THE HISTORY OF THE STANDARD OIL COMPANY try, and the daily consumption of that year had been but 15,00o barrels. This large capacity produced the liveliest competition in selling, and every year the margin of profit grew smaller.
Nov it is natural that men should struggle to keep up a profit. The refiners had become accustomed to making from twenty-five per cent. to fifty per cent., and even more, on every gallon of oil they put out. They had the same extrava gant notion of what they should make as the oil producers of those early days had. No oil producer thought in the six ties that he was succeeding if his wells did not pay for them selves in six months! And as their new industry slowly but surely came under the laws of trade, increased its produc tion, was subjected to severe competition, as they saw them selves, in order to sustain their business, forced to practise economies and to accept smaller profits, they loudly com plained. There was never a set of men who found it harder to accept the limitations of economic laws than the oil pro ducers of Pennsylvania. The oil refiners showed the same dislike of the harness, and in 1871, as we have seen, Mr. Rockefeller and a few of his friends combined to throw it off. What they proposed to do was simply to get all the refineries of the country under their control, and thereafter make only so much oil as they could sell at their own inter pretation of a paying price.
There was not enough profit in the margin of 1871. Now what was the profit? According to the best figures accessible of the cost of oil refining at that day, the man who sold a gallon of oil at 24% cents (the average official price for that year) made a profit of not less than cents-52 cents a barrel.* Josiah Lombard, a large independent refiner of New York City, when questioned by the Congressional Committee which, in 1872, looked into Mr. Rockefeller's scheme for making oil dearer, said that his concern was making money on this margin. "We could ship oil and do very well." A. H. Tack told the Congressional Committee of 1888, which was trying to find out why he had been obliged to go out of the refining business in 1873, that he could have made twelve per cent. on his capital with a profit of ten cents a barrel. Scofield, Shurmer and Teagle, of Cleve land, made a profit of thirty-four cents a barrel in 1875, and cleared $4o,000 on an investment of $65,000. Fifty-two cents a barrel profit then was certainly not to be despised. The South Improvement Company gentlemen were not modest in the matter of profits, however, and they launched the scheme whose basic principles have figured so largely in the devel opment of the Standard Oil Trust.
The success which Mr. Rockefeller had in getting the refiners of the country under his control, and the methods he took to do it, we have traced. It will be remembered that for
a brief period in 1872 and 1873 he held together an associa tion pledged to curtail the output of oil, but that in July, 1873, it went to pieces.* It will be recalled that three years after, in 1875, he put a second association into operation, which in a year claimed a control of ninety per cent. of the refining power of the country, and in less than four years controlled ninety-five per cent.t This large percentage Mr. Rockefeller has not been able to keep, but from 1879 to the present day there has not been a time when he has not con trolled over eighty per cent. of the oil manufacturing of the country. To-day he controls about eighty-three per cent.
Now it is generally conceded that the man or men who control over seventy per cent. of a commodity control its price—within limits, very strict limits, too, such is the force of economic laws. In the case of the Standard Oil Company the control is so complete that the price of oil, both crude and refined, is actually issued from its headquarters.
Now, with the help of the chart, let us see what Mr. Rockefeller and his colleagues have been able to do from 1872 to 1904 with their power over the price of oil. The first association which worked was brought about late in 1872. What happened? Prices for refined oil were run up from 23 cents a gallon in June to 27 cents a gallon in November, and the margin increased from 13.6 cents to 17.7 cents. From a profit of about 1% cents a gallon they rose to one of over 4 cents. Unfortunately, however, the refiners of that period were not educated to the self-restraint necessary to carry out this scheme. They very soon failed to keep down their out put of oil and overstocked the market, and the whole machine went to pieces. Mr. Rockefeller had been able to make oil dear for a short time, but only for a short time. Worse than that, what he had been able to do brought severe public con demnation. It had, indeed, produced exactly the result the economists tell us too high prices must produce—limitation of the market and stimulation of competition in rival goods. Mr. Rockefeller's second scheme to work out the good of the oil business by making oil dear resulted in decreasing oil exports for the first time since the discovery of oil.' It also increased one of the chief grievances of the American re finery—that was, the exporting of the crude oil to be refined in Europe. Where the exports of crude had been something over eleven million gallons in 1871, they were now over six teen millions. And it set the shale-oil factories of Scotland to work merrily. It was cheaper for Great Britain to use oil from Scottish shales than to buy oil sold under Mr. Rocke feller's great plan for benefiting the oil business. So for the time the scheme fell down.