Jacob Vandergrift,[5]Senior of employees60,000 (1909)[6]Standard Oil Co.was an Americanoil-producing, transporting, refining, and marketingcompany. Established in 1870 byJohn D. RockefellerandHenry Flagleras acorporationinOhio, it was the largestoil refinerin the world at its height.[7]Its history as one of the world\'s first and largestmultinational corporationsended in 1911, when the U.S. Supreme Courtruledthat Standard Oil was an illegalmonopoly.
Standard Oil dominated the oil products market initially throughhorizontal integrationin the refining sector, then, in later yearsvertical integration; the company was an innovator in the development of the businesstrust. The Standard Oil trust streamlined production and logistics, lowered costs, and undercut competitors. \"Trust-busting\" critics accused Standard Oil of using aggressive pricing to destroy competitors and form a monopoly that threatened other businesses.
Rockefeller ran the company as its chairman, until his retirement in 1897. He remained the majorshareholder, and in 1911, with the dissolution of the Standard Oil trust into 34 smaller companies, Rockefeller became therichest person in modern history, as the initial income of these individual enterprises proved to be much bigger than that of a single larger company. Its successors such asChevron,ExxonMobil,Amoco, andMarathon Petroleum, are still among thecompanies with the largest revenuesin the world. By 1882, his top aide wasJohn Dustin Archbold. After 1896, Rockefeller disengaged from business to concentrate on his philanthropy, leaving Archbold in control. Other notable Standard Oil principals include Henry Flagler, developer of theFlorida East Coast Railwayand resort cities, andHenry H. Rogers, who built theVirginian Railway.
Founding and early years[edit]John D. Rockefellerc. 1872, shortly after founding Standard OilStandard Oil\'s pre-history began in 1863, as anOhiopartnership formed byindustrialistJohn D. Rockefeller, his brotherWilliam Rockefeller,Henry Flagler, chemistSamuel Andrews, silent partnerStephen V. Harkness, andOliver Burr Jennings, who had married the sister of William Rockefeller\'s wife. In 1870, Rockefeller abolished the partnership and incorporated Standard Oil in Ohio. Of the initial 10,000 shares, John D. Rockefeller received 2,667; Harkness received 1,334; William Rockefeller, Flagler, and Andrews received 1,333 each; Jennings received 1,000, and the firm ofRockefeller, Andrews & Flaglerreceived 1,000.[8]Rockefeller chose the \"Standard Oil\" name as a symbol of the reliable \"standards\" of quality and service that he envisioned for the nascent oil industry.[9]
Standard Oil Articles of Incorporation signed by John D. Rockefeller, Henry M. Flagler, Samuel Andrews, Stephen V. Harkness, and William RockefellerShare of the Standard Oil Company, issued 1 May 1878[10]Share of the Standard Oil Trust, issued 18 January 1883[10]In the early years, John D. Rockefeller dominated the combine; he was the single most important figure in shaping the new oil industry.[11]: 35 He quickly distributed power and the tasks of policy formation to a system of committees, but always remained the largestshareholder. Authority was centralized in the company\'s main office in Cleveland, but decisions in the office were made cooperatively.[12]
Standard Oil Refinery No. 1 inCleveland, Ohio, 1897The company grew by increasing sales and through acquisitions. After purchasing competing firms, Rockefeller shut down those he believed to be inefficient and kept the others. In a seminal deal, in 1868, the Lake Shore Railroad, a part of theNew York Central, gave Rockefeller\'s firm a going rate of one cent a gallon or forty-two cents a barrel, an effective 71% discount from its listed rates in return for a promise to ship at least 60 carloads of oil daily and to handle loading and unloading on its own.[citation needed]Smaller companies decried such deals as unfair because they were not producing enough oil to qualify for discounts.
Standard\'s actions and secret[13]transport deals helped itskeroseneprice to drop from 58 to 26 cents from 1865 to 1870. Rockefeller used theErie Canalas a cheap alternative form of transportation—in the summer months when it was not frozen—to ship his refined oil from Cleveland to New York City. In the winter months, his only options were the three trunk lines—theErie Railroadand theNew York Central Railroadto New York City, and thePennsylvania Railroadto Pittsburgh and Philadelphia.[14]Competitors disliked the company\'s business practices, but consumers liked the lower prices. Standard Oil, being formed well before the discovery of theSpindletopoil field (in Texas, far from Standard Oil\'s base in the Midwest) and a demand for oil other than for heat and light, was well placed to control the growth of the oil business. The company was perceived to own and control all aspects of the trade.
South Improvement Company[edit]In 1872, Rockefeller joined theSouth Improvement Co.which would have allowed him to receive rebates for shipping and drawbacks on oil his competitors shipped. But when this deal became known, competitors convinced thePennsylvania Legislatureto revoke South Improvement\'s charter. No oil was ever shipped under this arrangement.[15]Using highly effective tactics, later widely criticized, it absorbed or destroyed most of its competition inClevelandin less than two months[how?]and later throughout the northeastern United States.
Hepburn Committee[edit]A. Barton Hepburnwas directed by theNew York State Legislaturein 1879, toinvestigate the railroads\' practice of giving rebates within the state. Merchants without ties to the oil industry had pressed for the hearings. Prior to the committee\'s investigation, few knew of the size of Standard Oil\'s control and influence on seemingly unaffiliated oil refineries and pipelines—Hawke (1980) cites that only a dozen or so within Standard Oil knew the extent of company operations. The committee counsel,Simon Sterne, questioned representatives from the Erie Railroad and the New York Central Railroad and discovered that at least half of their long-haul traffic granted rebates and much of this traffic came from Standard Oil. The committee then shifted focus to Standard Oil\'s operations.John Dustin Archbold, as president of Acme Oil Company, denied that Acme was associated with Standard Oil. He then admitted to being a director of Standard Oil. The committee\'s final report scolded the railroads for their rebate policies and cited Standard Oil as an example. This scolding was largely moot to Standard Oil\'s interests since long-distance oil pipelines were now their preferred method of transportation.[16]
Standard Oil Trust[edit]In response to state laws that had the result of limiting the scale of companies, Rockefeller and his associates developed innovative ways of organizing to effectively manage their fast-growing enterprise. On January 2, 1882,[17]they combined their disparate companies, spread across dozens of states, under a single group of trustees. By a secret agreement, the existing 37 stockholders conveyed their shares \"in trust\" to nine trustees:[18]John and William Rockefeller,Oliver H. Payne,Charles Pratt,Henry Flagler,John D. Archbold, William G. Warden,Jabez Bostwick, andBenjamin Brewster.[19]“Whereas some state legislatures imposed special taxes on out-of-state corporations doing business in their states, other legislatures forbade corporations in their state from holding the stock of companies based elsewhere. (Legislators established such restrictions in the hope that they would force successful companies to incorporate—and thus pay taxes—in their state.)”[20][21]Standard Oil\'s organizational concept proved so successful that other giant enterprises adopted this \"trust\" form.
In 1885,Standard Oil of Ohiomoved its headquarters fromClevelandto its permanent headquarters at26 BroadwayinNew York City. Concurrently, the trustees of Standard Oil of Ohio chartered the Standard Oil Co. of New Jersey (SOCNJ) to take advantage of New Jersey\'s more lenient corporate stock ownership laws.
Sherman Antitrust Act[edit]In 1890,Congressoverwhelmingly passed theSherman Antitrust Act(Senate 51–1; House 242–0), a source of American anti-monopoly laws. The law forbade every contract, scheme, deal, or conspiracy to restrain trade, though the phrase \"restraint of trade\" remained subjective. The Standard Oil group quickly attracted attention fromantitrustauthorities leading to a lawsuit filed byOhio Attorney GeneralDavid K. Watson.
Earnings and dividends[edit]From 1882 to 1906, Standard paid out $548,436,000 individendsat a 65.4%payout ratio. The total net earnings from 1882 to 1906 amounted to $838,783,800, exceeding the dividends by $290,347,800, which was used for plant style=\"margin: 0.5em 0px;\">In 1896, John Rockefeller retired from the Standard Oil Co. of New Jersey, the holding company of the group, but remained president and a major shareholder. Vice-presidentJohn Dustin Archboldtook a large part in the running of the firm. In the year 1904, Standard Oil controlled 91% of oil refinement and 85% of final sales in the United States.[23]At this time, state and federal laws sought to counter this development withantitrustlaws. In 1911, theU.S. Justice Departmentsued the group under the federal antitrust law and ordered its breakup into 34 companies.
Standard Oil\'s market position was initially established through an emphasis on efficiency and responsibility. While most companies dumpedgasolinein rivers (this was before the automobile was popular), Standard used it to fuel its machines. While other companies\' refineries piled mountains of heavy waste, Rockefeller found ways to sell it. For example, Standard created the first synthetic competitor forbeeswax(Paraffin) and bought the company that invented and producedVaseline, theChesebrough Manufacturing Co., which was a Standard company only from 1908 until 1911.
One of the original \"Muckrakers\"Ida M. Tarbell, was an American author and journalist whose father was an oil producer whose business had failed because of Rockefeller\'s business dealings. After extensive interviews with a sympathetic senior executive of Standard Oil,Henry H. Rogers, Tarbell\'s investigations of Standard Oil fueled growing public attacks on Standard Oil and monopolies in general. Her work was published in 19 parts inMcClure\'smagazine from November 1902 to October 1904, then in 1904 as the bookThe History of the Standard Oil Co.
The Standard Oil Trust was controlled by a small group of families. Rockefeller stated in 1910: \"I think it is true that the Pratt family, the Payne–Whitney family(which were one, as all the stock came from Colonel Payne), the Harkness-Flagler family (which came into the company together) and theRockefeller familycontrolled a majority of the stock during all the history of the company up to the present time.\"[24]
These families reinvested most of the dividends in other industries, especially railroads. They also invested heavily in the gas and the electric lighting business (including the giantConsolidated Gas Co. of New York City). They made large purchases of stock inU.S. Steel,Amalgamated Copper, and evenCorn Products Refining Co.[25]
Weetman Pearson, a British petroleum entrepreneur in Mexico, began negotiating with Standard Oil in 1912–13 to sell his \"El Aguila\" oil company, since Pearson was no longer bound to promises to thePorfirio Díazregime (1876–1911) to not to sell to U.S. interests. However, the deal fell through and the firm was sold toRoyal Dutch strive to find rare and unusual vintage pieces to match up with your special collection.
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