Of course securing a large crude shipping business like Mr. Neyhart's was a valuable point for the Standard. It threw all of the refiners whom he had supplied out of crude oil and forced several of them to come to the Standard buyer—a first step, of course, toward a lease or sale. At every point, indeed, making it difficult for the refiner to get his raw product was one of the favourite manoeuvres the combination. It was not only to crude oil it was applied. Factories which worked up the residuum or tar into lubricating oil a depended on Stand lants for their supply were off. There was one such in Cleveland—the firm of Morehouse and Freeman. Mr. Morehouse had begun to experiment with lubricating oils in 1861, and in 1871 the report of the Cleveland Board of Trade devoted several of its pages to a description of his business. According to this account he was then making oils adapted to lubricating all kinds of machinery—he held patents for several brands and trade marks, and had produced that year over 25,000 barrels of different lubricants besides 120,000 boxes of axle grease. At this time he was buying his stock or residuum from one or another of the twenty-five Cleveland refiners. Then came the South Improvement Company and the concentration of the town's refining interest in Mr. Rocke feller's hands. Mr. Morehouse, according to the testimony he gave the Hepburn Commission in 1879, went to Mr. Rocke feller, after the consolidation, to arrange for supplies. He was welcomed—the Standard Oil Company had not at that time begun to deal in lubricating oils—and encouraged to build a new plant. This was done at a cost of $41,000, and a contract was made with the Standard Oil Company for a daily supply of eighty-five barrels of residuum. Some time in 1874 this supply was cut down to twelve barrels. The price was put up too, and contracts for several months were demanded so that Mr. Morehouse got no advantage from the variation in crude prices. Then the freights went up on the railroads. He paid $1.50 and two dollars for what he says he felt sure his big neighbour was paying but seventy or seventy-five cents (there is no evidence of any such low rate to the Standard from Cleve land to New York by rail). Now it was impossible for Mr. Morehouse to supply his trade on twelve barrels of stock. He begged Mr. Rockefeller for more. It was there in the Standard Oil works. Why could he not have it? He could pay for it. He and his partner offered to buy 5,03o barrels and store it, but Mr. Rockefeller was firm. All he could give Mr. Morehouse was twelve barrels a day. "I saw readily what that meant," said Mr. Morehouse, "that meant squeeze you out—buy your works. They have got the works and are running them ; I am without anything. They paid about $i 5,000 for what cost me $41,000. He said that he had facilities for freighting and that the coal-oil business belonged to them; and any concern that would start in that business, they had sufficient money to lay aside a fund to wipe them out—these are the words." * At every refining centre in the country this process of con solidation through persuasion, intimidation, or force, went on. As fast as a refinery was brought in line its work was assigned to it. If it was an old and poorly equipped plant it was usually dismantled or shut down. If it was badly placed, that is, if it was not economically placed in regard to a pipe-line and rail road, it was dismantled even though in excellent condition. If it was a large and well-equipped plant advantageously located it was assigned a certain quota to manufacture, and it did nothing but manufacture. The buying of crude, the mak ing rates, the selling of the outpuLremained with Mr. Rockefeller. under which all the refineries _____,._.—
brought into line were run were of the most detailed and rigid description, and they were executed as a rule with a secrecy which baffles description. Take, for example, a run ning arrangement made by Rockefeller in 1876, with a Cleve land refinery, that of Scofield, Shurmer and Teagle. The mem ers of this concern had all been in the refining business in Cleveland in 1872 and had all handed over their works to r. Rockefeller, when he notified them of the South Improve ent Company's contracts. Mr. Shurmer declared once in an ffidavit that he alone lost $2o,000 by that manoeuvre. The embers of the firm had not stayed out of business, however. Recovering from the panic caused by the South Improvement ompany, they had united in 1875, building a refinery worth 65,000, with a yearly capacity of r8o,000 barrels of crude. On the first year's business they made $40,000. Although his was doing well, they were convinced they might do better if they could get as good freight rates as the Standard Oil Company, and in the spring of 1876 they brought suit against the Lake Shore and Michigan Southern and the New York Central and Hudson River Railroads for "unlawful and unjust discrimination, partialities and preferences made and prac tised . . . in favour of the Standard Oil Company, enabling the said Standard Oil Company to obtain to a great extent the monopoly of the oil and naphtha trade of Cleveland." The suit was not carried through at the time. Mr. Rockefeller seems to have suggested a surer way to the firm of getting the rates they wanted. This was to make a running arrangement with him. He seems to have demonstrated to them that they could make more money under his plan than outside, and they .signed a contract for a remarkable "joint adventure." Accord ing to this document Scofield, Shurmer and Teagle put into the business a plant worth at that time about $73,00o and their entire time. Mr. Rockefeller put in $10,000 and his rebates! That is, he secured for the firm the same preferential rates on their shipments that the Standard Oil Company enjoyed. The firm bound itself not to refine over 85,000 bar rels a year and neither jointly nor separately to engage in any other form of oil business for ten years—the life of the con tract. Scofield, Shurmer and Teagle were guaranteed a profit of $35,000 a year. Profits over $35,000 went to Mr. Rocke feller up to $70,000; any further profits were divided.
The making of this contract and its execution were attended by all the secret rites peculiar to Mr. Rockefeller's busi ness ventures. According to the testimony of one of the firm given a few years later on the witness stand in Cleveland the contract was signed at night at Mr. Rockefeller's house on Euclid Avenue in Cleveland, where he told the gentlemen that they must not tell even their wives about the new arrange ment, that if they made money they must conceal it—they were not to drive fast horses, "put on style," or do anything to let people suspect there were unusual profits in oil refin ing. That would invite competition. They were told that all , accounts were to be kept secret. Fictitious names were to be ' used in corresponding, and a special box at the post-office was employed for these fictitious characters. In fact, smugglers and house-breakers never surrounded their operations with more mystery.
But make his operations as thickly as he might in secrecy, the effect of Mr. Rockefeller's steady and united attack on the refining business was daily becoming more apparent. Before the end of 1876 the alarm among oil producers, the few inde pendent refineries still in business, and even in certain railroad circles was serious. On all sides talk of a united effort to meet the consolidation was heard.