Introduction, 604. — Circumstances under which motor-carrier regulation has developed, 606. — Characteristics which explain the regulation of railroads and other utilities largely absent, 608. — Restriction of entrance must be distinguished from other phases of regulation, 613. — Such restriction only partially explained by the nature of the industry, 615. — Protection of railway interests the dominant consideration, 620. — Delicate problems involved in granting of certificates of convenience and necessity, 625. — Difficulties and dangers of regulation exemplified by motor freight regulation, 632. — The theory of special highway use improperly reflected in motor-carrier regulation and taxation, 639. — Conclusion, 646

I. Introduction, 193. — II. The questions considered, 196. — The rate base: present value v. prudent investment, 197. — The investor's viewpoint. What is security? 200. — III. The basis for consumption charges, 203. — IV. The case for a general depreciation scheme, 208. — Past depreciation, 211. — V. Depreciation schemes. Defects of the straight-line method, 215. — VI. Only compelling need could justify, 217. — VII. Conclusions; alternatives, 218.

AT ninth annual conference of Harvard Committee on Economic Research held a year ago, it was pointed out by present writer that oil industry had been passing through era of unprecedented and even revolutionary advances in technology without corresponding progress in art of economic and conclusion was advanced that the petroleum industry in 1928 faces and will attempt to solve its greatest problem issue of economic The year of I928 has been characterized by two outstanding features: first, progress toward economic control within industry, which has taken form of partial rationalization of crude oil production in United States and of a trend toward cartelization abroad; and, second, a betterment in statistical position and price of gasoline, resulting in favorable profits for manufacturers and distributors of that commodity. The first development was outgrowth of necessity, and was brought about by planned control on part of industry, aided by state and federal authorities. The second development was primarily resultant of natural economic forces, though regarded in many quarters as also an outgrowth of control. These two developments should be plainly distinguished if a clear perception of current status of petroleum situation is to be gained. Nineteen hundred and twenty-eight was entered on a low and unprofitable price level, with a potential crude oil supply in sight that, if left to a normal development, would have greatly exceeded physical ability of industry to cope with output. In consequence, it became necessary to stem impending flood of oil, and steps were taken in menacing flush fields of Texas, Oklahoma, and California to retard production by cooperative methods of proration and drilling shut-downs. These efforts were initiated by operators themselves, but were subsequently stabilized by invoking authority of states involved through jurisdiction of Commissions charged with responsibility of conservation and prevention of waste. In this manner. rate of outDut of prolific pools of Permian Salt Basin in West Texas was curtailed to a small fraction of potentiality; drilling up of several pools in Seminole District in Oklahoma was staggered and spread out over year; and some production was shut-in in California. As a result, crude oil production was maintained at about 2,400,000 barrels per day for first 8 months of year and around 2,500,000 barrels per day since August, thus permitting demand to catch up with supply and bringing about statistical equilibrium. These results were not obtained without great effort and there were many set-backs and numerous local situations where efforts at control failed. Yet, by and large, it was demonstrated that at low prices crude oil supply could be regulated within certain limits. Coincident with these efforts to rationalize crude oil production in United States, progress in direction of improved economic control was witnessed in other directions, particularly in appearance of a trend toward cartelization of a group of foreign oil companies, organization of plans for formation of an American Export Association for cooperative handling of petroleum export business, and improvement in domestic trade practices in distribution of gasoline. Yet, in main, it was not from achievements in artificial economic control, as important as they seem, that financial betterment in I928 came to industry, but from an entirely different source operation of natural economic law in field of gasoline manufacture. Under influence of very low prices that prevailed for gasoline from early months of I927 until spring of I928, output of gasoline was curtailed and held at relatively low levels and, what is even more important, work on refinery expansion and cracking installations came almost to a standstill; and accordingly I928 gasoline season was entered with gasoline in a strong statistical position. This condition is indicated by fact that last March gasoline stocks were 23 per cent lower than twelve months previously and 79 per cent of co mputed normal