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Standard Oil

Standard Oil was an oil refining organization founded by John D. Rockefeller (1839-1937) and partners beginning in 1863. Borrowing heavily to expand his business, Rockefeller drew five big refineries including the business concern of Henry Morrison Flagler into one firm, Rockefeller, Andrews & Flagler. By 1868 he headed the world's largest oil refinery.

On January 10, 1870 he formed the Standard Oil Company of Ohio and started his strategy of buying up the competition and consolidating all oil-refining under one company. In 1874, Rockefeller acquired the oil interests of Charles Pratt and Company. 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 main men of Standard Oil Trust were Henry H. Rogers, William Rockefeller, and, the most important, John D. Rockefeller.

In 1890 the Congress of the United States passed Sherman Antitrust Act. This act is the source of all American anti-monopoly laws. The law forbids every contract, scheme, deal, conspiracy to restrain trade, though the phrase "restrain trade" is open to intepretation. It also forbids conspirations to secure monopoly of a given industry. Standard Oil Trust attracted attention from antitrust authorities and the Ohio Attorney General filed and won an antitrust suit in 1892.

Unwanted attention was also drawn to the Standard Oil Trust by Ida M. Tarbell, an American author and journalist, known as one of the leading muckrakers.

Tarbell had been born in Erie County, Pennsylvania. Her father was forced out of business by John D. Rockefeller's South Improvement Company, a predecessor to Standard Oil. She was hired by McClure's magazine in 1894. She soon turned to investigative journalism, and was the first to really use investigative reporting, as we know it today, redefining this in-depth technique of writing. Ida’s method was to use various documents concerning the Standard Oil Company, accompanied by interviews of employees, competitors, lawyers and experts on the topic. Tarbell and her fellow staff members Ray Stannard Baker and Lincoln Steffens became a celebrated muckraking trio.

Tarbell became acquainted with Henry H. Rogers, the most senior and powerful director of Standard Oil, through his friend, the famous author Mark Twain, who arranged a meeting. Meetings between Tarbell and Rogers began in January of 1902 and continued regularly over the next two years. Tarbell would bring up various case histories and Rogers would provide for her an explanation, documents and figures concerning the case. Rogers was surprisingly open with Tarbell, as he knew she would write the series with or without his help, and he wanted to make sure her information was correct, and for the company’s case to be “made right”.

Following extensive interviews with Henry H. Rogers, Tarbell's investigations of Standard Oil for McClure's, ran in 19 parts from November 1902 to October 1904. They were collected and published as The History of the Standard Oil Company in 1904. The book placed fifth in a 1999 list of the top 100 works of journalism in the 20th century.

Although public opposition to Rockefeller and Standard Oil existed prior to Tarbell's investigation, it fueled public attacks on Standard Oil and in trusts in general, and the book is credited with hastening the 1911 breakup of Standard Oil. "They had never played fair, and that ruined their greatness for me," Tarbell wrote about the company.

A trust system was set up at Standard Oil in order to allow the oil businesses in different states to be headed by the same board of directors. The Standard Oil Company of New Jersey, a holding company for the Rockefeller enterprises, was broken up after the United States Supreme Court declared the arrangement to be an "unreasonable" monopoly under the Sherman Antitrust Act 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, in competition with over a hundred other refiners). The Court's decision required Standard Oil to be broken into separate state companies, each with their own board of directors. However, the owners remained in charge of the smaller companies which made up four of the Seven Sisters. Standard Oil's founder, John D. Rockefeller, officially relinquished his title as president around this time.

Standard Oil, by this time, was often not appreciated by the its competitors and some of the public. It developed a negative reputation among many for its highly competitive business practices, including purchasing competitors and engaging in volume-discount transportation deals with the railroad companies to ensure it could undercut its competitors' prices. This helped kerosene to drop in price from 58 to 26 cents from 1865 to 1870. Competitors might not have appreciated the company's business practices, but consumers appreciated the drop in prices. Standard Oil, formed well before the discovery of Spindletop and a demand for oil other than for heat and light, was well placed to control the growth of the oil business. It was perceived that it did this by ensuring it owned and controlled all aspects of the trade.

During a massive strike by employees of the Rockefeller-owned Colorado Fuel and Iron Company , what was referred to as the Ludlow Massacre occurred on April 20, 1914. The state militia fired on a tent city inhabited by workers and their families, causing numerous deaths and a public relations disaster. John D. Rockefeller Jr. was forced to take action to bolster his public image to avert large-scale market losses. [1]

Perhaps the most infamous action of Standard Oil was its involvement with IG Farben. The two organizations worked together to build a plant for the manufacture of synthetic rubber in Nazi Germany, using slave labor from Auschwitz.

Successors

Successor companies to Standard Oil include:

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 Nebraska - eventually bought by Indiana Standard
  • 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

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