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04/28/2006

Monopoly, Part III

[WSH returns May 11]

This week we wrap up our story of how John D. Rockefeller’s
Standard Oil Company used its influence over the railroads to
monopolize the petroleum industry, which in the 1870s and
1880s was primarily about the business of kerosene, or “cheap
light.”

Following are further excerpts from an extensive piece in The
Atlantic Monthly, 1881, as written by the famous muckraker
Henry Demarest Lloyd. Again, as you read this remember Lloyd
had an agenda just like all muckrakers did back then (and more
than a few journalists today), but it’s interesting history;
including the environmental damage that was taking place in
those days as many an operator was forced to pump his oil onto
the ground in order to save his pipes from damage. You also see
how Standard, like any monopoly, used the courts to threaten
those who sought to compete with them.

---

Henry Demarest Lloyd:

Hundreds and thousands of men have been ruined by these acts
of the Standard and the railroads; whole communities have been
rendered desperate, and the peace of Pennsylvania imperiled
more than once. The thousands of men thrown out of
employment in Pittsburgh between 1872 and 1877 were actors in
the Pittsburgh tragedy of July, 1877. The oil producers
declared that “the Standard and the railroad companies leave to
the people, whose creatures they are, but two remedies, - an
appeal for protection first to the law of the land, and next to the
higher law of nature!” The very intelligent and fair
correspondent of the New York Sun, whom the Standard could
not seduce, as it did the representative of another great New
York daily, wrote from Titusville, Pa., Nov. 4, 1878, “The fact is
the State of Pennsylvania has had a narrow escape from an
internal war, that would have required all its resources to control
and check, and the danger is not over yet .Had certain men
given the word there would have been an outbreak that
contemplated the seizure of the railroads and running them, the
capture and control of the United Pipe Line’s [the Standard’s]
property, and in all probability the burning of all the property of
the Standard Oil Company in the region.” .

Mr. B. B. Campbell, who described himself as the unfortunate
owner of nearly a hundred producing wells, told a story before
the supreme court of Pennsylvania that ought not to be
uninteresting to the million of consumers of kerosene. One day,
returning to his home at Parker, near Pittsburgh, the center of a
great oil district, he found the citizens in a state of terrible
excitement. The Standard, through its pipe line, had refused to
run oil, unless sold to them, and then declared it could not buy,
because the railroads could furnish it no cars in which to move
away the oil. Hundreds of wells were stopped, to their great
damage. Thousands more, whose owners were afraid to close
them for fear of injury by salt water, were pumping the oil on the
ground. All the influence of a few leading men was hardly
enough to prevent an outbreak and the destruction of railroad and
pipe lines. Mr. Campbell telegraphed the railroad authorities,
“The refusal of the Standard to run oil, unless sold upon
immediate shipment, and of the railroads to furnish cars, has
created such excitement here that the conservative citizens will
not be able to control the peace, and I fear the scenes of last July
will be repeated in an aggravated form.” The interview that
followed convinced the railroad men they had gone too far, and
in a few hours afterwards hundreds of empty cars suddenly
appeared at Parker, and for a week the railroad, which had said it
could furnish no cars, took away from Parker fifty thousand
barrels of oil a day!

If we turn to the experience of the refiners we find they fared as
badly as the producers. The handful of New York refiners who
survived the conspiracy against them testify that they had to keep
their capacity limited and to do as little as they could. They did
not dare to build large refineries, because they would not be able
to get oil enough carried to them to keep them going. Mr.
Alexander, of Cleveland, tells how he was informed by
Rockefeller, of the Standard, that if he would not sell out he
should be crushed out. The Standard had a contract with the
railroads which made them master. He had to take their terms,
and sell for $65,000 a refinery which cost him $150,000, and was
making money. Refiner after refiner in Pittsburgh, buying his
crude oil in the open market, manufacturing it at his works,
shipping it to the seaboard, met with a continued succession of
losses, and was forced into bankruptcy or a sale of his works to
the Standard, who always had a buyer on the spot at the right
time. The great majority of these refineries, when bought by the
Standard, were dismantled and the “junk” was hauled to other
refineries. The Vesta and Cosmos refineries, which cost about
$800,000, were sold at sheriff’s sale to the Standard for $80,000,
and are now run vigorously by that company. The Germania,
which was run to its full capacity as long as the Pennsylvania
Railroad gave its proprietor transportation, is now leased to the
Standard, but stands idle, as that concern can make more money
by limiting the production and maintaining an artificial price than
by giving the people cheap light. The Standard became
practically the only refiner of oil in Western Pennsylvania, and
its rule was bankruptcy to all attempting to lead an independent
existence.

D.P. Reichardt tells us how the agents of the Standard came to
him with the threat that if he did not come into their combination
they would drive him to the wall. The Standard called upon this
free man to choose between financial ruin and joining them on
these terms: he was to refine only half as much as he had been
doing, and was to pay them a tribute of one cent a gallon, a tax of
five to twelve per cent. The selling, storing, transporting, and
price of his oil he was to leave entirely to the Standard .

The Pittsburgh Chamber of Commerce reported April 3, 1876,
that there were twenty-one oil refineries idle in that city, owing
to freight discriminations and combinations. There were
$2,000,000 invested in these refineries, and if in operation they
would have required the labor directly of 3060 men, besides the
much larger number of carpenters, masons, bricklayers, boiler-
makers, pump-makers, and other workingmen, who would have
employment if the oil refining business were prosperous .

Its genius for monopoly has given the Standard control of more
than the product of oil and its manufacture. Wholesale
merchants in all the cities of the country, except New York, have
to buy and sell at the prices it makes. Merchants who buy oil of
the Standard are not allowed to sell to dealers who buy of its few
competitors. Some who have done so have been warned not to
repeat the offense, and have been informed that, if they did so,
the Standard, though under contract to supply them with oil,
would cut them off, and would fight any suit they might bring
through all the courts without regard to expense .

Today, in every part of the United States, people who burn
kerosene are paying the Standard Oil Company a tax on every
gallon amounting to several times its original cost to that
concern. The average price of crude oil at the wells or at
Cleveland, as the railroads carry the crude free to the Standard’s
refineries, was in December last about three cents a gallon. The
price of refined at Cleveland was seventeen cents a gallon. Oil
that the Standard sells in New York at a profit, at ten and one
half cents a gallon, they charge nineteen and three fourths cents
for in Chicago. The average cost, last December, of the one and
third barrels of petroleum needed to make a barrel of kerosene
was $2.05 at Cleveland. The cost of refining, barreling, and all
expenses, including a refiner’s profit of half a dollar a barrel, is,
according to the testimony of experts, $2.75 a barrel. To bring
by rail to Chicago costs seventy cents, making the total cost
$5.50 for a barrel of fifty gallons, or eleven cents a gallon. The
price the Standard charges in Chicago is nineteen and three
fourths cents a gallon, in which, as the difference between eleven
and nineteen and three fourths cents, there is a tax on the public
of eight and three fourths cents. This tax is transmitted by the
middle-men, jobbers, and retailers to the consumer. When at
twenty-five cents a gallon the working-man buys kerosene
because it is cheaper than gas, or the student because it is better,
each pays the Standard this tax of eight and three fourths cents a
gallon. A family that uses a gallon of kerosene a day pays a
yearly tribute to the Standard of $32, the income from $800 in
the four per cents .

Today the only visible hope of cheap light for the people of this
country is the discovery, announced by the Atlantic cable of
January 28th, that in the Hanover petroleum district in Germany a
basin has been found, which is thought by experts to be, beyond
doubt, as large and rich as the one in Pennsylvania. In Europe,
such alliances between the railroads and the refiners as created
by the Standard monopoly are impossible. German oil wells,
German refineries, and the Canadian canals may yet give the
people of the interior of this continent what the American
Standard and the American railroads have denied them, - cheap
light.

It is the railroads that have bred the millionaires who are now
buying newspapers, and getting up corners in wheat, corn, and
cotton, and are making railroad consolidations that stretch across
the continent .

One mind invented the locomotive, established the railroad, and
discovered the law of this new force. All railroad history has
been a vindication of George Stephenson’s saying that where
combination was possible competition was impossible .

In less than the ordinary span of a lifetime, our railroads have
brought upon us the worst labor disturbance, the greatest of
monopolies, and the most formidable combination of money and
brains that ever overshadowed a state. The time has come to face
the fact that the forces of capital and industry have outgrown the
forces of our government. The corporation and the trades-union
have forgotten that they are the creatures of the state. Our strong
men are engaged in a headlong fight for fortune, power,
precedence, success. Americans as they are, they ride over the
people like Juggernaut to gain their ends. The moralists have
preached to them since the world began, and have failed. The
common people, the nation, must take them in hand. The people
can be successful only when they are right. When monopolies
succeed, the people fail; when a rich criminal escapes justice, the
people are punished; when a legislature is bribed, the people are
cheated .The nation is the engine of the people. They must use
it for their industrial life, as they used it in 1861 for their
political life. The States have failed. The United States must
succeed, or the people will perish.

---

Wall Street History will return in two weeks with the story of
Chernobyl.

Brian Trumbore



AddThis Feed Button

 

-04/28/2006-      
Web Epoch NJ Web Design  |  (c) Copyright 2016 StocksandNews.com, LLC.

Wall Street History

04/28/2006

Monopoly, Part III

[WSH returns May 11]

This week we wrap up our story of how John D. Rockefeller’s
Standard Oil Company used its influence over the railroads to
monopolize the petroleum industry, which in the 1870s and
1880s was primarily about the business of kerosene, or “cheap
light.”

Following are further excerpts from an extensive piece in The
Atlantic Monthly, 1881, as written by the famous muckraker
Henry Demarest Lloyd. Again, as you read this remember Lloyd
had an agenda just like all muckrakers did back then (and more
than a few journalists today), but it’s interesting history;
including the environmental damage that was taking place in
those days as many an operator was forced to pump his oil onto
the ground in order to save his pipes from damage. You also see
how Standard, like any monopoly, used the courts to threaten
those who sought to compete with them.

---

Henry Demarest Lloyd:

Hundreds and thousands of men have been ruined by these acts
of the Standard and the railroads; whole communities have been
rendered desperate, and the peace of Pennsylvania imperiled
more than once. The thousands of men thrown out of
employment in Pittsburgh between 1872 and 1877 were actors in
the Pittsburgh tragedy of July, 1877. The oil producers
declared that “the Standard and the railroad companies leave to
the people, whose creatures they are, but two remedies, - an
appeal for protection first to the law of the land, and next to the
higher law of nature!” The very intelligent and fair
correspondent of the New York Sun, whom the Standard could
not seduce, as it did the representative of another great New
York daily, wrote from Titusville, Pa., Nov. 4, 1878, “The fact is
the State of Pennsylvania has had a narrow escape from an
internal war, that would have required all its resources to control
and check, and the danger is not over yet .Had certain men
given the word there would have been an outbreak that
contemplated the seizure of the railroads and running them, the
capture and control of the United Pipe Line’s [the Standard’s]
property, and in all probability the burning of all the property of
the Standard Oil Company in the region.” .

Mr. B. B. Campbell, who described himself as the unfortunate
owner of nearly a hundred producing wells, told a story before
the supreme court of Pennsylvania that ought not to be
uninteresting to the million of consumers of kerosene. One day,
returning to his home at Parker, near Pittsburgh, the center of a
great oil district, he found the citizens in a state of terrible
excitement. The Standard, through its pipe line, had refused to
run oil, unless sold to them, and then declared it could not buy,
because the railroads could furnish it no cars in which to move
away the oil. Hundreds of wells were stopped, to their great
damage. Thousands more, whose owners were afraid to close
them for fear of injury by salt water, were pumping the oil on the
ground. All the influence of a few leading men was hardly
enough to prevent an outbreak and the destruction of railroad and
pipe lines. Mr. Campbell telegraphed the railroad authorities,
“The refusal of the Standard to run oil, unless sold upon
immediate shipment, and of the railroads to furnish cars, has
created such excitement here that the conservative citizens will
not be able to control the peace, and I fear the scenes of last July
will be repeated in an aggravated form.” The interview that
followed convinced the railroad men they had gone too far, and
in a few hours afterwards hundreds of empty cars suddenly
appeared at Parker, and for a week the railroad, which had said it
could furnish no cars, took away from Parker fifty thousand
barrels of oil a day!

If we turn to the experience of the refiners we find they fared as
badly as the producers. The handful of New York refiners who
survived the conspiracy against them testify that they had to keep
their capacity limited and to do as little as they could. They did
not dare to build large refineries, because they would not be able
to get oil enough carried to them to keep them going. Mr.
Alexander, of Cleveland, tells how he was informed by
Rockefeller, of the Standard, that if he would not sell out he
should be crushed out. The Standard had a contract with the
railroads which made them master. He had to take their terms,
and sell for $65,000 a refinery which cost him $150,000, and was
making money. Refiner after refiner in Pittsburgh, buying his
crude oil in the open market, manufacturing it at his works,
shipping it to the seaboard, met with a continued succession of
losses, and was forced into bankruptcy or a sale of his works to
the Standard, who always had a buyer on the spot at the right
time. The great majority of these refineries, when bought by the
Standard, were dismantled and the “junk” was hauled to other
refineries. The Vesta and Cosmos refineries, which cost about
$800,000, were sold at sheriff’s sale to the Standard for $80,000,
and are now run vigorously by that company. The Germania,
which was run to its full capacity as long as the Pennsylvania
Railroad gave its proprietor transportation, is now leased to the
Standard, but stands idle, as that concern can make more money
by limiting the production and maintaining an artificial price than
by giving the people cheap light. The Standard became
practically the only refiner of oil in Western Pennsylvania, and
its rule was bankruptcy to all attempting to lead an independent
existence.

D.P. Reichardt tells us how the agents of the Standard came to
him with the threat that if he did not come into their combination
they would drive him to the wall. The Standard called upon this
free man to choose between financial ruin and joining them on
these terms: he was to refine only half as much as he had been
doing, and was to pay them a tribute of one cent a gallon, a tax of
five to twelve per cent. The selling, storing, transporting, and
price of his oil he was to leave entirely to the Standard .

The Pittsburgh Chamber of Commerce reported April 3, 1876,
that there were twenty-one oil refineries idle in that city, owing
to freight discriminations and combinations. There were
$2,000,000 invested in these refineries, and if in operation they
would have required the labor directly of 3060 men, besides the
much larger number of carpenters, masons, bricklayers, boiler-
makers, pump-makers, and other workingmen, who would have
employment if the oil refining business were prosperous .

Its genius for monopoly has given the Standard control of more
than the product of oil and its manufacture. Wholesale
merchants in all the cities of the country, except New York, have
to buy and sell at the prices it makes. Merchants who buy oil of
the Standard are not allowed to sell to dealers who buy of its few
competitors. Some who have done so have been warned not to
repeat the offense, and have been informed that, if they did so,
the Standard, though under contract to supply them with oil,
would cut them off, and would fight any suit they might bring
through all the courts without regard to expense .

Today, in every part of the United States, people who burn
kerosene are paying the Standard Oil Company a tax on every
gallon amounting to several times its original cost to that
concern. The average price of crude oil at the wells or at
Cleveland, as the railroads carry the crude free to the Standard’s
refineries, was in December last about three cents a gallon. The
price of refined at Cleveland was seventeen cents a gallon. Oil
that the Standard sells in New York at a profit, at ten and one
half cents a gallon, they charge nineteen and three fourths cents
for in Chicago. The average cost, last December, of the one and
third barrels of petroleum needed to make a barrel of kerosene
was $2.05 at Cleveland. The cost of refining, barreling, and all
expenses, including a refiner’s profit of half a dollar a barrel, is,
according to the testimony of experts, $2.75 a barrel. To bring
by rail to Chicago costs seventy cents, making the total cost
$5.50 for a barrel of fifty gallons, or eleven cents a gallon. The
price the Standard charges in Chicago is nineteen and three
fourths cents a gallon, in which, as the difference between eleven
and nineteen and three fourths cents, there is a tax on the public
of eight and three fourths cents. This tax is transmitted by the
middle-men, jobbers, and retailers to the consumer. When at
twenty-five cents a gallon the working-man buys kerosene
because it is cheaper than gas, or the student because it is better,
each pays the Standard this tax of eight and three fourths cents a
gallon. A family that uses a gallon of kerosene a day pays a
yearly tribute to the Standard of $32, the income from $800 in
the four per cents .

Today the only visible hope of cheap light for the people of this
country is the discovery, announced by the Atlantic cable of
January 28th, that in the Hanover petroleum district in Germany a
basin has been found, which is thought by experts to be, beyond
doubt, as large and rich as the one in Pennsylvania. In Europe,
such alliances between the railroads and the refiners as created
by the Standard monopoly are impossible. German oil wells,
German refineries, and the Canadian canals may yet give the
people of the interior of this continent what the American
Standard and the American railroads have denied them, - cheap
light.

It is the railroads that have bred the millionaires who are now
buying newspapers, and getting up corners in wheat, corn, and
cotton, and are making railroad consolidations that stretch across
the continent .

One mind invented the locomotive, established the railroad, and
discovered the law of this new force. All railroad history has
been a vindication of George Stephenson’s saying that where
combination was possible competition was impossible .

In less than the ordinary span of a lifetime, our railroads have
brought upon us the worst labor disturbance, the greatest of
monopolies, and the most formidable combination of money and
brains that ever overshadowed a state. The time has come to face
the fact that the forces of capital and industry have outgrown the
forces of our government. The corporation and the trades-union
have forgotten that they are the creatures of the state. Our strong
men are engaged in a headlong fight for fortune, power,
precedence, success. Americans as they are, they ride over the
people like Juggernaut to gain their ends. The moralists have
preached to them since the world began, and have failed. The
common people, the nation, must take them in hand. The people
can be successful only when they are right. When monopolies
succeed, the people fail; when a rich criminal escapes justice, the
people are punished; when a legislature is bribed, the people are
cheated .The nation is the engine of the people. They must use
it for their industrial life, as they used it in 1861 for their
political life. The States have failed. The United States must
succeed, or the people will perish.

---

Wall Street History will return in two weeks with the story of
Chernobyl.

Brian Trumbore