Memorandum of Conversation, by the Chief of the Petroleum Division (Eakens)

In a meeting with Mr. Jones12 this morning I told him that we had under consideration the question of petroleum stocks in the Shanghai area and whether they were not excessive in view of the uncertainties in China at the present time and the fact that Shanghai might fall to the Communists. I indicated that it is our general view, as well as that of our Consulate General in Shanghai, that petroleum stocks should not be higher than the minimum level necessary to ensure supplies for essential consumption requirements, and that tentatively we were considering whether a six-weeks’ stock level for bulk products would not be sufficient for this purpose.

With respect to six-weeks’ stock level Mr. Jones wanted to know whether, assuming Shell’s stocks were considerably higher, it was our view that the excess amount of such stocks should be withdrawn. 1 replied that this was an aspect of the problem on which we had not reached any definite conclusion, that what we are thinking about mainly at this time is the adjustment of deliveries to bring the stock levels down. I mentioned that our figures indicate that present stock levels vary from two to four months on gasoline, gas oil, and diesel oil and that stock levels for residual fuel oil are about one month, for kerosene eight or ten months, and for lubricating oils and greases also about ten months.

We discussed the problem of maintaining low stock levels where each company individually was shipping in its own supplies and that the companies might utilize a borrow-and-loan for splitting up the cargo in each ship delivering oil supplies.

I told Mr. Jones that we considered that the maintenance of minimum stock levels was the sound position with respect to petroleum stocks irrespective of what conditions may turn out to be in the future, and that we hoped his Government would concur with us in this view and enlist the cooperation of Shell in attaining this objective. I also [Page 289] told Mr. Jones that we have discussed this matter with the American companies.

Mr. Jones said that he would take the matter up with his Government and let us have its views promptly.

  1. E. E. Jones, Petroleum Attached British Embassy.