Standard Oil

Standard Oil (1863 - 1911) was a large integrated oil producing, transporting, refining, and marketing organization. Using new techniques invented by chemist Samuel Andrews, it was founded by John D. Rockefeller (1839-1937) and partners in 1863, with the plan of making kerosene, which was sweeping the home lighting market, supplanting the commonly used whale oil (blubber). Borrowing heavily to expand his business, Rockefeller drew five big refineries including the business concern of Henry Morrison Flagler into one large firm, Rockefeller, Andrews & Flagler. By 1868 Rockefeller and Company headed Standard Oil of Pennsylvania, based in Pittsburgh, one of the world's largest oil refining concerns.

Foundation

On January 10, 1870 Rockefeller formed his business concerns into one large company, the Standard Oil Company of Ohio, based in Cleveland. Cleveland with its port on Lake Erie and a large refinery complex, was more suited to the growing concern. Standard sought out efficiencies in its own processes and aggressively competed for refinery business, buying out rival companies. In 1874, Rockefeller acquired the oil interests of Charles Pratt and Company. The founder Charles Pratt (1830-1891) and his protégé Henry Huttleston Rogers (1840-1909) came with the deal. By 1878 Standard Oil held about 90% of the refining capacity in the U.S. In 1882 the company was reorganized as the Standard Oil Trust. The three key leaders of Standard Oil Trust were Henry H. Rogers, William Rockefeller, and, the most well known, John D. Rockefeller. The quality of kerosene did improve greatly, up to the new standard of refined products.

Monopoly

By 1890 Standard Oil controlled over 90% of the refined oil flows in the United States. Though conspicuous, it made John D. Rockefeller the wealthiest man in the world. It was at this time that Standard Oil of Ohio moved its headquarters out of Cleveland and into its permanent headquarters at 26 Broadway in New York City.

Concurrently, the trustees of Standard Oil of Ohio chartered the Standard Oil Company of New Jersey in order to take advantages of New Jersey's more lenient corporate stock ownership laws. Standard Oil of New Jersey eventually became one of many important trusts that dominated key markets, such as steel and the railroad. Also in 1890, Congress passed the Sherman Antitrust Act -- the source of all American anti-monopoly laws. The law forbade every contract, scheme, deal, or conspiracy to restrain trade, though the phrase "restrain trade" remains open to interpretation. Standard Oil Trust quickly attracted attention from antitrust authorities and the Ohio Attorney General filed and won an antitrust suit in 1892.

Standard Oil's quasi-monopolistic position had been established through aggressively anti-competitive business practices, including a systematic program of purchasing competitors or running them out of business by any means necessary, legal or otherwise. Most controversially of all, Rockerfeller secretly arranged illegal volume-discount transportation deals with the railroad companies, in order to ensure that it could substntially undercut its smaller competitors' prices. Rockerfeller also used his enormous influence with the railroad companies to prevent his competitors from gaining access to other rail services.

In one of the most infamous examples of Standard's monopolistic practices, a rival oil association decided to build an oil pipeline, hoping to overcome the virtual boycott imposed on Standard's competitors. In response, the railroad company (at Rockerfeller's direction) denied the consortium permission to run the pipeline across railway land, forcing consortium staff to laboriously decant the oil into barrels, carry them over the railway crossing in carts, and then pump the oil manually back into the pipeline on the other side. When he learned of this tactic, Rockerfeller then instructed the railway company to park empty rail cars across the line, thereby preventing the carts from crossing the line. Actual photographs of this incident are included in the PBS TV adaptation of Daniel Yergin's awqard-winning history of the oil industry, The Prize.

Standard's monopolistic actions and secret transport deals helped its kerosene to drop in price from 58 to 26 cents between 1865 and 1870. Competitors might not have appreciated the company's business practices, but consumers appreciated the drop in prices. Standard Oil, being formed well before the discovery of the Spindletop oil field and a demand for oil other than for heat and light, was well placed to control the growth of the oil business. The company was perceived to own and control all aspects of the trade. Oil literally could not leave the oil field unless Standard Oil agreed to move it: the "posted price" for oil was the price that Standard Oil agents printed on flyers that were nailed to posts in oil producing areas, and producers were in a take-it-or-leave-it position.

Then came Ida M. Tarbell, an American author and journalist, and one of the original "muckrakers". Her father was an oil producer whose business had failed due to Rockefeller's unfair business dealings. Following extensive interviews with a sympathetic senior executive of Standard Oil, Henry H. Rogers, Tarbell's investigations of Standard Oil fuelled growing public attacks on Standard Oil and on trusts in general. Her groundbreaking work was first published in nineteen parts in McClure's magazine, from November 1902 to October 1904, in which year it was published in book form as The History of the Standard Oil Company. Tarbell's investigation is seen as hastening the breakup of Standard Oil, in 1911 and her report for McClure's is now regarded as one of the cornerstone works of investigative journalism.

The antitrust breakup

As the public became more aware of the Standard Oil trust in allowing its oil companies in different states to be headed by the same board of directors, there was more public support in calling for its dissolution. Eventually, the company was broken up after the United States Supreme Court declared the trust to be an "unreasonable" monopoly under the Sherman Antitrust Act. Thus, on May 15, 1911, though Standard Oil's share of the market had been steadily declining from 1900 to 1910 (Standard's share of oil refining was 64% at the time of the trial and in competition with over 100 other refiners), the Supreme Court of the United States ordered the dissolution of Standard Oil Company into 34 smaller companies, each with their own board of directors. It was at this time that John D. Rockefeller retired his position as President of the Standard Oil Company of New Jersey.

Successors

Successor companies to Standard Oil include:

• Standard Oil of Ohio - or Sohio now part of BP
• Standard Oil of Indiana - or Stanolind, renamed Amoco (American Oil Co.) - now part of BP
• Standard Oil of New York - or Socony and merged with Vacuum - renamed Mobil, now part of ExxonMobil
• Standard Oil of New Jersey - or Esso (S.O. or Eastern States Standard Oil) - renamed Exxon, now part of ExxonMobil
• Standard Oil of California - or Socal - renamed Chevron
• Atlantic and Richfield - merged to form Atlantic Richfield or Arco - now part of BP - Atlantic operations spun off and bought by Sunoco
• Standard Oil of Kentucky - or Kyso was acquired by Standard Oil of California - currently Chevron
• Continental Oil Company - or Conoco now part of ConocoPhillips
• The Ohio Oil Company - more commonly referred to as "The Ohio", and marketed gasoline under the Marathon name. Company is now known as Marathon Oil Company, and was often a rival with in-state Standard spinoff Sohio.

Other Standard Oils:

• Standard Oil of Iowa - pre 1911 - became Standard Oil of California
• Standard Oil of Minnesota - pre 1911 - bought by Standard Oil of Indiana
• Standard Oil of Illinois - pre 1911 - bought by Standard Oil of Indiana
• Standard Oil of Kansas - refining only, eventually bought by Indiana Standard
• Standard Oil of Missouri - pre 1911 - dissolved

• Standard Oil of Louisiana - always owned by Standard Oil of New Jersey (Esso)
• Standard Oil of Brazil - always owned by Standard Oil of New Jersey (now Esso)
• Standard Oil of Colorado - a scam to cash in on the Standard Oil brand in the 1930s
• Standard Oil of Connecticut - A fuel oil marketer in Connecticut not related to the Rockefeller companies

See also

• History of the United States (1865-1918)
• Wamsutta Oil Refinery
• Henry H. Rogers
• Ida M. Tarbell
• Charles Pratt and Company
• Charles Pratt
• John D. Rockefeller
• Standard Oil Co. of New Jersey v. United States

Scholarly Secondary Sources

• Latham, Earl ed. John D. Rockefeller: Robber Baron or Industrial Statesman? (1949) primary and secondary sources
• . ISBN 0801428785. {{cite book}}: Missing or empty |title= (help); Unknown parameter |Author= ignored (|author= suggested) (help); Unknown parameter |Publisher= ignored (|publisher= suggested) (help); Unknown parameter |Title= ignored (|title= suggested) (help); Unknown parameter |Year= ignored (|year= suggested) (help)
• Williamson, Harold F. and Arnold R. Daum. The American Petroleum Industry: The Age of Illumination, 1859-1899 (1959)

Online References

• Droz, R.V. (2004). Whatever Happened to Standard Oil?. Retrieved June 25, 2005.
• Standard Oil Company of California (1980). Whatever happened to Standard Oil?. Retrieved June 25, 2005.

External links

• The History of the Standard Oil Company by Ida Tarbell
• Educate Yourself- Standard Oil -- Part I
• Witch-hunting for Robber Barons: The Standard Oil Story by Lawrence W. Reed - argues Standard Oil was not a coercive monopoly