The effect on the men who produced oil was, of course, bad. They had found it impossible at any time, while the refined was kept so high, to force crude up to a correspond ing point, though every effort was made. The producers threatened to combine and refine their own oil. When the Empire Transportation Company went into refining the pro ducers heartily favoured the movement, and throughout the next year a severe competition kept prices down. The Em pire was finally wiped out; the producers, aroused by this failure, combined against the Standard in one of the greatest associations they ever had. From 1878 to 188o they fought continuously to restore competition. They secured the intro duction into Congress of a bill to regulate interstate com merce; they fought for more drastic laws against railroad discrimination in the state of Pennsylvania; they persuaded the state to prosecute the Pennsylvania Railroad for dis crimination; they indicted Mr. Rockefeller and eight of his colleagues for criminal conspiracy; and they supported by money and influence a scheme for a seaboard pipe-line con nected with the independent refineries.* If one will look at the chart he will see graphically the effect on Mr. Rockefeller's ambition of this fundamentally sound independent movement. The margin between crude and refined, thrust up to over twenty cents by the combina tion of 1878, fell rapidly under the combined efforts of the independents through 1877, 1878 and 1879. In the latter year it touched five cents for the first time in the history of the business. Competition resulting in economies, in a revo lutionising transportation invention—the seaboard pipe-line —in a greatly extended foreign market, brought down this margin in 1879. Nothing else.
Those who have read this history know what became of the competitive movement of these years of 1878-1879. They remember how the Producers' Union compromised its suits and abandoned its efforts for interstate commerce regulation. They remember, too, how, just before the great seaboard pipe-line project was proved to be a success, all but one of the independent refineries were, by one means or another, persuaded to sell or to combine with the Standard, leaving the Tidewater without an outlet for its oil. Before the end of 1879 the Standard claimed ninety-five per cent. of the refining business. Nov examine the chart for the effect on the price of oil in 188o, of this doing away with competition —another sudden uplift of the price of refined, this time without the excuse of a rise or probable rise in crude. For three years oil had not been sold so high as it was in 188o, when the exporters began to take on their winter's supply. An interesting contemporary account of this coup of 188o, and the way in which it was managed, is found in the excel lent monthly Petroleum Trade Report, published by John C. Welch. It is dated November, 188o, and headed "Very Sharp Practice": "There is made each day in New York what is known as an official quotation for refined oil, this official quotation being made as a matter of convenience in cabling the price of refined oil throughout the world. Refined oil not being sold at an open board, it is sometimes difficult to quote it accurately, but by having an 'official quotation' this can be quoted, and the difficulty is supposed to be, in a measure at least, remedied. The 'official quotation' is made by three petroleum brokers appointed by the Produce Exchange for that purpose, who meet each day after exchange hours for the purpose of establishing it. There is one party, and one party only, that have very large lots to sell, and so important a position do they hold in the business that their prices are ordinarily the market. Of course, to make transactions, their prices and buyers' prices have to come together, and transactions establish a market much better than prices offered to buy or sell at, but without transactions. At many times, if the Standard
do not sell, there are no transactions, and, consequently, the Standard's asking price is leaned upon to establish an official quotation. During September, the official quota tion went up from 9 cents to iii cents, with comparatively little demand, as the foreign stocks were large, and very little oil was required to supply the world's wants. The upward movement was, consequently, purely arbitrary. Arbitrary prices are, however, a part of the Standard's every-day life, and I am not taking at this time any exception to them. All through October and up to November 13, the official quotation was 12 cents, or sometimes a little over and sometimes a little under, and as this price did not meet the views of buyers to but slight extent, the Standard were supposed to be exercising a Roman virtue in not selling. Twelve cents continued as the official quota tion to November 13, without any wavering, but from the 13th to the 18th, while '12 cents asked by refiners' continued in the quotation, such sentences as these were included at different dates: 'Other lots obtainable at 11 cents.' Sales at toi cents, offered at that.' Other lots obtainable at irregular prices, from so to soi cents.' On November 18, the quotation was 'so to 12 cents.' I give the following quotation of the New York refined market as published in my Oil City daily report of November II: 'The New York market yesterday closed, secretly offered and unsalable at Is i cents, and probably at ist cents by resales and outside refiners, and likely by Standard, though they openly ask 12.' "The point that seems apparent is that the official quotation of 12 cents ceased to be an honest quotation a considerable time before it was abandoned. The committee making the quotation can probably justify their position by the custom of the trade of regarding the prices the Standard openly ask as the market, nevertheless they, and the Produce Exchange whom they represent, were the bulwark from behind which the Standard were able to get off their hot shot against the consuming trade in the United States and the consuming trade in Europe, who all this time were buying Standard oil on the basis of 12 cents at New York, the supplies at the time being drawn from their stock in Europe and from their various depots in the United States." But the performance of 1876 and 1877 was not forgotten in Europe. In 1879 the exporters and buyers from all the great foreign markets had met in Bremen in an indignation meeting over the way the Standard was handling the oil business. Remonstrances came from the consuls at Antwerp and Bremen to our State Department concerning even the quality of oil which had been sent to Europe by the Stand ard. John C. Welch, who was abroad in 1879, was told by a prominent Antwerp merchant: "I am of the opinion that if the petroleum business continues to be conducted as it has been in the past in Europe, it will go to smash." * The attempt to repeat in 188o what had been done in 1876 failed. The exports of illuminating oil that year fell much below what they had been the year before. In 1879, 365,00000o gal lons of refined oil were exported; in 188o, only 286,000,000 gallons. Exports of crude, on the contrary, rose from about 28,000,00o gallons to nearly 37,000,00o gallons. The foreign ers could export and refine their own oil cheaper than they could buv from Mr. Rockefeller. Competition was after him, too, for the Tidewater, whose refineries he had cut off, had stored their oil, built new plants, and were again ready to compete in the market.