Tales from Tennessee and Beyond: The Rise and Fall of the Standard Oil Company

Below is a research paper that I wrote this past semester (Spring 2015).

The petroleum industry in the United States has seen its share of ups and downs over the years. Oil pioneers and technological developments have come and gone. The biggest oil pioneer was John Davison Rockefeller. Rockefeller and his Standard Oil company became the leaders in the oil industry in the United States from 1870-1911. Rockefeller and his business partners created what was known as a trust. They made sure to have control of every aspect of the oil industry. This paper will focus on the technological aspects of the oil industry with a primary focus on J.D. Rockefeller and his Standard Oil Company, including some background information on Rockefeller and Standard Oil when appropriate. The paper will also examine some of the early history of the oil industry in the United States in order to set up the rest of the paper.

Yale Professor Benjamin Silliman Jr is widely regarded as the father of the oil industry. Silliman was a chemist who wanted to study the properties of oil as both a lubricant and as an illuminator. The goal was to figure out if the oil from rock could be used as an illuminator. Silliman found that oil could be boiled and then later distilled into several different products.[i] Thanks to these findings, Silliman has been credited with setting the race for oil into motion.

At this time oil was not a new discovery. Oil was being drilled in the Middle East and was then exported to other nations such as the United States. The question that every scientist and oilman was asking themselves was: How do we get our own oil in the United States? George Bissell, owner of the Pennsylvania Rock Oil Company thought that the best way to obtain oil was to use a salt boring technique. Instead of digging for the oil, they would drill for it.[ii] The first man to discover oil in the United States was Colonel Edward Drake. Colonel Drake struck oil

while drilling in western Pennsylvania.[i] This technological development would change the way that oil and other petroleum products were obtained and sold.

As was mentioned in the introduction of this paper, John Davison Rockefeller and his Standard Oil Company became the leaders in the oil and petroleum industry worldwide. J.D. was born on July 8, 1839, in the small town of Richford, New York. His family was not very rich materially, but they were very religious. They were members of the Baptist church and young J.D. was very interested in religion from a young age. Rockefeller helped his family on their farm for most of his childhood.[ii] He had always, however, wanted to be more than a farmer. The lure of big business was calling his name.

John Davison’s first foray into business was in the Clark and Rockefeller store. Together he and Maurice B. Clark sold meat and produce all around the Great Lakes and in Cleveland. Rockefeller and Clark had met while in school at E.G. Folsom’s Commercial College.[iii] The two young men became very wealthy as a result of their business efforts. The outbreak of the Civil War became an opportunity for Rockefeller to gain more wealth. He started a telegram office and he made very good money sending and receiving telegrams that had valuable information for either army.[iv]

J.D. Rockefeller was able to get into the oil industry by investing $4,000 in the new refining corporation known as Andrews, Clark, and Co. This investment cemented Rockefeller in the oil industry for the rest of his life. Rockefeller had to work his way up from the position of refiner. His first refinery was located on three acres of land in Kingsbury Run, which was near Cleveland. The refinery had access to Lake Erie as well as multiple railroads that made transporting oil very easy. Pretty soon other refiners realized that this technology was needed and built refineries around J.D.’s. That did not sit well with Rockefeller and he soon began to explore other ways to refine oil.[v] The things that he discovered would change the oil industry in the United States for years to come.

The Standard Oil Company became one of the United States’ first monopolies. They controlled everything about the oil industry. Standard had complete control of the drilling operations both in the United States as well as in other countries around the world. They also controlled all oil refineries as well as the nearby railroads. The corporation was able to set their prices so low that no one else could compete with them. By doing all of this and more Rockefeller and his Standard Oil Company were able to become the leader in oil production and sales and the results were bountiful riches.

By 1878, Standard Oil controlled ninety-five percent of the oil that was produced and sold in the United States.[vi] One big reason that Standard Oil was able to make money was because they were able to develop new technology that made oil easier and most importantly cheaper to refine. Standard Oil refineries made their own barrels to put the oil in.[vii] This eliminated the need to go and purchase barrels from an outside company, thus saving Rockefeller money. Standard was also able to find new technological developments in the way that oil was drilled and stored. They developed their own; more durable drilling machines, as well as tanks, and pumps.[viii] These new developments were far more efficient and could get oil out of the ground much quicker. All of these new ideas and developments led to more oil and more money.

Rockefeller and his business partners also planned to change the way that oil was produced and sold by constructing a pipe line that ran from Indian Territory to New York. This was detailed in a December 21, 1904 article in The New York Times. Many Americans were opposed to this because they were concerned about potential effects that would be harmful to the environment. Opponents were also concerned because they did not want to give up their land, and they did not want the Indians to be tortured more than they already had been. Other Americans felt like the pipeline would be a good thing because it would create more jobs and lead to the continued rise of progress in the United States. The pipeline plan failed in the end, but it was a very valiant effort by Standard Oil to try and expand their footprint even more in the United States. [ix]

The Standard Oil Company eventually became known as The Standard Oil Trust. The trust was designed to unite all of the holdings that Standard Oil had. The trust was made up of thirty-four different companies. Each company was limited to a particular state. The most notable states that Standard had a footprint in were Ohio, New Jersey, New York, and Indiana. These new corporations became known as Standard Oil of, and then the particular state where it was located. Companies such as Continental Oil Company in Colorado, and South Penn Oil Company in Pennsylvania, had been independent companies but had been unable to compete with Rockefeller and Standard Oil and were forced to join the Standard Oil Trust. These companies continued to work in the states where they were located, but all the money that they earned had to be given to the trust.[x] This revolutionized the way that oil was produced and sold.

Standard Oil and its technological developments were good in the sense that they provided many people with jobs. Individuals worked as drillers, refiners, and pipeline layers, among various other things. Drillers were asked to find the oil. This was a gamble of sorts. If they found oil then they would be paid a very hefty sum. If they failed to find oil, then they did not get a check. The men who worked as drillers depended upon Standard Oil and the oil industry in order to survive. The pipeline layers operated almost like an army. If there was a need for a new pipeline to be constructed, then the layers were to get there as quickly as possible and get the pipeline put into place. This operation was extremely efficient for the time.[xi] These people not only made The Trust rich, but they became quite wealthy as well.

John Davison Rockefeller was a very devout Christian, as a child he had been taught about the Bible and those teachings carried over to adulthood. He used the Bible and its teachings to help him in his business dealings. His faith in Christianity was vital in helping him become a great businessman. He attended church every time that the doors were open. Rockefeller served as a Sunday school teacher. Many of his critics thought that this was all a show, and he was using his fellow churchgoers.[xii] This was not the case. John Davison leaned upon his brothers and sisters in Christ for support in order to get through the multiple attempts to defame his character. He knew that God was always going to be with him, and he felt his critics were jealous of the fortunes that he had been given thanks to his Standard Oil Company and the technological developments that he was responsible for.

Rockefeller and his family were very involved in charitable work. The Rockefellers as well as Standard Oil gave many monetary gifts to various charities as well as colleges and universities. Rockefeller believed that to have a successful business, and gain the trust of others, he should give back to his community. Once again his critics claimed he was buttering up the various recipients of these donations, but Rockefeller denied every accusation. There were many critics who wanted to see Rockefeller put in jail, but he had not done anything illegal.

Standard Oil began to experiment with pipelines more and more. The trust executives felt as though the railroads were becoming obsolete and were not as efficient as they once had been. Pipelines would allow oil to be transported more easily and it could be done faster. There were four new pipelines that were constructed for the sole purpose of oil production, not to be mistaken with the failed pipeline plan mentioned earlier. These pipelines were located in Cleveland, New York City, Philadelphia, and Buffalo. The shift to pipelines basically put the railroad industry out of business, as far as the oil industry was concerned.[xiii] Once again John Davison Rockefeller and his Standard Oil Company had come up with a new technological development that would change the oil industry forever.

Standard Oil’s main employee when it came to the pipelines was Daniel O’Day. O’Day was what was known as a pipeline boss. He controlled everything about the pipelines that were constructed. He had a construction gang that went around and laid pipelines. As was mentioned above, they acted as an army. They were there as soon as a new pipeline was needed. They were more of a gang then an army. O’Day and his pipeline gang went around to different potential sites and negotiated with the producer. Most of the time O’Day and the gang used scare tactics in order to make the producer give them access to the land for pipeline construction. If the producer refused then O’Day vowed to ruin them. [xiv]

O’Day and his pipeline gang would also lie to potential producers and say that they should go ahead and sell Standard Oil their land. He would comment about how their land was inaccessible for a pipeline to be run. He would also make them feel guilty about not having the funds or resources to construct storage tanks. By doing this O’Day was able to convince the producer that he should sell out to Standard Oil.[xv] This was extremely illegal and unethical.

Standard Oil was the first corporation to control all or the majority of all the oil fields in the United States. John D. Rockefeller was dubbed as the “Lord of the Oil Regions,” as a result of this. Rockefeller and Standard Oil controlled almost all the oil fields and pipelines, by the turn of the century. [xvi] Standard Oil’s foray into the oil fields, especially in Texas was detailed in an April 27, 1901 article on the front page of the New York Times. The article detailed the plan that was being put into place. This particular oil field was considered by many to be the only way to directly access the Beaumont Oil Fields in Port Arthur, Texas. This oil field led to a lawsuit for Rockefeller. [xvii] This lawsuit would be the first of many for him.

John D. Rockefeller and his Standard Oil Company did not limit themselves to the United States and their oil reserves. Rockefeller and his partners had plans to expand into other world nations. Their target was the Danish West Indies. The first hurdle to cross was to obtain access to the oil reserves from the Denmark government. In an April 28, 1900 New York Times article, the author was concerned that Rockefeller and his Standard Oil Company were going to push the Danish government too far and start a war. This was not the case however and Rockefeller was able to purchase the oil reserves.[xviii]

In two follow up articles that were published in The New York Times on May 1 and 2, 1900, the author said that the oil reserves in the Danish West Indies were able to be purchased thanks to the Buffalo Strike. The Buffalo Strike was a dockworker’s strike that occurred in Buffalo New York. As a result of this strike, oil was not able to be transported into and out of the Buffalo docks. This increased the need for Standard Oil to have oil reserves outside of the United States. That way they were able to make money while the ports were shut down.[xix]

Just a day later on May 3, another article was published in The New York Times stating that Russia was expressing interest in purchasing the oil reserves in the Danish West Indies. The article was making the public aware of the negotiations that Standard Oil and the Russian government were involved in.[xx] The article is somewhat difficult to read, so it is unknown as to how the negotiations turned out. Based on these articles Standard Oil was the first United States oil company to have a worldwide footprint in the petroleum industry. The technological developments that were discovered were unlike any other.

After these attempts by Rockefeller to expand his footprint into other countries, he and his Standard Oil Company shifted their focus back to pipelines. One of Rockefeller’s biggest employees that was over the pipeline project was Byron Benson. Benson had a vision for a massive pipeline that ran from one United States seaboard to the other. Before this time, there had been no pipeline that had run longer than thirty miles. Benson’s idea was almost unprecedented. If this pipeline idea was successful, then it would completely squash any competition that Standard Oil might have. This seaboard to seaboard pipeline idea would further strength Standard Oil as a leader in technological developments within the petroleum industry.[xxi]

Rockefeller and his Standard Oil Company faced their greatest competition in the pipeline race from the Tidewater Pipeline Company. The Tidewater Pipe Line Company helped other independent pipeline companies to go up against and hopefully be able to compete against Standard Oil and their pipeline monopolies. The Tidewater Pipeline Company had plans to construct a 110 mile pipeline that ran from Bradford to Williamsport in central Pennsylvania. Rockefeller and his fellow Standard Oil executives felt like this was impossible. However they still felt threatened by this. In response to this plan, Standard Oil bought up as much of the land that Tidewater was going to use as they could to prevent this pipeline plan from being successful. When Standard Oil and their executives realized that this was not going to work, they turned to bribery to get their way.[xxii]

The process of bribery was the beginning of government involvement in the Standard Oil monopoly. Standard Oil and their executives bribed the state legislatures in Pennsylvania and Maryland to issue pipeline bills that would prevent the Tidewater pipeline company from constructing their planned 110 mile pipeline. In return for passing these pipeline bills, Rockefeller and other executives within Standard Oil received kickbacks and other government incentives. Rockefeller showed his appreciation to these politicians by giving them very generous campaign donations.[xxiii] This is the first of the political corruption that had a major impact on the oil industry.

By the late 1880s, John D. Rockefeller and his Standard Oil Company had expanded their footprint across the globe more than it had been in times past. The lure of expanding into foreign countries was that kerosene could be obtained. Kerosene was very lucrative and reserves had been found in China and Japan. Kerosene was seen as being much safer than regular oil, and the rise of kerosene lamps in the United States as well as in other places throughout the world led to the growing demand for kerosene. Standard Oil suppliers used rivers to transport this kerosene from one place to the other. The methods of drilling and the technology that was used spilled over into the new foreign markets.[xxiv] By the turn of the century Standard Oil now had a monopoly on foreign petroleum.

Eventually John D. Rockefeller and his business associates began to look for alternatives to kerosene. They were able to find this alternative in natural gas. They discovered that natural gas unlike kerosene could power a greater quantity of things. Instead of powering just a whole house, natural gas could power an entire city. Daniel O’Day, Standard Oil’s leading pipeline man, discovered that natural gas could be transported using a pipeline. It took Standard Oil approximately two years to get a natural gas pipeline up and running. This pipeline was able to transport natural gas from western Pennsylvania to cities located in Ohio and New York.[xxv] This was quite the development for the time.

The foray into natural gas went along fairly smoothly for Standard Oil. Like they had done with the pipeline battles, Rockefeller used his political pull to get his natural gas implemented into cities and towns throughout the United States. By forming alliances with different politicians, Standard Oil was able to avoid natural gas battles for the most part. The only recorded natural gas battle took place in Toledo, Ohio. The citizens and some government leaders in Toledo thought that their natural gas was being controlled and provided by the Eastern Ohio Natural Gas Company. But unbeknownst to them, the Standard Oil Company had come in and bought up the company, resulting in a monopoly of the natural gas production in the United States. In response to this the city of Toledo decided to build their own municipal gasworks instead of relying on Standard Oil for natural gas. In the year 1886, the Standard Oil Company set up the Natural Gas Trust. They made John D. Rockefeller the chairman of the board as well as the largest stockholder in the trust. [xxvi]

By the turn of the century, The Standard Oil Company had stifled all of its competition. There were no other companies that were able to compete with Standard Oil. All of these companies were either forced to merge with Standard, or close their doors. Many critics of Rockefeller believed that this was bad business practice. They thought that what Rockefeller was doing was unethical and leading many people to suffer financial ruin. Critics were pleading with government officials to do something about Rockefeller and the Standard Oil Trust. Most of these politicians had already been bribed by Rockefeller, but there were some who wanted to help stop the trust. Rockefeller responded to these critics by treating them with Christian tolerance, and he also vowed to hold no malice against those people. [xxvii] Perhaps the biggest and most outspoken critic of John D. Rockefeller was muckraker Ida Tarbell. Tarbell’s findings would bring Rockefeller and his Standard Oil Company and Trust to the ground.

According to many historians, Ida Tarbell’s early life was very much intertwined with Standard Oil’s early history. She was born near the site where Sir Edmund Drake first struck oil. Her father, Franklin Tarbell, worked as a barrel maker, and was employed by early oil refiners to make barrels for them. By the time that Ida Tarbell was fifteen years old, she saw her beloved hometown completely ripped apart by the South Improvement Company. The citizens of the town became divided over this new issue. Some supported the South Improvement Company, while others, like Franklin Tarbell, were opposed to it. These events would lead to a lifelong hatred of big businesses, especially Standard Oil, by Ida Tarbell. She would make it her lifelong mission to bring down every one of these corporations.[xxviii]

By the early twentieth century, the United States government and Teddy Roosevelt were cracking down on corporations that were in violation of the Sherman Anti-Trust Act. The biggest target was Standard Oil and the Standard Oil Trust. Muckraker Ida Tarbell became the United States government’s most valuable resource in bringing down John D. Rockefeller and Standard Oil. By this time, Tarbell had begun working for Samuel McClure and his McClure’s Magazine. [xxix]It was in this magazine that Tarbell began to expose Standard Oil for their misdeeds.

Most of the information that Tarbell received to assist her in her takedown of Standard Oil, came from her brother William Walter Tarbell. William Walter had been a leading figure in the Pure Oil Company. Pure Oil, according to historians, was most likely Standard Oil’s greatest competition. William Walter sent his sister numerous accounts of Pure Oil’s business dealings with Standard Oil. He encouraged other “Rockefeller Enemies” to do the same. Ida never favored one side or the other, but she just wanted to make all the facts known.[xxx]

Ida Tarbell left no stone unturned when it came to exposing Standard Oil. In her numerous articles for McClure’s Magazine, she went into detail about every business dealing that Standard Oil and the Trust were involved in. The most interesting articles that she wrote however, and the most pertinent for this paper, are her articles about Standard’s way of doing things, or their technology. Tarbell told about how Standard used high temperatures for distillation. She later exposed how the corporation used high steam to distill petroleum. She then talked about how naphtha was used for illumination.[xxxi] Her point in writing these articles to expose these technological developments was to convince the general public that Rockefeller and Standard Oil were not just breaking the law, but they were harming the environment as well.

John D. Rockefeller responded to Ida Tarbell and her articles in a way that no one really expected him to. Most people thought that Rockefeller would bring lawsuits against Tarbell and McClure’s Magazine, but he did the exact opposite. In one account, a neighbor of Rockefeller’s went to him and asked him point blank what he thought of the articles that were coming out in protest of Standard Oil. The neighbor said that “Rockefeller’s attitude was like that of a prize fighter.” Rockefeller had the attitude that he had already been whacked on the head numerous times, so what was one more time. He felt as though he and his Standard Oil Company had done much more good than they had bad. He did not feel as though a few articles written by a muckraker would bring him and his company down. Rockefeller called Tarbell his “lady friend.” On other occasions, it is believed that Rockefeller referred to Ida Tarbell as “Miss. Tar Barrel.”[xxxii] It is safe to say that there was really no love lost between Rockefeller and Tarbell.

In 1904, right after Teddy Roosevelt was elected president of the United States, he and his administration launched an investigation against John D. Rockefeller and Standard Oil. The investigation became legal in nature in March 1906.[xxxiii] Many attempts had been made to bring Standard Oil and its employees up on legal charges, but this one looked like it was finally going to be able to stick.

Once the investigation was launched, Standard Oil was forced to go into survival mode. The Federal Government had turned the tables on them and there was not a quick way out. Executives within the company felt as though the United States Government would not only destroy the company, but them as well. They felt it best to exhaust every resource available to them to save the company, but most importantly themselves.[xxxiv]

Many people within the Federal Government, as well as the general public, felt like it would benefit the oil industry, as well as the United States in general to throw Rockefeller in jail. President Roosevelt was noted to have said behind closed doors, that John D. Rockefeller and the entire Standard Oil Company were nothing but criminals and should be punished for the things that they have done. The War Department announced that due to the investigation, they would no longer buy their petroleum products from Standard Oil.[xxxv] With the Federal Government against them, The Standard Oil Trust was barely surviving.

In 1911, the antitrust suit went to trial. Many current and former executives were called on to testify. Even Rockefeller himself was called to the stand. These witnesses were vital to both the prosecution and the defense. Many of the witnesses for the defense said that Standard Oil and its employees just used smart business strategies. They claimed that they could not help it if their competitors were not as “bright” as they were. Witnesses for the prosecution were primarily those who had been put out of business by Standard Oil. They claimed that Standard Oil was indeed breaking the law, and in the process had ruined them. On May 15, 1911 the Supreme Court made their ruling.[xxxvi]

At approximately four o’clock in the afternoon on May 15, 1911, the verdict of the antitrust suit was read. Chief Justice Edward White ruled that Standard Oil and the Standard Oil Trust would be dissolved effective immediately. John D. Rockefeller reacted calmly. He was on a golf outing and received the news while on the course. Rockefeller knew that the Federal Government was out to get him, and he was not shocked by the decision. He sent a fake obituary out to all his business partners telling of the “death” of Standard Oil. Rockefeller is never believed to have read the court’s ruling.[xxxvii] He had made his money, built a legacy, and he was at peace, thanks to being a religious man.

The impact that John D. Rockefeller and his Standard Oil Company had on the petroleum industry in the United States is unquestioned. They were the leaders, and they paved the way for future companies to use as a model. The technological developments that were developed as a result of Standard Oil are still being used today. The way that oil was mined and transported became revolutionary. Pipelines became, and still are the main way to transport oil. The use of barrels to store oil is still being used. Since the government break up in 1911, there have been other cases like Rockefeller’s. In 2001 the Supreme Court ruled that Microsoft should break up their trust. A few years earlier in 1974, AT&T was found to be in violation of the Sherman Antitrust Act, and was forced to break up.[xxxviii] The Federal Government used Standard Oil as an example of a monopoly, and if a company is found to be too big, then it will be broken up. Standard Oil just happened to be the first victim of this. Even though the company ceases to exist, the legacy of John D. Rockefeller and his Standard Oil Company continues to live on.