The American Nation A History of the United States, Combined Volume (14th Edition)

Competition and Monopoly: Oil 469

of oilpipelines and large reserves of petroleumin
the ground.
Standard Oil emerged victorious from the com-
petitive wars because Rockefeller and his associates
were the toughest and most imaginative fighters as
well as the most efficient refiners in the business. In
addition to obtaining from the railroads a 10 per-
cent rebate and drawbacks on its competitors’ ship-
ments, Standard Oil cut prices locally to force small
independents to sell out or face ruin. Since kerosene
was sold in grocery stores, Standard supplied its own
outlets with meat, sugar, and other products at arti-
ficially low prices to help crush the stores that han-
dled other brands of kerosene. The company
employed spies to track down the customers of inde-
pendents and offer them oil at bargain prices.
Bribery was also a Standard practice; the reformer
Henry Demarest Lloyd quipped that the company
had done everything to the Pennsylvania legislature
except refine it.
Although a bold planner and a daring taker of
necessary risks, Rockefeller was far too orderly and
astute to enjoy the free-swinging battles that plagued
his industry. Born in an upstate New York village in
1839, he settled in Cleveland in 1855 and became a
produce merchant. During the Civil War he invested
in a local refinery and by 1865 was engaged full time
in the oil business.
Like Carnegie, Rockefeller was an organizer; he
knew little about the technology of petroleum. His
forte was meticulous attention to detail: Stories are
told of his ordering the number of drops of solder
used to seal oil cans reduced from forty to thirty-nine
and of his insisting that the manager of one of his
refineries account for 750 missing barrel caps. Not
miserliness but a profound grasp of the economies of
large-scale production explain this behavior.
Rockefeller competed ruthlessly not primarily to
crush other refiners but to persuade them to join with
him, to share the business peaceably and rationally so
that all could profit. Competition was obsolescent, he
argued, though no more effective competitor than he
ever lived.
Having achieved his monopoly, Rockefeller stabi-
lized and structured it by creating a new type of busi-
ness organization, the trust. Standard Oil was an Ohio
corporation, prohibited by local law from owning
plants in other states or holding stock in out-of-state
corporations. As Rockefeller and his associates took
over dozens of companies with facilities scattered
across the country, serious legal and managerial diffi-
culties arose. How could these many organizations be
integrated with Standard Oil of Ohio?
A rotund, genial little Pennsylvania lawyer named
Samuel C. T. Dodd came up with an answer to this

question in 1879.^1 The stock of Standard of Ohio

and of all the other companies that the Rockefeller

interests had swallowed up was turned over to nine

trustees, who were empowered to “exercise general

supervision” over all the properties. In exchange,

stockholders received trust certificates, on which divi-

dends were paid. This seemingly simple device

brought order to the petroleum business. Competition

almost disappeared, prices steadied, and profits sky-

rocketed. By 1892 John D. Rockefeller was worth

over $800 million.

The Standard Oil Trust was not a corporation. It

had no charter, indeed no legal existence at all. For

many years few people outside the organization knew

that it existed. The form they chose persuaded

A regally attired John D. Rockefeller poses on top of a barrel from his

Standard Oil refinery, his crown encircled by the railroads he controlled.

Rockefeller’s actual clothing was considerably less conspicuous.

Source: © Collection of The New-York Historical Society.

(^1) The trust formula was not “perfected” until 1882.