The History of the Standard Oil Company IDA M. Tarbell
The History of the Standard Oil Company was produced to address the national “trust question” by detailing the rise of a specific monopoly. The Standard Oil Trust (SOC) was chosen because it was the first trust, providing the methods and traditions for its followers. The SOC is considered the most perfectly developed trust in existence, closely achieving the ideal of entire control over its commodity. Its flawless organization and immense financial influence, coupled with the daring of its execution, make its history pre-eminent for understanding capital combinations.
Chapter-Wise Summary
Chapter One: The Birth of an Industry
Petroleum was initially valued as a curiosity and medicine. The industry began when Edwin L. Drake successfully drilled the first oil well in Titusville, likely inspired by the image of an artesian well on a rock-oil label. The resulting great flow of oil created complex challenges in storage, refining, and transportation, which were ultimately overcome, illustrating the “normal unfolding of a new and wonderful opportunity for individual endeavour”.
- Oil shifted from medicine to industry.
- Drake successfully drilled the first well.
- Industry developed despite heavy costs and difficulties.
Chapter Two: The Rise of the Standard Oil Company
John D. Rockefeller, an astute former commission merchant and capable accountant, formally organized the Standard Oil Company in June 1870 with able associates like William Rockefeller and Henry M. Flagler. The SOC immediately exploited volume to secure preferential treatment (rebates) from railroads. They secretly formed the South Improvement Company (SIC), securing contracts for massive rebates on their own oil and “drawbacks” (fees) on competitors’ shipments. Armed with this, Rockefeller forced 21 of 26 Cleveland refiners to join or sell, quickly gaining mastery over one-fifth of U.S. capacity.
- SOC formed, securing early rebates.
- Secret SIC secured rebates and drawbacks.
- Rockefeller used SIC leverage to crush Cleveland refiners.
Chapter Three: The Oil War of 1872
The SIC’s plan was exposed when freight rates abruptly doubled for non-members. The Oil Regions erupted, forming the Petroleum Producers’ Union and initiating an oil blockade against the conspirators. A Congressional investigation confirmed the monopoly aimed to transfer roughly $6,000,000 annually to the combinators via rake-offs and rebates, leading to widespread public condemnation. Railroad officials, facing intense pressure, revoked the SIC contracts and signed an agreement pledging “perfect equality to all shippers”. Despite this victory, Rockefeller continued pursuing special rates.
- Producers formed the Union; initiated a blockade.
- Investigation revealed the SIC planned immense illicit profit.
- Railroads revoked contracts due to pressure.
Chapter Four: “An Unholy Alliance”
Rockefeller quickly pivoted to the open “Pittsburg Plan,” proposing centralized control, output limits, and transportation management for all refiners. Although rejected by most independents, Rockefeller soon headed the National Refiners’ Association, controlling four-fifths of the industry. The producers formed the Petroleum Producers’ Agency to collectively sell oil at a fixed minimum price. However, internal dissent and financial strain led the producers’ leadership to agree to a compromise—the “Treaty of Titusville”—which “snuffed out” organized opposition and secured Rockefeller’s steady expansion.
- Rockefeller led the National Refiners’ Association.
- Producers countered by forming the Producers’ Agency.
- Compromise ended organized opposition (“Treaty of Titusville”).
Chapter Five: Laying the Foundations of a Trust
The principle that large shippers receive preferential rates quickly became established, overriding agreements for common carriage. Railroads instituted pooling, equalizing rates to destroy the geographical advantage of Oil Region refiners, as noted in the “Rutter Circular”. Rockefeller then secretly created the Central Association—a private company—to acquire control of all refineries using his secured preferential rates as the primary weapon of “persuasion or force”.
- Rebates quickly reappeared after the March 1872 pact.
- Rockefeller organized the secret Central Association.
- He used preferential rates to force rivals to sell or join.
Chapter Six: Strengthening the Foundations
The Standard successfully used its influence (e.g., Congressman H. B. Payne) to stifle the first Interstate Commerce Bill. Independent efforts to build competitive seaboard pipe-lines generally failed due to mismanagement and combined opposition from the Standard and the railroads. A massive “bitter and costly war” against the integrated Empire Transportation Company (backed by the Pennsylvania Railroad) ended when the Standard defeated and acquired the Empire Line, gaining control of the entire pipe-line system in the Oil Regions. Rockefeller then systematized the practice of receiving drawbacks (payments) on competitors’ freight.
- Standard successfully lobbied against the Commerce Bill.
- Standard defeated the Empire Line and acquired its pipe-lines.
- Rockefeller initiated widespread use of drawbacks.
Chapter Seven: The Crisis of 1878
Producers reorganized due to poor returns despite high oil prices. The Standard enforced the “immediate shipment” order in the Bradford field, forcing producers to sell immediately at less than market price. Investigations in New York and Ohio revealed the Standard’s continued use of discrimination, confirming it was essentially a continuation of the SIC. The Producers’ Union secured the indictment of John D. Rockefeller and eight associates for criminal conspiracy in Pennsylvania.
- “Immediate shipment” forced producers to sell crude below market.
- Investigations proved the SIC methods persisted.
- Rockefeller and associates were indicted for conspiracy.
Chapter Eight: The Compromise of 1880
The conspiracy indictment proved tactically damaging to the producers, as Standard witnesses could refuse testimony in other investigations by pleading the right not to incriminate themselves. Facing organizational fatigue, the Producers’ Union leaders compromised: all lawsuits were withdrawn in exchange for a weak agreement that allowed the SOC to reserve the right to accept “reasonable” rebates. This compromise effectively dismantled the organized resistance, largely blamed on the producers’ failure to provide sustained financial and moral support.
- Indictment shielded key Standard witnesses from testimony.
- Producers compromised, withdrawing lawsuits.
- The organized opposition collapsed due to lack of support.
Chapter Nine: The Fight for the Seaboard Pipe-Line
The Tidewater Pipe Company successfully pioneered pumping oil over the Allegheny Mountains to the sea, threatening the railroads and Standard. The Standard responded by consolidating its interests into the National Transit Company and waging a fierce “war on the Tidewater”. Tactics included market absorption (buying refiners Tidewater needed), discrediting the enterprise, and lawsuits aimed at wrecking its credit. Rockefeller eventually acquired a controlling stock interest in Tidewater, converting the rival into an ally and achieving a total transportation monopoly.
- Tidewater built the first trans-mountain pipe-line.
- Standard formed National Transit, waging war on Tidewater.
- Rockefeller bought control, consolidating the transport monopoly.
Chapter Ten: Cutting to Kill
The Standard implemented a highly efficient marketing system, buttressed by secret industrial espionage. This involved securing competitors’ shipment details (consignor, quantity, destination) from bribed railroad clerks. Using this intelligence, Standard agents systematically targeted competitors through predatory underselling (“cutting to kill”) until rivals failed. The Standard sometimes created “bogus” independent companies for this purpose. While prices dropped temporarily during “Oil Wars,” they became “abnormally high” once competition was destroyed.
- Efficient marketing was supported by industrial espionage.
- Standard agents used intel to systematically undersell rivals.
- Temporary low prices led to abnormally high monopoly prices.
Chapter Eleven: The War on the Rebate
Individual refiners continued to fight the rebate system in court. Scofield, Shurmer and Teagle successfully sued the Lake Shore Railroad for unlawful discrimination in favor of the SOC. The George Rice case proved the Standard was demanding and receiving a drawback (25 cents per barrel) on all of Rice’s shipments via the Cleveland and Marietta Railroad. Judge Baxter condemned the arrangement as an “unparalleled wrong” and ordered the receiver’s removal and recovery of funds paid to the Standard.
- Independent firms won suits proving rail discrimination.
- George Rice proved the Standard received drawbacks on his oil.
- Judicial ruling condemned the practice as “unparalleled wrong”.
Chapter Twelve: The Buffalo Case
The Standard-controlled Vacuum Oil Works targeted the Buffalo Lubricating Oil Company. Testimony in a civil suit revealed Vacuum directors (the Everests) had advised an employee to “arrange the machinery so it would bust up,” or flee the company. C. B. Matthews, the independent owner, won his civil suit and secured the criminal indictment of high-ranking Standard officials, including H. H. Rogers and J. D. Archbold, for conspiracy. Though the top officials were acquitted due to lack of direct proof linking them to the sabotage attempts, the case popularized the view that the SOC was “lawless and relentless”.
- Standard agents were proven to have advised sabotage.
- Top Standard officials were indicted for conspiracy.
- The case confirmed the public perception of the SOC as “lawless”.
Chapter Thirteen: The Standard Oil Company and Politics
The SOC was widely charged with political corruption, notably over the 1884 election of Henry B. Payne to the U.S. Senate, secured amidst accusations of bribery. Subsequent Senate investigation failed to fully resolve the charges. The defeat of the Billingsley Bill in Pennsylvania, which aimed to regulate pipe-line rates, solidified public suspicion that the Standard exerted undue legislative power. These dramatic political conflicts heightened public demand for a full investigation of the secretive Standard Trust.
- The election of Senator Payne reinforced charges of bribery.
- Standard successfully worked to defeat anti-monopoly legislation.
- Political conflicts increased public scrutiny of the Trust.
Chapter Fourteen: The Breaking Up of the Trust
During the 1888 “epidemic of trust investigation,” the New York Senate compelled John D. Rockefeller to testify, leading to the revelation of the secret 1882 Standard Oil Trust Agreement. This document showed that controlling interests of many corporations were placed under the absolute control of nine trustees. Ohio Attorney-General David K. Watson used this information to file a quo warranto action against the Standard Oil Company of Ohio. Despite intense political pressure, the Ohio Supreme Court ruled against the Standard in 1892, compelling a formal, though largely nominal, dissolution.
- The 1882 Trust Agreement was revealed publicly.
- Ohio Attorney-General Watson sued the Trust.
- The court ordered the formal dissolution of the Trust in 1892.
Chapter Fifteen: A Modern War for Independence
The failure of the initial dissolution spurred independents (producers and refiners) to create the Producers’ Oil Company. Lewis Emery, Jr., led a pivotal effort to build the United States Pipe Line to the seaboard, enduring massive legal and financial warfare from the Standard. To sustain their war against collapsing prices, the independents consolidated their capital into the Pure Oil Company. After nearly a decade of struggle, the Pure Oil Company proved that sustained independence was possible through unity and fierce determination, though it did not restore industry-wide competition.
- Producers organized the Producers’ Oil Company.
- Lewis Emery built the United States Pipe Line.
- Independents consolidated into the Pure Oil Company.
Chapter Sixteen: The Price of Oil
Price charts demonstrate that the margin between crude and refined oil prices increased arbitrarily after the Standard achieved monopoly control around 1880. The SOC’s immense economies (from pipe-lines, integration, and by-products achieved between 1879–1889) were retained as massive profits, not passed to consumers via lower export margins. Domestic prices varied dramatically, confirming that the consumer paid higher, non-competitive prices except where local competition forced the Standard to cut prices, absorbing the cost of “Oil Wars”.
- Monopoly control led to arbitrary margin increases.
- Vast internal economies were retained as profit, not passed to consumers.
- Domestic prices were highest where competition was absent.
Chapter Seventeen: The Legitimate Greatness of the Standard Oil Company
The SOC’s non-illegal success rested on perfect centralization under nine working trustees. This efficiency was driven by an “ingenious system of competition,” compelling allied refineries to compare monthly cost statements and adopt the cheapest methods. The company excelled in minute supervision (watching over details like barrel bungs) and cost elimination, integrating side-industries (like cans and barrels) so that a profit was paid “to nobody” outside the organization. This systematic efficiency, combined with Rockefeller’s strategic genius, made the SOC inherently formidable.
- Success was based on “perfect centralization” under trustees.
- Internal competition drove down costs and maximized efficiency.
- Integration and attention to minute detail eliminated external profit.
Chapter Eighteen: Conclusion
The formal 1892 dissolution was evaded, prompting Ohio Attorney-General Frank S. Monnett to bring contempt proceedings in 1897. In response, the Standard reorganized as the Standard Oil Company of New Jersey, centralizing control again with a capital of $110 million and unlimited duration. The SOC earns immense annual profits, averaging about $45 million (or 50% on capital), which is steadily invested in allied fields like railroads, banking, and copper, making it the strongest financial aggregation in the world. The author concludes that the SOC is fundamentally the success of the South Improvement Company’s illegal methods, and therefore, the Trust question remains unsolved because the transportation question remains unsolved.
- The Trust evaded dissolution and re-centralized in New Jersey.
- Annual profits of $45 million fund vast outside investments.
- The Standard’s supremacy hinges on its transportation control.
20 Notable Quotes from the Book
- “The normal unfolding of a new and wonderful opportunity for individual endeavour.” (Chapter 1)
- “Silence is golden.” (Chapter 2)
- “Under the thin guise of assisting in the development of oil-refining in Pittsburg and Cleveland… this corporation has simply laid its hand upon the throat of the oil traffic with a demand to ‘stand and deliver.’” (Chapter 3)
- “A fundamental provision of these contracts was that there should be no discriminating in favour of one person or one town, that such a discrimination was a violation of charter…” (Chapter 3)
- “All we want is a practical combination. We are wed to no particular form.” (Chapter 4)
- “The most important feature of this contract… is perhaps that part which provides that the Executive Committee of the Central Association are to have the exclusive power to arrange with the railroads for the carrying of the crude and refined oil.” (Chapter 5)
- “They crushed her business and her spirit as remorselessly as they would have killed a dog.” (Chapter 6)
- “The coal-oil business belongs to us.” (Chapter 7)
- “The railroad companies have combined with an organisation of individuals known as the Standard Ring…” (Chapter 7)
- “I refuse to answer, lest I incriminate myself.” (Chapter 8)
- “The day of the railroads [was] over as long-distance transporters of oil.” (Chapter 9)
- “The Tidewater must not be allowed to live, then.” (Chapter 9)
- “We want to make the prices at Dallas and in the neighbourhood on Brilliant and water-white oil, that will prevent Clem (an independent dealer) from doing any business.” (Chapter 10)
- “The public has to pay the cost of the expensive ‘Oil Wars’ which have been carried on so constantly for the last twenty-five years all over the country…” (Chapter 10)
- “But why should Rice be required to pay 250 per cent. more for the carriage of his oil than was exacted from his competitor?” (Chapter 11)
- “As a matter of fact, no refinery was burned in Buffalo, nor was it ever proved that Mr. Rogers knew anything of the attempts the Everests made to destroy Matthews’s business.” (Chapter 12)
- “The most unfortunate fact in the history of the Senate.” (Chapter 13)
- “This sum in the hands of nine men… is one of the most active and possibly the most formidable moneyed power on this continent.” (Chapter 14)
- “They have become a strong organisation almost solely because of the persistent opposition of the Standard Oil Trust.” (Chapter 15)
- “The Trust question will go unsolved so long as the transportation question goes unsolved.” (Chapter 18)
Conclusion
Ida M. Tarbell’s comprehensive history reveals the Standard Oil Company as a monumental achievement of efficiency and organization, characterized by its “perfect centralisation” and strategic genius. However, this “legitimate greatness” was built upon and maintained through a foundation of illegal methods, chiefly the system of securing preferential transportation rates—the core principle of the nefarious South Improvement Company. With annual profits of roughly $45 million now flowing into and influencing diverse sectors, the SOC remains the world’s most formidable financial power. Ultimately, the book argues that the SOC’s monopoly rests entirely upon its control of transportation; therefore, “The Trust question will go unsolved so long as the transportation question goes unsolved“.