Bad as the charter was in appearance, the oil men found that the contracts which the new company had made with the railroads were worse. These contracts advanced the rates of freight the Oil Regions over Ioo per cent.—an advance which more than covered the margin of profit on their business—but it was not the railroad that got the greater part of this advance; it was the South Improvement Com pany. Not only did it ship its own oil at fully a dollar a barrel cheaper on an average. than anybody else could, but it received fully a dollar a barrel "rake-off" on every barrel its competitors shipped. It was computed and admitted by the members of the company who appeared before the inves tigating committee of Congress that this discrimination would have turned over to them fully $6,000,000 annually on the carrying trade. The railroads expected to receive about one and a half millions more than from the existing rates. That is, an additional cost of about $1.25 a barrel was added to crude oil, and it was computed that this would enable the refiners to advance their wholesale price at least four cents a gallon. It is hardly to be wondered_at that_when_ the_oil men had before them the full text of these _contracts they refused absolutely to accept the repeated assertions of the members of the South Improvement Company that their scheme was intended only for "the good of the oil business." The committee of Congress could not be persuaded to believe it either. "Your success meant the destruction of every refiner who refused for any reason to join your com pany, or whom you did not care to have in, and it put the producers entirely in your power. It would make a monopoly such as no set of men are fit to handle," the chairman of the committee declared. Of course Mr. Warden, the secretary of the company, protested again and again that they meant to take in all the refiners, but when he had to admit that the contracts with the railroads were not made on this condition, his protestations met with little credence. Besides, there was the damning fact that no refiners had come in except those in Cleveland, and that they with one accord testified that , they had yielded to force. Not a single factory in either New 1 York or the Oil Regions was in the combination. The fact that the producers had never been approached in any way looked very bad for the company, too. Mr. Watson affirmed and reaffirmed before the committee that it was the intention of the company to take care of the producers. "It was an essential part of this contract that the producers should join it," he declared. But no such condition was embodied in the contract. It was verbal only, and, besides, it had never been submitted to the producers themselves in any form until after the trouble in the Oil Regions began. The committee, like the oil men, insisted that under the circumstances no such verbal understanding was to be trusted.* No part of the testimony before the committee made a worse impression than that showing that the chief object of the combination was to put up the price of refined oil to the consumer, though nobody had denied from the first that this was the purpose. In a circular, intended for private cir culation, which appeared in the newspapers about this time explaining the objects of the South Improvement Company, this was made clear: "The object of this combination of interests," ran the cir cular, "is understood to be twofold: firstly, to do away, at least in a great measure, with the excessive and undue com petition now existing between the refining interest, by reason of there being a far greater refining capacity than is called for or justified by the existing petroleum-consuming require ments of the world; secondly, to avoid the heretofore undue competition between the various railroad companies trans porting oil to the seaboard, by fixing a uniform rate of freight, which it is thought can be adhered to by some such arrangement as guaranteeing to each road some such per centages of the profit of the aggregate amount of oil trans ported, whether the particular line carries it or not. It is also asserted that a prominent feature of the combination will be to limit the production of refined petroleum to such amounts as may serve, in a great measure, to do away with the serious periodical depressions in the article. Is it also to be expected that, desiring to curtail the production of refined petroleum in this country, the railroads will not offer any additional facilities for exportation of the crude article." A writer in the Oil City Derrick, quoted in the Cleveland Herald, March 2, 1872, said: "The ring_pretend that they will make their margin out_ofthe consumers. That is, that they will put refined up to a figure that will enable them to pay well for crude. . . .. The consumers are the avowed victims; s'irice they must pay ring in going on with their operations. And the producers' security for the price is a mere matter of discretion." Wherever the members of the company discussed the sub ject they put forward this object as one sufficient to justify the combination. If refined oil was put up everybody in the trade would make more money. To this end the public ought to be willing to pay more.
When Mr. Warden was under examination by the com mittee the chairman said to him: "Under your arrangement, the public would have been put to an additional expense of $7,5oo,000 a year." "What public?" said Mr. Warden. "They
would have had to pay it in Europe." "But to keep up the price abroad you would have to keep up the price at home," said the chairman. Mr. Warden conceded the point: "You could not get a better price for that exported without having a better price here," he said.* Mr. Watson contended that the price could be put up with benefit to the consumer. And when he was asked how, he replied: "By steadying the trade. You will notice what all those familiar with this trade know, that there are very rapid and excessive fluctuations in the oil market; that when these fluctuations take place the retail dealers are always quick to note a rise in price, but very slow to note a fall. Even if two dollars a barrel had been added to the price of oil under a I steady trade, I think the price of the retail purchaser would not have been increased. That increased price would only amount to one cent a quart (four cents a gallon), and I think '1 the price would not have been increased to the retail dealer because the fluctuations would have been avoided. That was one object to be accomplished." j.
The committee were not convinced, however, that a scheme which began by adding four cents to the price of a gallon of oil could be to the good of the consumer. Nor did any thing appear in the contracts which showed how the fluctua tions in the price of oil were to be avoided. These fluctuations were due to the rise and fall in the crude market, and that depended on the amount of crude coming from the ground. The South Improvement Company might assert that they meant to bring the producers into their scheme and persuade them to keep down the amount' of production in the same way they meant to keep down fe-fined, so that the price could be kept steadily high, but they had nothing to prove that they were sincere in the intention, nothing to prove that they had thought of seriously until the trouble in the Oil ,-- Regioriabegan. It looked very much to the committee as if the real intention of the company was to keep up the price of refined to a certain figure by limiting the output, and that there was nothing to show that it would not go up with crude though it might not go down with it! Under these circum stances it seemed as if a fluctuating market which gave a moderate average was better for the consumer than the steady high price which Mr. Watson thought so good for the pub lic. Thirty-two cents a gallon was the ideal price they had in view, though refined had not sold for that since 1869, the average price in .1870 being 26Y8 and in 1871 24%. The refiner who in 1871 sold his oil at 24% cents a gallon cleared easily fifty-two cents a barrel—a large profit on his investment, —but the refiners in the early stages of this new industry had made much larger profits. It was to perpetuate these early profits that they had gone into the South Improvement Company.
It did not take the full exposition of the objects of the South Improvement Company, brought out by the Congres sional Investigating Committee, with the publication of charters and contracts, to convince the country at large that the Oil Regions were right in their opposition. From the first the sympathy of the press and the people were with the oil men. It was evident to everybody that if the railroads had made the contracts as charged (and it daily became more evident they had done so), nothing but an absolute monopoly of the whole oil business by this combination could result. It was robbery, cried the newspapers all over the land. "Under the thin guise of assisting in the development of oil refining in Pittsburg and Cleveland," said the New York Tribune, "this corporation has simply laid its hand upon the throat of the oil traffic with a demand to 'stand and deliver.' " And if this could be done in the oil business, what was to prevent its being done in any other industry? Why should not a company be formed to control wheat or beef or iron or steel, as well as oil? If the railroads would do this for one company, why not for another? The South Improve ment Company, men agreed, was a menace to the free trade of the country. If the oil men yielded now, all industries must suffer from their weakness. The railroads must be taught a lesson as well as would-be monopolists. / The oil men had no thought of yielding. With every day of the war their backbone grew stiffer. The men were calmer, too, for their resistance had found a ground which seemed impregnable to them, and arguments against the South Im provement Company now took the place of denunciations. On all sides men said, This is a transportation question, and now is the time to put an end once and forever to the rebates. The sentiment against discrimination on account of amount of freight or for any other reason had been strong in the country since its beginning, and it now crystallised imme diately. The country so buzzed with discussion on the duties of the railroads that reporters sent from the Eastern news papers commented on it. Nothing was commoner, indeed, on the trains which ran the length of the region and were its real forums, than to hear a man explaining that the railways derived their existence and power from the people, that theii charters were contracts with the people, that a fundamental provision of these contracts was_that there should be no dis.