This third corner of the oil market seems to have con vinced Mr. Rockefeller and his colleagues at last that, how ever great the fun and profits of making oil very dear, in the long run it does not pay; that it weakens markets and stimulates competition. They learned a lesson in these years they have never forgotten—that when you make a scoop it must not be so big that you will never have a chance to make another one ; that if you want to keep your power to manipu late the market you must use that power so modestly that the public in general will not realise you have it. Again and again the effect of the experiences of 1872, 1876 and 188o crops out in the testimony of Standard officials. Benjamin Brewster once said to a Federal Investigating Committee, which had asked if the Standard could not fix the price of oil as it wished: "At the moment many things may be done, but the reaction is like a relapse of typhoid fever. The Standard Oil Company can never afford to sell goods dear. The people would go to dipping tallow candles in the old fashioned way if we got the price too high." The after-effects of the first great raids, then, were salutary. The Standard learned the limitations set on monopolies by certain great economic laws.
But if the Standard Oil Company learned in its first at tempts to raise the price of oil that they could not in the long run afford to make from mo to 35o per cent., they by no means gave up their attempt to keep their con trol, and to hold up profits as high as they could without injuring the market or inviting too strong competition. If one will look at the chart showing the fluctuations from 1879, when control was achieved, to the beginning of 1889, one will find that for ten years the margin between refined oil and crude never fell below the point reached by com petitive influences in the former year, though frequently it rose considerably above. Yet it is in this period that the Standard did all its great work in extending markets, in developing by-products, and in introducing the small and varied economies on which it rests its claim to be a great public benefactor. The first eight years of its existence had been spent in bold and relentless warfare on its competitors. Competition practically out of the way, it set all its great energies to developing what it had secured. In this period it brought into line the foreign markets and aided in increas ing the exports of illuminating oil from 365,000,00o gallons in 1879 to 455,000,000 in i888; of lubricating, from 3,000,000 to 24,000,000, and vet this great extension of the volume of business profited the consumer nothing. In this period it laid hands on the idea of the Tidewater, the long-distance pipe-lines for transporting crude oil, and so rid itself prac tically of the railroads, and yet this immense economy prof ited the public nothing. In spite of the immense develop
ment of this system and the enormous economies it brought about—a system so important that Mr. Rockefeller himself has said: "The entire oil business is dependent upon this pipe-line system. Without it every well would shut down, and every foreign market would be closed to us"—the mar gins never fell the fraction of a cent from 1879 to 1889, though it frequently rose. In this period, too, the by-products of oil were enormously increased. The waste, formerly as much as ten per cent. of the crude product, was reduced until practi cally all of the oil is worked up by the Standard people, and yet, in spite of the extension of by-products between 1879 and 1889, the margin never went below the point competition had forced it to in 1879.
The enormous profits which came to the Standard in these ten years by keeping out competition are evident if we consider for a moment the amount of business done. The exports of illuminating oil in this period were nearly 5,000,000,000 gallons; of this the Standard handled well toward ninety per cent. Consider what sums lay in the abil ity to hold up the price on such an amount even an eighth of a cent a gallon. Combine this control of the price of re fined oil with the control over the crude product, the ability to depress the market for purchasing, an ability used most carefully, but most constantly; add to this the economies and development Mr. Rockefeller's able and energetic machine was making, and the great profits of the Standard Oil Trust between 1879 and 1889 are easily explained. In 1879, on a capital of $3,5oo,000, the Standard Oil Company paid $3,150,000 dividends; in 188o it paid $1,o5o,000. In 1882 it capitalised itself at $7o,000,000. In 1885, three years later, its net earnings were over $8,000,o0o; in 1886, over $15, 000,000; in 1888, over $16,000,000; in 1889, nearly $15,000, 000. In the meantime the net value of its holdings had increased from $72,000,000; in 1883, to over $101,000,000. While the Standard was making these great sums, the men who produced the oil saw their property depreciating, and the value of their oil actually eaten up every two years by the prices the Standard charged for gathering and storing it.
But to return to the chart. With the beginning of 1889 the margin begins to fall. This is so in spite of a rising crude line. It would look as if the Standard Oil Company had sud denly had a change of heart. In the report of that year's business made to the trustees of the Standard Oil Trust, the following elaborate and interesting calculation was presented: "The quantity of crude oil consumed by the Standard manufacturing interests in 1889 was 896,250,325 gallons, or 20,339,293 barrels, an increase over the previous year of i19, 073,589 gallons, or 2,835,085 barrels, an increase of 15.3 per cent.