volume of business in each town it enters. Only a concern with enormous capital could afford to establish a marketing system in competition with that of the Standard throughout the entire country and thereby force the Standard, if it desired to cut prices, to sacrifice profit on its entire business.

It is clear from these considerations that the Standard has an enormous advantage over any of its competitors in the marketing of oil. By a vigilant policy of aggressive attacks on competitors competition is kept strictly localized and scattered, and thus easily controlled. The Standard can make huge profits on its total business while reducing the profits of its competitors to a small amount, or even forcing them to sell at a loss.

Relation of differences in prices to profits. The significance of the extraordinary differences in prices charged by the Standard as among different sections of the country or different individual towns can be appreciated only in the light of the fact that a very small amount per gallon constitutes a fair margin of profit on the investment in the refining and marketing of illuminating oil and the other principal petroleum products. The average investment of Standard refining concerns per gallon of product annually is probably not to exceed 22 cents, so that a return of 10 per cent. on the investment in refining can be secured on the basis of a margin of profit of only about 21⁄2 mills per gallon for all products combined. The investment of the Standard in facilities for marketing illuminating oil and gasoline, etc., averages about 4 cents per gallon of product marketed annually. A return of 10 per cent. on the marketing investment can therefore be secured from a profit margin of only about 4 mills per gallon.

A difference of about 7 mills per gallon in the price of illuminating oil may, therefore, mean the difference between a profit of 10 per cent. on the investment in both refining and marketing and no profit at all. The actual differences in price between competitive and noncompetitive towns and areas, after

making allowance for all possible differences in cost of production and marketing, often amount to several cents per gallon. These discriminations in price may mean, thus, the difference between an enormous profit on investment and little or no profit or even a loss. The destructive effect of the practice of price discrimination upon the business of independent concerns is thus obvious.

Local discrimination [Part II, pages 32-33]. The difficulty in comparing average State prices arising from the uncertainty concerning the relative cost of manufacturing the oil sold in different States may be avoided by comparing only those States which are supplied from a single refinery or from a group of refineries having conditions so similar as to exclude the possibility of any material difference in cost.

Thus, there are a large number of States and parts of States lying on or near the Atlantic seaboard and extending from Maine to Florida which are supplied with illuminating oil principally from a group of Standard refineries situated either at the seaboard (New York, Philadelphia, and Baltimore) or in and near the Appalachian oil field (Buffalo and Olean, N. Y., Franklin and Pittsburg, Pa., and Parkersburg, W. Va.). The differences in the cost of producing illuminating oil at these different refineries are insignificant. Yet the average State prices in the territory supplied by them show a very wide range. In December, 1904, the average price in Delaware, freight deducted, was 7.7 cents. In Pennsylvania the average was also relatively low, 8.7 cents. On the other hand, in the State of New York, itself containing several Standard refineries, the average price was no less than 10 cents; in North Carolina and also in New Hampshire, 10.3 cents; in part of South Carolina supplied from these seaboard refineries, 11.4 cents; in Florida, 12.8 cents, and in part of Georgia supplied from this source, 13 cents, or 5.3 cents higher than in Delaware.

Again, there is a great group of States in the interior of the country, comprising almost the entire Mississippi Basin

from the northern border to the Gulf of Mexico, which are supplied with illuminating oil chiefly from the Standard's refineries at Cleveland and Lima, Ohio, and Whiting, Ind. These three refineries use the same kind of crude oil, and the differences in cost among them are insignificant. Much the greater part of the area is, moreover, supplied from Whiting alone. Yet the prices (freight deducted) within the territory supplied by them show a range from 8.5 cents for Ohio, where several independent refineries are situated, to 13.7 cents for that part of Arkansas which is supplied from Whiting. In North Dakota, South Dakota, Tennessee, Alabama, and Georgia, which are supplied largely from the same source, the prices range from 11 to 12 cents per gallon.

Perhaps the most striking instance of sectional discrimination which has appeared during recent years is on the Pacific coast. In southern California there are a number of independent refineries. The Standard carries oil from its great refinery near San Francisco, several hundred miles by water and rail, and sells it in southern California for much less than the price at San Francisco. The average price, freight deducted, for the southern part of California in December, 1904, was 7.2 cents per gallon, while for the northern part of the State it averaged 12.4 cents per gallon. In Oregon, supplied from the same source the price averaged 15.3 cents per gallon, and in Washington, 15.7 cents. The price in Washington and Oregon was thus more than twice as high as in southern California for the same oil.

Differences in prices among large cities [Part II, pages 34-35]. It is a striking fact that some of the largest cities have, during recent years, paid very high prices for illuminating oil. This is not because there is no independent oil sold in them, but because the Standard prefers to allow the independents to do a small volume of business rather than to cut prices against them. Thus, in December, 1904, the price at New York, which is at the very seat of the Standard's greatest refineries, was 10.5 cents per gallon, and at Boston, freight

deducted, 10.8 cents per gallon. At Worcester, Mass., a much smaller city, the price was only 7.5 cents. The prices at Cincinnati and Cleveland were still lower, 6.4 cents and 7 cents, respectively. The differences in cost of producing and marketing the oil sold in the cites just mentioned is insignificant. The price at Augusta, Ga., was 8.2 cents, as compared with 10.9 cents at Atlanta, 12.1 cents at Charleston, and 12.5 cents at Jacksonville. All these cities must have substantially similar costs. The price at Minneapolis and St. Paul was 7.2 cents, as contrasted with 12.3 cents at San Francisco, 14.5 cents at Seattle, 14.4 cents at Denver, and no less than 16.6 cents at Butte. Only a small fraction of these differences is due to differences in costs.

The evidence obtained from Standard concerns regarding marketing costs indicates that, as among most of the large cities, such differences cannot exceed one-half or three-fourths cent per gallon, and that the extreme difference between the lowest and the highest would not exceed 1 cent per gallon. The differences between Eastern and Western cities are perhaps in part due to higher cost of producing the illuminating oil sold in the latter, but this difference can scarcely exceed 2 cents per gallon.

The prices of gasoline show substantially as great differences among States and sections as the prices of illuminating oil.

WATER-POWER DEVELOPMENT IN THE

UNITED STATES

[A REPORT under the foregoing title was made by the Commissioner of Corporations (U. S. Bureau of Corporations) and published March 14, 1912. Some extracts are here taken from the summary on pages 1-34.]

Physical facts involved. Prior to the discovery of electrical transmission of power over long distances, waterpower could be utilized only at the power site. This limited its development in most cases to comparatively small units, and almost exclusively to manufacturing enterprises. The introduction of electric-power transmission not only provided a means of supplying distant manufacturing and domestic demands, but also opened up an entirely new power field, namely, the operation of street railways and lighting plants, and enormously increased the relative importance of waterpower. Thus the development of water-power (based on installed wheel capacity) for railway and lighting purposes increased from 487,000 horse-power in 1902 to 1,441,000 horse-power in 1907 (the latest date for which statistics are available), or by nearly 200 per cent. In manufacturing industries, where transmission by electricity is infrequent, waterpower development during the period 1900-1905 increased by only 11 per cent.

These comparisons suggest the remarkable influence that electrical transmission has had upon the development of waterpower in recent years, and at the same time they indicate the peculiarly close natural relationship between the water-power industry and public-service enterprises.

This growing importance of the "commercial" use of waterpower, its comparatively, recent development, and the con