Main FI Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

Fourth International, May 1948

John Fredericks

Oil and Labor

From Fourth International, Vol.9 No.3, May 1948, pp.89-93.
Transcription & mark-up: Einde O’Callaghan for ETOL.

World politics and the economic conditions that lead to new world wars cannot be discussed today without an analysis of the tremendous role played by the struggle among the great powers for the possession of oil. The value of oil as a motor fuel, as a lubricant, as the primary motor force in the machinery of war was strikingly brought home during the recent imperialist war. A single bomber required 3,000 gal. of high octane gasoline to complete a single mission. A fleet of 1,000 bombers on a single mission required more fuel than was used by all the armies for 6 months in World War I.

The supply of the 500 oil products used by the army and the mastery of the world’s limited sources of oil became a key to victory on the battle field. Much of Japanese and German strategy was based upon the struggle to obtain new sources of oil, the vital product necessary to propel the machines of war as well as to feed the process of production at home, The Japanese conquest of Indonesia, the German campaign in the Caucasus, as well as Rommel’s drive through Africa toward Saudi Arabia, all had as their objective the acquisition of new oil supplies.

Wars have been fought and “revolutions” sponsored by capitalist interests seeking the black gold that is the life-blood of a modern industrial nation. British imperialist interests have long sought oil fields outside their home islands, which are devoid of any appreciable supply of oil. The Near East has been the reservoir from which the British have drawn the bulk of their oil. Many struggles, both open and concealed, are constantly taking place with governments occupying the role formerly reserved for private oil companies. The Gran Chaco War was a classic example of the concealed struggle taking place hetween two rival imperialist interests with an oil field as the prize.

American oil companies and the US State Department, working as a team, have used the active intervention of the US Government in the internal alfairs of half a dozen South American countries. Every major US embassy or consulate employs an oil expert, invariably the agent of’ the oil industry. Mexico, which was a battleground betwccn the British-sponsored forces of Huerta and the US-supported Carranza in the struggle for the Tuxam oil fields, is again becoming a focal point for the American oil industry.

From the time the first gusher brought forth its black gold in Titusville, Penn., in 1859, men have fought and died by the thousands for its possession. In the period of 1860-90, word of an oil discovery brought oil rushes that rivaled the famous gold rushes of early American history. Great American fortunes, the influence of which is felt today in every branch of industry, were built in this period by people like Rockefeller, who in the period of growth acquired oil lands, rights of way, pipelines, refineries and distribution points, through methods of bloodshed and bribery. It is not the purpose of this article to repeat the well-known gory details of the beginning, of these fortunes but rather to show the present role of oil in international relations, to trace the changing production relations resulting from the technological revolution and the changing social conceptions that have permeated the working class as the logical result. The latest revolution in the productive process did more than change the technology, it also changed the relationship between the man and his machine.
 

The Process of Production

The production of oil has passed through three major stages, each the result of a specific technological revolution in the industry or conditioned by the technical development of another industry. For example: the first, or kerosene stage, is related to lighting for the home; the second, or gasoline stage, to the invention of the automobile; the third,or fluid catalytic cracking stage, made possible the supply of motor power for the American air fleet during World War II.

The kerosene stage lasted from the discovery of oil in 1859 to the day of the automobile around 1910. It was during this first stage that Rockefeller established his complete monopoly over the industry.

Before the advent of the automobile and its demand for special fuels and lubricants, the more explosive fuel, gasoline, had been thrown away since no market existed for it. Once the need for gasoline had been established a further technological revolution resulted in the refining process, with the aim of obtaining more gasoline and less kerosene from crude oil. World War I, and the subsequent development of mass production methods expanded production at a rapid rate. Production of crude oil rose from 69 million barrels in 1901 to 1,006 million barrels in 1929.

Fluid catalytic cracking increased the yield of gasoline per barrel of crude oil from 26% in 1920 to 46% in 1919. While the process was known earlier it was only with World War II and the fleets of heavy bombers using huge supplies of high octane fuel, that it became profitable and the application of the process to the entire industry became general.

The new refining process does more than provide fuel for aircraft, the flexible nature of the process allows the refiner to change the quantity and quality of the product at will, in response to changing demands. The products enter into every phase of all industries, often changing the nature of labor within another industry. For example: diesel engines, using low grade diesel fuel, a by-product, are replacing steam locomotives at the rate of one per day. Diesel-powered trucks and buses provide more efficient transportation to thousands of communities, making branch line railroads obsolete. All new ships are oilburning rather than coal-burning. Over a million oil burners have been installed in homes since the end of the war. A thousand different oil products flow into American industry, Oil is the very lifeblood of the entire national economy.

Once an oil well is brought into production the amount of labor necessary to keep the well producing is relatively small in comparison to the mining of coal or ores. One man or several working in shifts, use high pressure pumps which carry the oil from the well to storage tanks through a series of pipelines. These pipelines have long ago replaced tankcars and railroads as primary carriers of oil. They cover 150,000 miles as they crisscross America. The addition of the Big Inch and the Little Inch pipelines, built by the government at a cost of $155,000,000, enabled oil to be sent from Texas to Philadelphia during the war with infinitely less human labor involved than by any other means of transportation.

At the refinery oil is the raw material from which over 1,200 different commodities will be produced. It is now possible through chemistry to produce, aside from the well known gasoline and fuel oi1, such products :as rubber, alcohol, toluene for TNT and products ranging from fine perfume to tar.

The refining process itself, stripped of technical phrasoology, consists of heating and condensing the crude oil or cracking it into its various chemical componen ts. The modern refinery unit consists of a capital investment of 50 to 100 mill ion dollars. The machinery itself represents the finest example of semi-automatic production to be found in any industry. Since the technical problem involved consists of controlling the flow of fluids and control of their temperature, automatic devices such as electrical regulators, automatic air-operated valves, etc., have appreciably lessened the need for men to stand constantly on guard over production. The real control of the proccss takes place in a central control room, with the rate of production governedby the machine rather than by the few men who operate the plant.
 

1. The Laborer

The life of the early oil workers was similar in many ways to life in a gold camp. The frontier spirit prevailed. The migratory character of the workers who followed an oil discovery is still seen today in certain sections of the country and will continue to remain true for certain job classifications such as drilling crews, pipeline gangs, and field construction men, who, though their skills have increased, must still work and live on a migratory basis.

Work in the early oil refineries was properly classified as a hazardous. occupation. The equipment was of the most primitive type and little was known of oil chemistry. The lives of the workers and the capital investnumt were risked every time a fire was built under the old-time still. The danger of explosion was great, and the product that resulted was never of a uniform quality. Success in distilling a batch of crude oil depended entirely on the skill and judgment of the workers who operated the plant.

The“good old days” for a refinery worker consisted of 10 hours of hard dangerous work for which he received 17 cents per hour. His recreation consisted of a couple of “boilermakers with helpers” at a local bar. Men were hired off the streets by a foreman who tested them for the size of their muscles. Husky, rugged “foreigners” who could “stand the gaff” took jobs as stillmen and worked 24 hours straight when a batch of oil was being processed. The penalty for falling asleep was to be fired.

Petroleum refining in those days was hardly more exact than making bathtub gin. You dumped crude oil into a vat, or still, and built a fire under it. The first vapor to come off as it boiled was gasoline, which was thrown away as a waste product. Kerosene, the payoff product, was trapped and condensed, and then the lubricating oils. The muck that was left was scraped out of the still and another batch started.

The activity of a stillman is vividly described in a novel of the oil industry called Danger, Keep Out, by Edward J. Nichols. I quote a, few lines:

“If you fired on the new pressures you had 6 stills, and there was a nervous breakdown in each one. Use your bar on Number 1; keep it out of Number 3; 5 and 6 are dropping off half a point; throw more coal on Number 2; keep your eye on the peepholes; you got a hot bottom on Number 3; Number 4 is boosting; watch for a change in the wind that will knock you off balance on every still; above all keep your eye on Number 3 ... Otherwise there is nothing to it except throwing in your 15 to 20 tons of coal for 10 hours on the day shift and even more on the 14 hour night shift. Almost anything could happen ... and did.”

As the productive process improved and pressure stills were introduced, the batch process gave way to the continuous stream process. Steam was introduced as a heating element in place of direct fired vessels and the result was a refinery that produced a uniform series of products with less danger to the men.

The catalytic cracking process, employing a bead or fluid catalytic agent to produce even greater temperatures than could be produced by the use of steam alone, required even greater pressures in the vessels and in turn more exact instruments for controlling temperature and pressure.

More mechanical and electrical semi-automatic devices to replace the human factor were introduced. The new refining process changed the role of the worker in the process of production, substituting men of greater technical skills for those with huge strong bodies. With this process changes also took place in the thinking of the worker involved.

The modern refinery is designed along lines that make it the closest thing to automatic production that exists anywhere today. Through this process it is possible for the operator to sit in a control room, push buttons and control the entire refining process. Automatic electric pumps move the crude oil from storage tanks, pump it through the various towers of the refinery from which it emerges broken up into various products, gasoline, light oil, heavy oil, kerosene, etc. From this point it is distributed by more automatic pumps to storage tanks or through pipelines, tankcars or tankers to the consumers.

The other workers around a refinery are engaged in such tasks as reading meters, repairing equipment in adjacent shops, painting and cleaning the equipment, etc. A large staff of highly trained men are always present, ready to step into the breach in case of a breakdown of production. Yet these men are not the factor that sets the rate of:procfuction. They may sit “idle” at full pay with plenty of time to think, but when they are needed they must jump to the job and set the machine back in operation. Here it is the machine that controls the activity of the man.

The capitalist has long sought a factory free of its troublesome workers and thinks of the automatic process of production as the answer. Yet the modern oil refinery, the closest reality to the capitalist dream, shows that within automatic productive process there is little or no actual decrease in the number of workers required. Since automatic production as exemplified in the oil industry today is symbolic of all industry tomorrow, it must be studied with great care for lessons from which the working class can benefit.

True automatic production does not mean the elimination of the worker from the process of production as the capitalist thinks it does, but rather the elimination of the automatistic nature of the labor of the work. Automatic production requires the fully developed individual, knowing and understanding every and all steps in the productive process, not just his own specialized operation. Men will be chosen for work in plants of this type on the basis of their scientific knowledge of the productive process. It is not difficult to convince these men that the plants can operate without their capitalist owners.

However, since capitalism has transformed the worker into nothing but an appendage to a machine, the capitalist is caught in a contradiction. He tries to solve this capitalistically, by employing specialists, men who will stand by the machines, be idle for weeks or months, but always ready to spring into action to repair the faulty machine that threatens to interrupt the even flow of the entire process. It is true that an operator may not do anything for several years, but a few minutes’ work at the right time will save the company enough to “pay his ‘salary for 30 years.” The contradiction lies in the unfortunate division between mental and manual labor, making it necessary for the capitalist to employ so many specialists and laborers that there has been little decrease in the number of workers employed despite the semi-automatic nature of the process of production. Moreover the capitalist further aggravates the contradictory nature of his problem by placing in the hands of a single worker the equivalent of 20 million dollars worth of machinery. The automaticity of the produ&ive process and the role of the laborer are so closely linked to capital investments that it is impossible to draw any conclusions without examining the question of capital investment.
 

2. Capital Investment and the Rate of Profit

The outstanding difference between capital invested in the petroleum industry and that invested in other industries is the comparatively short life of oil capital. All investment in refineries is:written off the hooks after a five-year period, as compared with a ten-year period for other basic industries. The oil industry allows nearly twice the normal rate of obsolescence and depreciation over that allowed by the manufacuring industries, In part, this can be explained by the semi-automatic, continuous nature of the prociuctive process in the oil industry which operates on a 24-hour basis. However, the more basic reason is the method of production which requires that every six months the entire refinery be shut down for a period of one to three weeks, the process lines and vessels tested, renewed or replaced, new innovations in the process introduced, plant capacity enlarged or changed and the plant returned to operation on a 24-hour basis.

By contrast, other industries tend to make repairs on equipment overnight, to introduce new equipment gradually or to introduce new models on an annual basis so that the productive process is interfered with as little as possible. The fact that the costs of this method are charged up to current production as a part of operation expense, rather than to investment in capital equipment is a convenient bookkeeping trick, especially since such a shutdown costs millions of dollars. But it does not change the contradictory nature of capitalist production as it pertains to the investments in labor on the one hand and those in capital on the other.

The net worth of the petroleum industry is $20 billion. This makes it the second largest industry in the United States. The concentration and central izaticm of’ capital, on the one hand, and, on the other hand, the small number of workers employed in this industry compared to other basic industries, seems to contradict the Marxist postulate that surplus value is extracted only from living labor. The superficial observer points to the disproportionately high profit per employee, thus:

Precisely because production is semi-automatic, capital investments are enormous. Ftmn the above table we learn also that the oil industry employs one worker for every five enlployed by other industries with comparable assets. The key to the situation can be found in a dual relationship. While there are fewer workers in the industry, there is more capital invested per employee. This, in turn, causes a decline in the rate of profit. Precisely because the number of workers employed is relatively small, the rate of profit in this industry is actually smaller than in manufacturing industry as a whole:

Compare the lush war years with the prosperity of the pre-war period, and you get the following results:

The above table reveals that the reverse of the superficial appearance is the truth. Furthermore, the method of computing the rate of profit on the basis of net worth is a capitalist device which gives a wholly inadequate picture of capitalist production since net worth is merely the book value of original cost. Were we to compute the rate of profit on the basis of investments in fixed capital, and consider true replacement cost rather than original cost, we would get a radically different view. However, so organic is the general movement that it peers through even this type of computation, and even in a period when mass profits are phenomenal!

As against the disproportionately high profit per employee, let us consider the very real investment per every employee. In the oil industry in 1937 the overall investment for every worker employed was $20,000, compared with $11,000 for the steel industry and $4,000 for the rubber industry. A further breakdown of these figures is necessary since no other industry includes transportation and marketing employees in basing its figures on the total number employed, whereas the oil industry does.

In an analysis called Economics of the Petroleum Industry, Joseph E. Pogue, vice-president of the Chase National Bank, contrasts the investment in the two branches of the petroleum industry:

“The marketing division has an investment of $6,000 per worker and an annual wage of $1,055 per worker. Because of its high degree of mechanization, the ratio of capital to the number of employees is large, the entire industry relationship being about $18,400 per worker for the entire industry. The amount of capital per worker is, however, much larger in production, transportation and refining where it averages $43,500 per worker.”
(1937 figures; emphasis mine – JF)

The current estimates of the total investment per producing worker is much higher than these. Since the real technological revolution in the industry has taken place after 1937, and the investment in the new type of equipment is five times greater than the old type of refinery, while the number of employees is no greater than before; the total investment per producing worker is no less than $250,000!

Thus it is that the oil industry is not only plagued with the same general disease — the decline in the rate of profit – which afflicts all of capitalist production. The gargantuan investment of capital on the one hand, and the relatively few production workers on the other hand, so sharpens the tendency of profits to decline as to call into question the whole expansion program in the hands of private industry, This, again, seems to contradict the actual picture since the oil industry is planning in the next few years to spend no less than $13 billion for capital expansion. But a closer look at the expansion program will reveal its weakness.
 

3. Capital Expansion and Government ‘Interference’

Let us take the largest company in the industry, Standard Oil of N.J., and analyze its capital expansion program.

This will give us an excellent view of the masses of capital needed to keep production expanding. In the 24 months which will end December 31, 1948 the Jersey Standard will have expanded by one billion dollars! Appropriations of like size are in prospect for 1949. IIn the seven-year period, 1940-46, capital expenditures of this company and its affiliates reached a total of $1,244,000,000, or an average of $178,000,000 annually. The overall expansion program includes hundreds of projects from new laboratories in New Jersey to modern refineries in Venezuela; the purchase of large-capacity oil tankers and development of Canadian oil fields.

In addition to this expansion, private industry “inherited” a billion dollars’ worth of new refinery equipment built by the government at the expense of the taxpayers, and then turned over to the big monopolists. However, even this gift of the state to the industry helps private monopolists care only for normal expansion needs.

But there is, besides, the relationship of the whole industry to the extractive industries and to transportation. And, above that, rises the question for a synthetic oil industry. According to Secretary of the Interior Krug that would require no less than $9 billion. Here private industry does not even venture forth, but hides behind the argument that since such an industry would be predicated not upon world resources of crude oil, but only those at home (which may be the only ones available to the United States Governmnht in the event of war), tbis becomes a matter of “national welfare,” and is no longer a problem of private capital. It is not mere selfishness, however, that pushes the monopolists toward such an attitucie. There is a lack of capital “venturesome enough” to be worthy of the new scientific age in which we live.

There was a time in the development of capitalism when it would have been impossible to build railroads, if society had to wait for private capital to accumulate sufficient means. The state magnanimously stepped in as the true executive committee of capital. In this age, atomic energy would never have been explored if it were upto private capital to finance that technological revolution. The government has to build the atomic project at the expense of the people and for the needs of v’ar because there was not enough “risk capital” found to start such a development.

If it was entirely beyond the capacity of private industry to launch this $2 billion project, how much more is it true of a synthetic oil industry which requires no less than a $9 billion investment. We see that in this age of decadent capitalism, private enterprise is neither enterprising nor private. The only thing that is private is the profits which the government allowed the private managers of the atomic project to coin from the sweat and toil of its workers. We need not doubt it will do as much for the oil industry.

 
Top of page

Main FI Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

Last updated on 25.2.2009