STANDARD OIL COMPANY, The. Two very thrifty young men, John D. Rocke feller and an Englishman named M. B. Clark, after making small savings from their meagre salaries for years and with close financing, de termined to pool their little capital. They started a produce commission business in Cleveland, Ohio, in 1858, and were quickly doing a very large turn-over. In 1862 they gave a financial backing of $4,000 to Samuel Andrews to enter into the mineral oil refining business. Andrews by his clever discoveries in refinery improvements soon made the concern wealthy and by 1865 it became the city's most promising industry." Rockefeller sold out his interest in the commission business and devoted his time and money to the oil firm of Rocke feller and Andrews. A second refinery was soon started— William A. Rockefeller and Company, with John D.'s brother as partner. H. M. Flagler bought a partnership and was assigned selling quarters in New York City. John D. Rockefeller remained head of all the concerns. Five years after the start in the refining business each of the companies (1870) became combined in the title Standard Oil Com pany, with a capital of $1,000,000. The partners were John D. Rockefeller, Henry M. Flagler, Samuel Andrews, Stephen V. Harkness and William Rockefeller. The numerous oil re fineries were progressing at a marvelous rate, but in three or four i years the Standard's prog ress was so greatly in advance of its rivals that they started an investigation to discover by what means this firm could be getting so far ahead of the others. The Standard Oil Com pany was found to be receiving rebates from the railroads which were not extended to its 25 rivals in Cleveland. While Cleveland was the largest refining centre in the United States and rapidly gaining in momentum, the Rocke feller interests, by 1870, were the largest oper ators in that field. The ones of that thriving city declared that the unflagging en ergy and commercial talents of the Standard partners assured the concern rapid progress; and the continuance of the extra substantial rebate in transportation cost, in spite of the clamors of its rivals, made their position posi tively dangerous to competitors. Cleveland still outstripped her rivals in the refining field, but the "Oil Regions" threatened to become a re fining centre. Pittsburgh and the Pennsyl vania Railroad were making the Cleveland future uncertain. The Standard had to face such facts as that the Pennsylvania Railroad and the Erie Railroad were allying themselves with the Empire Transportation Company and their rivals were putting up a refining plant in Jersey City connected with their pipe line supply. Railroad competition was becoming so keen rebates were given profusely and so much secret dealing was being revealed that each concern suspected its neighbor. The New York Central was forced into the scrimmage in self-protection, and now by 1871 the refining capacity was too great and supply was beyond demand, as so many were rushing into a field that had proven so prosperous. Refined oil prices began to drop. Rockefeller prices of 583 cents per gallon in 1865 had fallen to 263 cents by 1870—his 43 cent margin was wiped out except 174 cents. Added to these ominous conditions foreign sales of refined oil were decreasing rapidly, for Europeans were beginning, to import the crude oil and do their own refining. A scheme was set on foot (John D. Rockefeller and H. M. Flagler on oath declared they were not the originators but disbelieved in the plan at first) among the Pennsylvania refiners to combine enough plants and shippers to awe the railroads into giving the combination special rebates "and draw backs on that of other people." They felt as sured thus the refiners could control the situa tion and regulate the amount refined and put up prices. The extra rebate had been allowed by the railroads to the Standard Oil Company as shippers of larger quantities than those of competitors. This concern now purchased, secretly, a charter of a company that was in liquidation and which permitted its owners the widest scope of commercial action. It was en
titled Improvement Company" and was owned and organized by a combination of railroad men and oil refiners in 1872. They are said to have obtained control of one-tenth of the refining capacity of the country. Favor able freight contracts were made between the Southern Improvement Company and the Penn sylvania, Erie and New York Central railroads. Nearly all the Cleveland refiners subscribed later and one-fifth of the United States refining capacity was absorbed. In 1874 the Standard Oil Company acquired control of several leading refineries in Pittsburgh and Philadelphia as well as the great plant of Charles Pratt and Company at New York. From 1875 to 1879 the refiners were brought under the control or into the possession of the Standard Oil Com pany in ever-increasing numbers. All the oil region was gained by the combine and large numbers of works were dismantled and closed. By 1879 the Standard Oil Company held almost a monopoly in oil transportation facilities, in cluding pipe lines, and the Standard "alliance" produced 95 per cent of the country's refined oil; this "alliance" consisting of the principal refining companies from Cleveland to Balti more. In 1882 the Standard Oil Trust was formed for "convenience of control and man agement." It placed all the stock in the hands of trustees and corporations were organized in the different States that had business centres of the trust. The growth of the gigantic con cern was steady and its prosperity was unin terrupted. In 1882 the properties under control of the Trust were valued at $75,000,000; by 1892 this valuation had grown to $121,631,312, 50 per cent of the increase being from profits in vested. Dividends rose from 54 per cent in 1882 to 12 per cent in 1891. But 1892 opened up litigation and a suit to oust the corporation from its corporate rights for "abuse of cor porate powers." The court decided the part nership of corporations illegal and that such a combine was in restraint of trade, illegal, etc. Hence the Standard Oil Company was dis solved into its 20 constituent companies. In 1899 the Standard Oil Company of New Jersey was organized to bring about closer unity and provision for the claims of small holders of trust certificates. The former Standard Oil Company of New Jersey had a capital of $1,000,000, whereas the newer concern had an increased capital of $110,000,000 with power to purchase and own stock of the different cor porations. and since 1900 over $97,000,000 of this capital stock had been utilized in purchasing other standard companies atpar, the market value based on good will and earnings have been valued at $650,000,000. Suit under the Sherman Anti-Trust Law was instituted in 1906 in the United States Circuit Court at Saint Louis and its dissolution was ordered by the court, the decision being, on appeal, confirmed by the Supreme Court in 1911. But the distri bution pro rata of the stock among subscribers left the strength of the companies a combined power equal to the prior condition. The figures of the earning capacity of the concern appear to range from $8,000,000 from 1882, $15,000,000 from 1886, by 1896 rising to $34,000,000, and in 1905 amounting to $57,459,356. Computation of the income of the entire congeries of com panies owned by the Standard is not obtainable. Immense oil well and refining interests are held in the Baku district of Russia, in Mexico, in fact in every section of the world where mineral oil has been discovered in commercial quan tities. The great lines of tank steamers cross ing the seas to all parts of the globe and owned by the Standard. Oil Company have a stupen dous value in their entirety.
Bibliography.— Howland, H. J., 'Standard Oil, Illustrated with photographs .reproduced from The Outlook' (New York 1907) ; Hub bard, Elbert, 'The Standard Oil Company' (East Aurora, N. Y., 1910) ; Lloyd, H. D., 'Story of a Monopoly' (extract from Atlantic Monthly, New York 1881) ; Montague, G. H., 'The Rise and Progress of the Standard Oil Company' (New York 1904) •, Tarbell, I. M., 'The History of the Standard Oil Company' (New York 1904).