From The Oil and Gas Journal, September 23, 1963.
A quiet revolution in liquid transportation has been achieved by the pipeline industry during the past dozen or so years with little fanfare or public attention.
There has been no spectacular scientific breakthrough, but a long series of individually minor improvements has steadily increased efficiency and lowered the cost of moving a barrel of oil.
The public has benefited directly, but has also received probably as much in indirect benefits from the fact that pipeline competition has forced other forms of transportation to increase their efficiency.
One example is the Colonial pipeline. Only 20 years ago the government subsidized the two Big Inch pipelines for wartime movement of Southwest oil to Middle Atlantic markets. After the war it was universally agreed that their continuation in oil service was uneconomic.
But today private companies are investing some $350,000,000 in the Colonial project for essentially the same movement. And shipping interests, after first fighting the project, are now designing more efficient, highly automated coastwise tankers to retain some of the business.
LP-gas lines are another example. Their success has spurred railroads and off-line shippers to develop jumbo tank cars and other means of meeting pipeline competition.
And the mere threat of coal-slurry pipelines is bringing tremendous cost-cutting innovations in the rail shipment of coal.
What’s the explanation? Are pipeliners inherently smarter than other transportation men? No. The answer is that pipelines have always been forced to compete against each other and against other transportation.
Only a minimum of regulation was imposed. Pipelines were forced to be common carriers and file public tariffs. But they have no exclusive franchises, require no certificate for construction, and are largely free to set rates in their own business judgment. They are also free to experiment, to merge, interconnect, engage in joint ventures, and employ the economies of large-scale operation.
On the other hand oil pipelines have never been subsidized or pampered. They have had to fight for rights-of-way, while other forms of transportation have often benefited from public funds.
There’s a lesson here. It is that nothing spurs technological progress and increased efficiency like stiff competition and the necessity to survive through merit alone.
Time and again oil pipelines have won business away from the overregulated railroads and the partially subsidized road and water carriers.
This is a lesson that should be noted by the ICC, the FPC, and all other agencies engaged in business regulation and economic planning. The best regulation is that which forces hard competition.