3
13
8
11
1
22
9
-8
5
5
13
6
5
5
8
-9
-15
-10
-10
-9
-20
-15
-6
-20
-12
-9
-7
-23
-8
-10
-10
-10
-16
-10
-8
13 -13
352,555
70,348
1,196,181
19,616
95,609
44,484
46,377
354,325
17,756
58,324
69,215
104,201
$4,428,825
13.1
13.1
16.7
7.1
21.7
21.0
19..4
19.0
12.7
19.9
12.5
14.9
13.9
10.4
15.4
11 .8
13.8
14.2
10.3
17.4
12.7
16.8
11.6
15,0
14.5
13.3
13.3
9.6
13.6
18.7
15.5
11 .6
17.2
12.8
16.0
15.6
10.8
18.6
16.7
20.6
-
10.1
14.2
11.4
23.3
14.3
21.1
1 Debits 10 demand de~sit accounts of individuals, partnerships, and corporation. and
of stoles and political .ub ivlslons.
2 Demond deposit accounls of Individuals, partnerships, and corporations and of slales
and political subdivisions.
• These figures include only one bonk in Texarkana, Texas. Total debits for all bonks In
Texarkana, Texa~Arkansas, Including Iwo bonks located In the Eighth District, amounted 10
$35,947,000 for th. month of February 1956.
MONTHLY BUSINESS REVIEW
60
RESERVE POSITIONS OF MEMBER BANKS
COND1T10N OF THE FEDERAL RESERVE BANK OF DALLAS
Eleventh Federal Reserve District
lin thousands of dollars)
(Averages of doily figures. In thousands of dallars)
February
1956
nem
RESERVE CITY 8ANKS
Reserve balances ••... ...•....•...
Required reserves • ••• • • •• •• •• •. .•
Excess reserves . .•........•..... .
Borrowings •..• .• •.• •.••.•.• •• •• .
Free reserves •• ••.•••. •• •. ••••••.
COUNTRY BANKS
Reserve balances .••........ ...•..
Required reserves •. •••••• • •.•. . ••
Excess reserves . .•• .... .. ..... •• .
Borrowings ••...•...• •.•. . •. .....
Free reserves .•...•..••••••.•..•.
february
January
1955
1956
$ 545,212
539,201
6,011
36,288
-30,277
$ 559,701
550,397
9,304
13,821
-4,517
$ 568,387
558,363
10,024
41,619
-31,595
455,661
405,731
49,930
1,970
47,960
455,324
397,959
57,365
1,050
56,315
466,089
409,315
56,774
1,918
54,8.56
1,000,873
944,932
55,941
38,258
17,683
1,01 5,025
948,356
66,669
14,871
51,798
1,034,476
967,678
66,798
"'3,537
23,261
MEMBER BANKS
Reserve balon!:!!s •••••• • ••••.• •• ••
Required reserves •••••• • •• •• •• •• •
EAcen reserves ••................
Borrowings ••••••••••••••••••••••
Free reserves •...................
Debits to demand deposits during February were 13 per·
cent below the previous monthly figure but were the same
percent above the level in February 1955. Each of the 24
reporting cities showed a monthly decline, reflecting the short
month and normal seasonal factors. The velocity of demand
deposits in February measured 18.6, which is below the Jan.
uary figure but is substantially above the level recorded in
February 1955.
Beginning with this issue of the Review, a table showing
the daily average reserve balances, required reserves, excess
reserves, borrowings from the Federal Reserve bank, and free
reserves for reserve city banks, country banks, and all member
banks will be presented monthly. In this table, the amount
of excess reserves represents the daily average surplus of
member bank reserve balances over their legal reserve require.
ments. Free reserves, on the other hand, are measured by the
difference between excess reserves and member bank borrow·
ing. Thus, in February, excess reserves for all member banks
equaled $55,941,000, of which $38,258,000 represented the
daily average amount of member bank borrowing. Conse·
quently, only 317,683,000 was free reserves.
At reserve city banks, excess reserves equaled $6,011,000,
while their average borrowing totaled $36,288,000, resulting
in negative free reserves of $30,277,000. Country banks, on
a daily average basis, had $49,930,000 of excess reserves;
average borrowing was $1,970,000, and free reserves
CHANGES IN FACTORS AFFECTING MEMBER BANK RESERVE BALANCES
Eleventh Federal Reserve District
(In thousands of dollars)
CHANGEt
4 weelcs ended
March 14, 19.56
Dec. 28, 1955March 14, 1956
-$22,456
- 67,222
89,781
7,684
139
262
-$ 5,739
- 295,505
236,064
61,668
3
2,764
+$
-$
FACTORS
Federal Reserve credit-local ......... .. ....... .
Interdislrict commercial and flnancialtransactions .. .
Treasury operations ... . ...................... .
Currency transactions ............ . .... . ...... . .
Other deposits at Fodera! Reserve Banlc ......... .
Other Federal Reserve accounh .............•...
RESERVE 8ALANCES
March 14, 1956. . . . . . . . . . . . . . . .
February 15, 1956... ... ..... ...
1
$946,309
$938,121
Sign of change Indicates effect on reserve balances .
+
+
+
+
8,188
+
+
+
751
March 14,
March 16,
Item
1956
1955
Feb. 15,
1956
Total gold certificate reserves ............. . .
Discounts for member bonks ....... ... .... . .
Othof discounts and advances ............. .
U. S. Government securiti.,s . . . . ... .... . .... .
Total earning as5flts ......... . ..... ....... .
Membflr bonlc rese rve deposits ..... . ...... . .
Federal Reserve notes in actuol circulation .... .
$731,260
5,550
$752,120
100
5,013
927,519
932,632
973,741
716,961
$710,678
22.750
510
936,110
959,370
938.121
687,535
o
938,685
944,235
946,309
681,205
amounted to $47,960,000. Average free reserves for all
Eleventh District member banks declined about $5,500,000
from Jannary to February to total $17,683,000, which com·
pares with $51,798,000 in February 1955.
Member bank reserve balances during the 4 weeks ended
March 14 increased $8,188,000. A 522,456,000 decrease in
local Federal Reserve credit - namely, discounts and floatand a $67,222,000 decline resulting from interdistrict trans·
actions were about offset by the addition to reserve balances
induced by Treasury operations. The effect of currency trans·
actions was to increase reserve balances by $7,684,000, while
other Federal Reserve deposits and accounts led to a modest
gain in member bank balances.
Total earning assets of the Federal Reserve Bank of Dallas
equaled $944,235,000 on l\'larch 14, reflecting a 4·week de·
cline of more than $15,000,000. Total Government securities
increased about 32,500,000, but member bank discounts
declined $17,200,000. Federal Reserve notes in actual circu·
lation decreased about $6,330,000 over the 4-week period
and declined $35,756,000 from the corresponding date of
1955. The amount of currency issued by this bank continues
to diminish, contrary to the national pattern.
The United States Treasury offered to refund $8,472,000,·
000 of the lo/s·percent notes maturing March 15 and $1,007,·
000,000 of the lY2·percent notes maturing April 1 by an
NEW PAR BANKS
The League City Bank, League City, Texas, an in·
sured, nonmember bank located in the territory served
by the HOlLSton Branch of the Federal Reserve Bank 0/
Dallas, was added to the Par List on its opening date,
March 15, 1956. The officers are: /P. C. Hall, Presi·
dent ; Waters S. Davis, Jr., Vice President; C. A. Deese,
Vice President and Cashier; Mrs . Lorena Harbison,
Assistant Cashier; and Sam A. Rowe, Agricultural
Officer.
The American Bank of Commerce, Odessa, Texas,
an insured, nonmember bank located in the territory
served by the El Paso Branch o/the Federal Reserve
Bank of Dallas, was added to the Par List on its open·
ing date, March 16, 1956. The officers are: Lester W.
Morton, President; D. N. London, Vice President; and
Donald R. Code, Cashier.
MONTHLY BUSINESS REVIEW
exchange for the 2o/s-percent certificate maturing February
15, 1957, and an additional amount of the 2%-percent notes
maturing June 15, 1958. Holders of the 1%-percent notes
were allowed to exchange their holdings only for the new
certificate_ The subscription books were open from March 5
through March 7_ Subscriptions for the new issues amounted
to $9,343,000,000, leaving $136,000,000 of the maturing
issues for cash redemption. In the Eleventh Federal Reserve
District, holders exchanged $23,956,000 of the lo/s-percent
notes for the new certificate and $29,313,000 of the lo/s.
percent notes for the 2%-percent note.
The Nation's oil industry has
moved out of the winter heating
season with fairly comfortable stocks
of crude oil and refined products but
with excessive gasoline stocks, ac·
cording to industry sources. The recent high rates of production and refining have begun to taper, as conservation authoriI ies take into account seasonal declines in demand and the
above· mentioned levels of stocks.
Crude oil production in the District during early March
averagcd 3,388,000 barrels per day, which is virtually unchanged from the February level and is 1 percent above the
level in March 1955. This record level of production is expected to decline somewhat in April because of the reduction
in Texas oil allowables; however, in view of the relatively
small cutback, the discovery allowables for new wells may
maintain total production at nearly the same level as in
March. CTUde oil production in the United States in early
March-at 7,158,000 barrels per day-was 1 percent more
than in February and 272,000 barrels above a year earlier.
Crude runs to refinery stills in the District during early
March averaged 2,323,000 barrels per day, or 3 percent
below the month-earlier level but 4 percent above the March
1955 level. Crude runs in the Nation, at 7,998,000 barrels
per day, were down 1 perccnt from February but were 8 percent above the year-earlier level.
These recent declines in refinery actIvlty were to be expected in view of the substantial build-up of gasoline stocks.
On March 16, such stocks totaled 195,941,000 barrels, or 7
percent above the level on both February 3, 1956, and
March 18, 1955. However, stocks of crude oil and the other
major refined products are considered by industry sources
10 be at the desirable working levels. At a recent hearing
before the Texas Railroad Commission, representatives of
major United States oil companies indicated that crude stocks
should average between 255,000,000 and 260,000,000 barrels at this time of the year and that gasoline stocks should
bc in the neighborhood of 175,000,000 to 180,000,000 bar·
rels. Cold weather and high-level economic activity have
resulted in the reduction of stocks of distillate and residual
~ fuel oils and kerosene, with recent figures showing declines
, of 10 percent to 17 percent from a month earlier.
The demand for crude oil and refined products averaged
7,565,000 barrels per day in the 5 weeks ended March 16,
61
CRUDE OIL : DAILY AVERAGE PRODUCTION
(In thousands of borrels)
Change from
February
1956 1
Area
ElEVENTH DiSTRICT • • • ••••• 3.380.3
T~xas ................. • 3.026.3
Gulf Coost •...• o • • • • • •
625.6
West Texas .. o • • • • • • • • 1,232.2
Easl TfIXes Iproper) •••••
223.6
93.1
851.8
Panhandle • • ••• .. •..••
Res! of State •••.••.•..
Southeastern New Mexico . .
234.1
Northern l ouisiana .••.. • ..
119.9
OUTSIDE ELEVENTH DISTRICT. 3,736.5
UNITED STATES • •.. .•• ••.•• 7,116.8
february
1955 1
January
February
January
1956 1
1955
1956
3,335.3
2,997.6
643.3
1,169.9
237.8
90.2
856.4
219.8
117.9
3,500.1
6,835.4
3.289.8
2,943. 8
616.3
1,188.0
223.5
45.0
28.7
-17:7
62.3
-14.2
2.9
-4.6
14.3
2.0
236.4
281.4
92.2
823.8
228.3
117:7
3,727.8
7,027.6
90.5
82.5
9.3
44.2
.1
.9
28.0
5.8
2.2
8:7
89.2
SOURC'S, I Estimated from American Petroleum InstiMe weekly reports.
2 United Stotes Bureau of Mine ••
or 4 percent below the preceding 5-week period but 6 percent above the level in the corresponding period of 1955. The
strongest demand in recent weeks has been for gasoline, with
an 8-percent increase; kerosene has shown the greatest decline, 22 percent. Compared with a year earlier, gasoline demand was up 8 percent; distillate, up 7 percent; and residual,
up 4 percent. However, kerosene demand decreased 1 percent.
Total imports in the United States during the 5 weeks
ended March 16 averaged 1,362,000 barrels per day, or 2
percent above the previous 5-week period but unchanged from
the comparable period last year_ All of the strength in imports compared with both the previous 5 weeks and a year
earlier was concentrated in crude imports, since refined
products imports declined 13 percent in the recent period
and were down 17 percent from the corresponding period
a year ago.
Nonagricultural employment in
the five states lying wholly or partly
within the District totaled 3,991,600
in February, reflecting a decline of
only 1,400 workers from the revised
estimate for January and a gain of 168,800 workers from
a year earlier. Trade employment continued its seasonal decline, but government, finance, and manufacturing employment showed offsetting increases from January to February.
NONAGRICULTURAL EMPtOYMENT
Five Southweslern States1
Percenf chan;e
feb. 1956 from
Number of perJOl'lf
Type of employment
February
February
Jonvary
1955r
Feb.
Jan.
1956.
1956
1955
1956
3,822,800
703.100
3,119,700
:235,600
252,800
3,993,000
746.400
3,246,600
248,500
271,000
4.4
6.5
4.0
5.7
7.0
0
.3
_.1
.2
_.2
387,400
981,100
161,600
447,300
653,900
397,200
1,025,200
167,300
461 ,300
676,100
1.9
3.6
4.6
3.1
4.2
- .6
- .8
1.0
0
.8
Total nonagricuftural
wage and salary workers .. 3,991,600
748,600
Nonmanufaduring • . ...... 3.243.000
Mining .• •..••••••..• .
249,100
270,400
Construction ••••.• • ••• .
Manufacturing •.. ...•...•
Transportation and public:
utilities •••••••••••••
Trod •••••.•••••.•• • . .
Finance ••• •• •• ••••••••
Service • . ••••.•. •••.•.
Government • • •. • • ••• ••
394,900
1,016,800
169,000
461,300
681,500
1 Atilano. louisicna, New Mexico, Oklahoma, and TO]{05 .
• -Estimoted.
r-Re'Yised.
SOURCES: Slate employment aQencieJ,
Federol Reserve Bonk of Dollos,
MONTHLY BUSINESS REVIEW
62
VALUE OF CONSTRUCTION CONTRACTS AWARDED
BUilDING PERMITS
(In thousands of doliarsT
2 months 1 956
Percentage
change in
valuation from
Janua ry-February
Area and type
february
February
January
1956
1955
1956
1956
1955
February 1956
ELEVENTH .DISTRICT.... $ 209,877 $ 130,636 $ 154,979 $ 364,856 $ 257,508
ReSidential... ......
106,164
79586
67762
173,926
130,6 82
Allother...........
103,713
51;050
87;217
190,930
126,826
UNITED STATESt •••••. 1,859,737 1,581.143
1,858,228 3,7 17,965 3,066,593
Resldentlal.........
799,27 1
744,102
694392 1,493,663 1,.15,457
All other .... ... .... 1,060,466
837,041 1,163;836 2,224,302 1,651 ,136
1 37 slates east of the Rocky Mounlains.
SOURCE, F. W. Dodge Corporglion.
Manufacturing employment, at 748,600, was up 2,200 work·
ers from the previous month. Employment increased in the
machinery, fabri cated metal products, primary metals, and
food.processing industries but declined in lumber and wood
products manufacturing. Construction employment showed a
further small decline in February.
Area
Number
Valuation
Feb.
1955
Jan,
1956 Number
ARIZONA
81
2 10
342 $ 2,742,772
Tucson ..•.....
LOUISIANA
3,097,281
84
Shrl!lveport . .. .
404
17
TEXAS
19
Abi lene • .•....
200
2,147,097 -2
-8
Amarillo .... ..
153
1,649,908 -20
2,242,850 -21 -38
Audin ........
229
442,633 -45 -86
Beaumont .....
227
1,801,622 -7
-3
Corpus Christi..
379
Dallas . .•. . ... 1,733 12,284,100 -37 -49
2,5.5,021 -25
-9
EI Paso . . .. ...
3 06
.6
Fori Worth .•..
759
3,4 I 6.50' -37
24
Galveston .. . ..
96
'74,210 137
51
60
781 16.2 83,631
Houston .. ... .
4
1,969,274
23
Lubbock ......
236
248,917 _64 -29
Port Arthur ....
149
81
6.
Son Antonio ... 1,552 10, 124,603
1,014,536 - 23
-4
236
Waco ........
795,542 - 27
26
Wichita fa lls ..
107
-4
Total-17 cities .. 7,889 $63,280,501
Percentage
change in
valuotian
from 2
months
Valuation
1955
688
3.628,014
81
861
5.7 39,766
68
387
33 1
536
509
796
3,958,606
3,-441,083
5,835,050
3,650,747
3,187
172
1,658
462
309
3,239
466
220
36,605, 26 8
5,3"2,357
5,762,679
856,351
26,4 29,296
3,573,232
600,436
16, 287,435
2,069,74 1
1,429,156
24
-12
I
156
-28
13
-10
-32
143
25
-19
-42
44
-30
-25
15,7 16
$128,862,696
12
725
1,170
3,653.479
Unemployment increased in February, as midyear grad.
uates of high schools and· colleges entered the labor market.
Available data show that in Texas, unemployment increased
from 118,700 in January to 120,600 in February.
cent from January but were 27 percent above the value of
a year ago.
Construction contracts awarded in the District during Feb·
ruary were valued at $209,877,000, or 35 percent above those
of January and 61 percent above the level of a year earlier.
Most of the month·to·month gain occurred in residential
construction, which increased 57 percent, while "all other"
construction increased 19 percent. Compared with a year
ago, residential awards were up 33 percent, and "all other"
awards were up more than 103 percent.
Cumulative construction awards during the first 2 months
of the year were 42 percent higher in the District and were 21
percent higher in thc Nation than in the comparable period of
1955. Residential awards showed a gain of 33 percent in thc
District, compared with a smaller gain of 6 percent in the
Nation. "All other" awards in this same period also showed
a greater gain in the District; the District increase of 51 per·
cent compared with the national gain of 35 percent.
In the Nation the value of construction contract awards
during February showed a less than l·percent increase from
January and was 18 percent above the February level a year
earlier. Residential awards increased 15 percent from the
previous month and were 7 percent above the level of Feb·
ruary 1955. "All other" construction awards declined 9 per·
Cement production at Texas mills during 1955 totaled
23,322,000 barrels, representing an increase of 6 percent over
output during 1954. The value of 1955 output reached $61,.
337,000 for a year·to·year increase of 8 percent. The high
level of cement production rcflcctcd the record volume of
construction during 1955. Further increases in production
are indicated by expansion programs begun last year by
five major cement producers in the State.
DOMESTIC CONSUMPTION AND STOCKS OF COnON
{Boles)
August-Janua ry
January
Area
1956 l
January
1955
December
1955:1
This season last S8a$Ol"l
CONSUMPTION
Total
Texas mill, ....•.....
11.577
10,967
13,340
72,039
68.331
U. S. mills .... • . ... ..
746,996
716,045
855,447 4,673,010 4,413,165
Daily average
Tl!lxas mills .... ..•. ..
579
548
534
55.
526
U. S. mills .......•...
37,350
35,802
34,218
33,947
35.946
STOCKS, U.S.-End of period
COIuumlng establishments' 1,712,495 1,808,241
1,699,257
Public storage and
compreues •........ • 17,289,089 13,528,730 17,592,790
1 Four weeks ended January 28.
:I Five wee ks ended December 31.
SOURCE, Unitl!ld States Bureau of the Censos.
Industrial expansion in the District contin ues to be paced
by investment plans of chemical industries. Among the plans
recently announced by individual companies are a proposal
by a major chemical company to spend $45,000,000 in the
expansion of its District plants; the plan of a petroleum com·
pany to establish a major chemical-industrial center on thc
Houston ship chann el; and proposals by other companies to
expand District production of synthetic rubber, plastics, and
agricultural and industrial chemicals. Major expansion also
is indicated for the aluminum industry of the District by a
$30,000,000 construction contract award for expansion of
an alumina plant and an announcement that facilities for
producing pig aluminum arc to be expanded.
@FedFRASER