none. 1839-1937, industrialist and philanthropist. Rockefeller was the primary force behind the establishment of the Standard Oil Company and thus of the American petroleum industry. Playing on the error of the judge, who should have said "South Improvement Company", he takes the opportunity to reveal nothing while not lying. But this did not stop the investigation. Rockefeller's stake in the oil industry increased as the industry itself expanded, spurred by the rapidly spreading use of kerosene for lighting.
In 1870 he organized The Standard Oil Company along with his brother William, Andrews, Henry M. Flagler, S. V. Harkness, and others. It had a capital of $1 million. By 1872 Standard Oil had purchased and thus controlled nearly all the refining firms in Cleveland, plus two refineries in the New York City area.
Before long the company was refining 29, 000 barrels of crude oil a day and had its own cooper shop manufacturing wooden barrels. The company also had storage tanks with a capacity of several hundred thousand barrels of oil, warehouses for refined oil, and plants for the manufacture of paints and glue. Standard prospered and, in 1882, all its properties were merged in the Standard Oil Trust, which was in effect one great company. It had an initial capital of $70 million. There were originally forty-two certificate holders, or owners, in the trust.
After ten years the trust was dissolved by a court decision in Ohio. The companies that had made up the trust later joined in the formation of the Standard Oil Company (New Jersey), since New Jersey had adopted a law that permitted a parent company to own the stock of other companies. It is estimated that Standard Oil owned three-fourths of the petroleum business in the U. S.
in the 1890 s. In addition to being the head of Standard, Rockefeller owned iron mines and timberland and invested in numerous companies in manufacturing, transportation, and other industries. Although he held the title of president of Standard Oil until 1911, Rockefeller retired from active leadership of the company in 1896. In 1911 the U. S. Supreme Court found the Standard Oil trust to be in violation of the anti-trust laws and ordered the dissolution of the parent New Jersey corporation.
The thirty-eight companies which it then controlled were separated into individual firms. In his biography, Study in Power, John D. Rockefeller, Industrialist and Philanthropist, the historian Allan Nevins reports that Rockefeller at that time owned 244, 500 of the company's total of 983, 383 outstanding shares. 7. 9 The 1890 Sherman Antitrust Act Congress passed this act in 1890, and this is the source of all American anti monopoly laws.
The law forbids every contract, scheme, deal, and conspiracy to restrain trade. It also forbids conspirations to secure monopoly of a given industry. The ideas were new and had to wait before they could achieve some efficiency. The Standard reorganized once more, in a holding in the Standard Oil Company (New Jersey) which now coordinated the whole machine, that is 70 companies and 23 refineries controlling 84% of the crude oil refined in the US in 1899. Ten years later, international competition (from Canada, Peru, Rumania, Poland, India or Russian) and the struggle of the independents lowered this percentage to 14 %.
Theodore Roosevelt committed himself in 1901 and during both of his mandates to a strong war against monopolies, launching the federal government in 1906 in a lawsuit against the Standard because of discriminatory practices on the market, abuse of power and excessive control on the American oil industry. Sherman Antitrust Act, 1890, first measure passed by the U. S. Congress to prohibit trusts; it was named for Senator John Sherman. Prior to its enactment, various states had passed similar laws, but they were limited to intrastate businesses.
Finally opposition to the concentration of economic power in large corporations and in combinations of business concerns led Congress to pass the Sherman Act. The act, based on the constitutional power of Congress to regulate interstate commerce, declared illegal every contract, combination (in the form of trust or otherwise), or conspiracy in restraint of interstate and foreign trade. A fine of $5, 000 and imprisonment for one year were set as the maximum penalties for violating the act. The Sherman Act authorized the federal government to institute proceedings against trusts in order to dissolve them, but Supreme Court rulings prevented federal authorities from using the act for some years.
As a result of President Theodore Roosevelt's trust-busting campaigns, the Sherman Act began to be invoked with some success, and in 1904 the Supreme Court upheld the government in its suit for dissolution of the Northern Securities Company. The act was further employed by President Taft in 1911 against the Standard Oil trust and the American Tobacco Company. In the Wilson administration the Clayton Antitrust Act (1914) was enacted to supplement the Sherman Antitrust Act, and the Federal Trade Commission (FTC) was set up (1914). Antitrust action sharply declined in the 1920 s, but under President Franklin Delano Roosevelt new acts supplementary to the Sherman Antitrust Act were passed (e. g. , the Robinson-P atman Act), and antitrust action was vigorously resumed.
As a result of a suit filed in 1974 under the Sherman Antitrust Act, the American Telephone and Telegraph (AT&T) monopoly was broken up in 1982. The Hart-S coss-Rodin o Antitrust Improvement Act (1976) made it easier for regulators to investigate mergers for antitrust violations, but few mergers were blocked during the merger boom of the 1980 s, when the FTC and Justice Dept. adopted a looser interpretation of antitrust legislation. By the 1990 s, still a time of large corporate mergers, the FTC became more litigious in antitrust actions, and the Justice Dept. aggressively pursued the Microsoft Corp. (see Gates, Bill).
Antitrust legislation is primarily regulated by the Antitrust Division of the Dept. of Justice and the FTC. U. S.
corporations with international operations also face antitrust scrutiny from European Union regulators. 7. 10 Dismantling of the Standard Oil In 1911, the Supreme Court finds the Standard Oil in violation of the 1890 Sherman Antitrust Act because of excessive restrictions to trade, and in particular its practice of buying out the small independent refiners or that of lowering the price in a given region to force bankruptcy of competitors. The court ordered the Standard Oil Company (New Jersey) to dismantle 33 of its most important affiliates, giving the stocks to its own shareholders and not to a new trust. From these offspring will come Exxon, Mobil, Chevron, American, Esso (that is SO). This is a landmark ruling in the economic history of the USA, and is the basis for a new doctrine in American antitrust policy, called the rule of reason (because of the famous unreasonable restraints to trade mentioned in the Sherman Antitrust Act.
Need for more solid juridical basis led to the Clayton Antitrust Act in 1914, which explicitly condemns commercial practices like price discrimination, exclusive commercial relations, the buying out of competitors and the incestuous boards. Rockefeller's testimony before a court In his testimony, Rockefeller says he did not take part in the South Improvement Company, did not receive special rebates from the railroads and that lived in good entente with his competitors... One may probe Rockefeller's attitude toward the investigation by reading the following part of the transcript. The judge talked of the refiners pool of 1872: Judge: Was there a Southern Improvement Company Rockefeller: I have heard of such a company Judge: Were you in it? Rockefeller: I was not OIL INDUSTRY Many of the early explorers of America encountered petroleum deposits in some form.
They noted oil slicks off the coast of California in the sixteenth century. Louis Evans located deposits along the eastern seaboard on a 1775 map of the English Middle Colonies. Settlers used oil as an illuminant for medicine, and as grease for wagons and tools. Rock oil distilled from shale became available as kerosene even before the Industrial Revolution began.
While traveling in Austria, John Austin, a New York merchant, observed an effective, cheap oil lamp and made a model that upgraded kerosene lamps. Soon the U. S. rock oil industry boomed as whale oil increased in price owing to the growing scarcity of that mammal. Samuel Downer, Jr.
, an early entrepreneur, patented "Kerosene" as a trade name in 1859 and licensed its usage. As oil production and refining increased, prices collapsed, which became characteristic of the industry. The first oil corporation, which was created to develop oil found floating on water near Titusville, Pennsylvania, was the Pennsylvania Rock Oil Company of Connecticut (later the Seneca Oil Company). George H. Bissell, a New York lawyer, and James Townsend, a New Haven businessman, became interested when Dr. Benjamin Silliman of Yale University analyzed a bottle of the oil and said it would make an excellent light.
Bissell and several friends purchased land near Titusville and engaged Edwin L. Drake to locate the oil there. Drake employed William Smith, an expert salt driller, to supervise drilling operations and on August 27, 1859, they struck oil at a depth of sixty-nine feet. So far as is known, this was the first time that oil was tapped at its source, using a drill. Titusville and other towns in the area boomed. One of those who heard about the discovery was John D.
Rockefeller. Because of his entrepreneurial instincts and his genius for organizing companies, Rockefeller became a leading figure in the U. S. oil industry. In 1859, he and a partner operated a commission firm in Cleveland. They soon sold it and built a small oil refinery.
Rockefeller bought out his partner and in 1866 opened an export office in New York City. The next year he, his brother William, S. V. Harkness, and Henry M. Flagler created what was to become the Standard Oil Company.
Flagler is considered by many to have been nearly as important a figure in the oil business as John D. himself. Additional discoveries near the Drake well had led to the creation of numerous firms and the Rockefeller company quickly began to buy out or combine with its competitors. As John D.
phrased it, their purpose was "to unite our skill and capital." By 1870 Standard had become the dominant oil refining firm in Pennsylvania. Pipelines early became a major consideration in Standard's drive to gain business and profits. Samuel Van Syckel had built a four-mile pipeline from Pinhole, Pennsylvania, to the nearest railroad. When Rockefeller observed this, he began to acquire pipelines for Standard. Soon the company owned a majority of the lines, which provided cheap, efficient transportation for oil.
Cleveland became a center of the refining industry principally because of its transportation systems. When product prices declined, the ensuing panic led to the beginning of a Standard Oil alliance in 1871. Within eleven years the company became partially integrated horizontally and vertically and ranked as one of the world's great corporations. The alliance employed an industrial chemist, Hermann Frasch II, to remove sulfur from oil found at Lima, Ohio.
Sulfur made distilling kerosene very difficult, and even then it possessed a vile odor - another problem Frasch solved. Thereafter, Standard employed scientists both to improve its product and for pure research. Soon kerosene replaced other illuminants; it was more reliable, efficient, and economical than other fuels. Eastern cities linked to the oil fields by rail and boat boomed also. The export trade from Philadelphia, New York, and Baltimore became so important that Standard and other companies located refineries in those cities.
As early as 1866 the value of petroleum products exported to Europe provided a trade balance sufficient to pay the interest on U. S. bonds held abroad. When the Civil War interrupted the regular flow of kerosene and other petroleum products to western states, pressure increased to find a better method of utilizing oil found in such states as California. But Standard exhibited little interest in the oil industry on the West Coast before 1900. In that year it purchased the Pacific Coast Oil Company and in 1906 incorporated all its western operations into Pacific Oil, now Chevron.
Edward L. Doheny located Los Angeles's first well in 1892, and five years later there were twenty-five hundred wells and two hundred oil companies in the area. When Standard entered California in 1900, seven integrated oil companies already flourished there. The Union Oil Company was the most important of these. Operating difficulties plus the threat of taxation on its out-of-state properties led to the creation of the Standard Oil Trust in 1882. In 1899 the trust created Standard Oil Company (New Jersey), which became the parent company.
The trust controlled member corporations principally through stock ownership, an arrangement not unlike that of the modern-day holding company. The tremendous growth of Standard did not occur without competition. Pennsylvania producers engineered the creation of an important competitor, the Pure Oil Company, Ltd. , in 1895.
This concern endured for more than a half century. In 1901 one of the largest and most significant oil strikes in history occurred near Beaumont, Texas, on a mound called Spindletop. Drillers brought in the greatest gusher ever seen within the United States. This strike ended any possible monopoly by Standard Oil. One year after the Spindletop discovery more than fifteen hundred oil companies had been chartered. Of these, fewer than a dozen survived, principally the Gulf Oil Corporation, the Magnolia Petroleum Company, and the Texas Company.
The Sun Oil Company, an Ohio-Indiana concern, also moved to the Beaumont area as did other firms. Other oil strikes followed in Oklahoma, Louisiana, Arkansas, Colorado, and Kansas. Oil production in the United States by 1909 more than equaled that of the rest of the world combined. Many smaller companies developed outside the Northeast and the Midwest where Rockefeller and his associates operated. Oil found at Corsicana, Texas, in the 1890 s attracted a remarkable Pennsylvanian, Joseph S. ("Buckskin Joe") Cullinan, who organized several small companies.
He later moved to Spindletop where he became instrumental in the organization of the Texas Company, soon a major competitor of Standard. Henri Deterring, creator of the Royal Dutch-Shell Group in Holland and Great Britain, moved into California in 1912 with his American Gasoline Company (Shell Company of California after 1914). As Standard Oil grew in wealth and power, it encountered great hostility not only from its competitors but from a vast segment of the public. Standard fought competition by securing preferential railroad rates and rebates on its shipments. It also influenced legislatures and Congress through tactics that, though common in that era, were unethical. Nor was the company's handling of labor any better.
The Industrial Revolution had harmful effects on many farmers and residents of small-town America. Led by a number of charismatic leaders, those people demanded industrial, railroad, and labor reforms. They focused their spleen on Standard Trust and the railroads. This led in 1887 to a semblance of railroad regulation, the Interstate Commerce Act, and in 1890 to the relatively ineffective Sherman Antitrust Act. In 1911 the Supreme Court declared that the Standard Trust had operated to monopolize and restrain trade, and it ordered the trust dissolved into thirty-four companies. That the trust's share of the industry had declined from 33 to 13 percent the Court held to be of little consequence.
The splitting-off of the Standard affiliates proved difficult. Some marketed, some produced, some refined, and these concerns quickly moved toward vertical integration of their businesses. But the 1911 decision ensured that though the industry might have giants, they at least competed with one another. Increasing sales of gasoline first for automobiles and then for airplanes in the early 1900 s came as oil discoveries across the United States mounted. The oil industry had a vast new market for what had been for many years a useless by-product of the distilling process.
As soon as the internal combustion engines created demand, refiners sought better methods to produce and improve gasoline. Before its entry into World War I, the United States contributed oil to the Allies, and in 1917 the oil companies cooperated with the Fuel Administration. At war's end executives who had served with that agency created the American Petroleum Institute (1919), which in time became a major force in the economy and the business. Although the U. S. oil industry had marketed abroad extensively before the war, it owned few foreign properties.
Judging from government surveys, many producers believed that a major oil shortage would soon occur. Both Secretary of Commerce Herbert Hoover and Secretary of State Charles Evans Hughes began to pressure American companies to seek oil abroad. These firms invested in the Middle East, Southeast Asia, and South America and searched for oil everywhere while they continued to export quantities of oil from the United States. The individual who focused attention back on the United States was Columbus Marion ("Dad") Joiner. Joiner became convinced that some flatland's in an East Texas basin like structure contained oil. He obtained a lease near Tyler, Texas, and on October 5, 1930, after having drilled two dry holes, struck perhaps the largest oil pool ever found in America.
It lay beneath 140, 000 acres and contained 5 billion barrels. H. L. Hunt, an oil entrepreneur, bought Joiner's leases and later sold them to oil companies at a profit of $100 million, thereby adding to his already substantial fortune. In a sense the Joiner strike came at an inopportune time; it was the onset of the Great Depression. The price of oil plummeted to ten cents a barrel in 1931, creating chaos in the industry.
But some New Deal measures restored a modicum of prosperity, and then World War II stimulated the oil business enormously. The various oil strikes focused attention on a legal situation unique to the United States. Land ownership carried with it rights to all subsoil minerals, termed the common law "right of capture." Oil companies, like other mineral companies, negotiated with each landowner for drilling rights. This right of capture continued for years despite the efforts of such industry giants as conservation-minded Henry L. Doherty of Cities Service Oil Company, who sought to institute oil field unit ization. The right of capture ensured early exhaustion of oil fields and tragic waste of a valuable energy source.
Wallace E. Pratt, a geologist and longtime Jersey Standard leader, has estimated that by releasing the natural gas that often underlies petroleum pools and by using poor production techniques, oil producers have wasted at least 75 percent of the oil and natural gas found to date in the United States. World War II made the oil industry a key American resource. Oil company research and executive leadership played major roles in the conflict. Research increased the number of products made from petroleum and natural gas, including the explosive tnt and artificial rubber. The Jersey-Dupont jointly owned product, tetra ethyl lead, upgraded gasoline to improve airplane speed.
Oil tankers supplied gasoline for the Allies at great risk from submarine attacks. The government rationed gasoline and controlled prices during the war. In the last analysis the war ended the delusion that American supplies of crude were unlimited, so that the industry and the securing of oil became a top priority for both foreign and domestic policy. When the war ended, the United States faced the problem of stabilizing the peace.
Over the next forty-five years numerous major crises occurred, in many of which oil played a key role. Europe underwent a coal shortage, the first energy crisis, immediately after the war. The Marshall Plan, created to solve that and other problems, was hampered by the first Iranian crisis of 1950-1954. From the 1956 Suez crisis to the Iraqi invasion of Kuwait in 1990, oil proved to be the most important consideration in America's Middle Eastern policy.
The United States sought to balance support for the new state of Israel against the pressures of the oil producers, mostly Arab, united in 1960 as the Organization of Petroleum Exporting Countries opec. This proved increasingly difficult as the United States became steadily more dependent on imported oil. In the United States the standard of living based on cheap oil continuously rose and the public, accustomed to this way of life, resisted all conservation measures. The United States continues to consume about two-thirds of the world's oil production.
Oil should be considered the keystone of the standard of living in the United States and to a large degree its rank as a world power. Part of the energy problem after 1940 resulted from the depletion of domestic oil reserves during World War II - around 6 billion barrels. In the Vietnam struggle experts contend the United States supplied about 5 billion barrels of oil, although great quantities of that came from Middle Eastern properties owned by American companies. Certainly the total for both wars represents a quantity larger than either that of the great East Texas oil field or possibly that discovered on Alaska's North Slope in 1967.
After the 1960 s, as domestic production declined and demand soared, the oil industry had to import vast quantities from the Middle East and Venezuela. The nation's key energy source increasingly hinged on balancing diplomatic relations with Arab oil-producing nations while continuing its aid to Israel. While the United States was blessed with plentiful supplies of oil its growth to the rank of a great power accelerated. In today's world as an oil-dependent power it must find alternate sources of energy or accommodate drastic changes in its way of life and position in the world. ROCKEFELLER & THE STANDARD OIL COMPANY Rockefeller's stake in the oil industry increased as the industry itself expanded, spurred by the rapidly spreading use of kerosene for lighting.
In 1870 he organized The Standard Oil Company along with his brother William, Andrews, Henry M. Flagler, S. V. Harkness, and others. It had a capital of $1 million. By 1872 Standard Oil had purchased and controlled nearly all the refining firms in Cleveland, plus two refineries in the New York City area.
Before long the company was refining 29, 000 barrels of crude oil a day and had its own shop manufacturing wooden barrels. The company also had storage tanks with a capacity of several hundred thousand barrels of oil, warehouses for refined oil, and plants for the manufacture of paints and glue. The Standard Oil Company prospered and, in 1882, all its properties were merged in the Standard Oil Trust, which was in effect one great company. It had a beginning sum of money that totaled $70 million. After ten years the trust was dissolved by a court decision in Ohio. The companies that had made up the trust later joined in the formation of the Standard Oil Company (New Jersey), since New Jersey had adopted a law that permitted a parent company to own the stock of other companies.
It is estimated that Standard Oil owned three-fourths of the petroleum business in the U. S. in the 1890 s. In addition to being the head of Standard Oil Company, Rockefeller owned iron mines and timberland and invested in numerous companies in manufacturing, transportation, and other industries. Although he held the title of president of Standard Oil until 1911, Rockefeller retired from leadership of the company in 1896. In 1911 the U.
S. Supreme Court found the Standard Oil trust to be in violation of the anti-trust laws and ordered the dissolution of the parent New Jersey Corporation. The thirty-eight companies, which it then controlled, were separated into individual firms. High Points of The Kerosene Age and Mr.
Rockefeller " Edwin Drake was sent to Penn to supervise a project to drill for oil " He was successful, but it took longer than expected and then others were attracted to the area and many came to find oil " Production soared from 2000 barrels a year in 1859 to almost 5 million ten years later " 1870 -Standard Oil of Ohio- John D Rockefeller " Standard Oil Phases " Confederation- eliminated wasteful production, get others to join or cease operating " Consolidation- central control and rational organization " Vertical integration-less dependent on others " Public attack- price cutting, sabotage " Standards share of the nations refining capacity was reduced to 60% by 1911 Rockefeller on Money "I know of nothing more despicable and pathetic than a man who devotes all the hours of the waking day to the making of money for money's sake.".