|
|
Wall Street History
https://www.gofundme.com/s3h2w8
|
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
|
|
|