STANDARD OIL COMPANY

The origins of the Standard Oil Company date from 1863 when John D. Rockefeller (1839–1937), son of a modest businessman, and two others purchased a refinery in Cleveland, Ohio. Rockefeller foresaw the potential of refining Pennsylvania crude oil, which would revolutionize the way people lighted their homes, fueled their vehicles, and powered their industries. With easy access to railroads and the Great Lakes, Rockefeller's home city of Cleveland, Ohio, soon became the hub for crude oil refining, thanks to the business acumen of Rockefeller and his partners.

After seven years of local success the company was incorporated in 1870. Rockefeller then began a series of shrewd business maneuvers, which included several mergers, the absorption of the next three largest refiners in the nation, and the use of favorable railroad rebates. (Rockefeller was such a hard-nosed negotiator that he talked the railroads not only into giving Standard Oil rebates; they even paid him rebates on his competitors' shipping!) In ten years, Rockefeller controlled $33 million of the $35 million annual refining capacity of the United States. By 1878 Rockefeller and partner Henry Flagler (1830–1913) had consolidated most of the oil refining in the nation, and Rockefeller became one of the five wealthiest men in the country.

The already gigantic company was growing at such an remarkable pace that it alarmed the "muckraker" exposé journalists of the late nineteenth century, like Ida Tarbell (1857–1944), who denounced Standard Oil as an "octopus," or a monopoly, strangling the forces of competitive capitalism, ruining the small businessman, and trampling on the rights of labor.

Standard Oil was, as the muckrakers said, a monopoly. Because it was able to establish dominance over its competitors in the field of refining, it was a "horizontal monopoly." And because it branched out from its original concentration on refining into the drilling of crude oil and the sale of petroleum products, it also became a "vertical monopoly."

One of Rockefeller's main contributions was in devising ways to structure this economic power. In 1882 Rockefeller and his associates established the first trust in the United States, which consolidated all of the company's assets under the New York Company, in which Rockefeller was the major shareholder. The 30 companies in the trust controlled 80 percent of the refineries and 90 percent of the oil pipelines in the country.

In an effort to check the monopolization of the economy, Congress passed the Sherman Anti-Trust Act in 1890. In 1892 the Ohio Supreme Court dissolved the Standard Oil Trust. The company, however, took advantage of the newly liberalized laws in New Jersey and incorporated there under a consolidated corporate structure. This maneuver enabled Standard Oil to continued to operate as a Trust.

Standard Oil accumulated $830 million in profits from 1899 to 1911. In 1906 a federal lawsuit against Standard Oil broke up the New Jersey trust. While Jersey Standard retained a number of smaller companies, it lost the largest refineries held in other states and its monopoly on production of oil and pipelines. Jersey Standard, still handling Rockefeller's trusts, acted quickly to acquire oil supplies in other states, particularly Texas. Although it eventually lost its domination of the oil market, the company was still huge and ripe for criticism.

In 1888 the first foreign affiliate of Standard Oil was created. The Anglo-American Oil Company Ltd. of London allowed Standard to begin securing interests outside the United States. It acquired companies in Latin America in the 1920s, particularly in Venezuela, and also expanded marketing companies abroad.

As more and more automobiles and trucks began to dominate transportation in the 1920s, Standard Oil's sales shifted from kerosene to gasoline. By 1950, however, the top-selling products were still fuel oils used as substitutes for coal to power ships and industrial plants; distillates used for home heating and diesel engines were also important products. The big profit earner, even in the early 1990s, remained crude oil, and not gasoline sales.

The legal confrontation finally came to a head in the United States Supreme Court in 1911. The Court ordered Standard Oil of New Jersey to divest itself of its 33 subsidiaries. Later the company changed its name to Esso, using the abbreviation from Standard Oil (S. O.). This caused protest from the companies that were still using the Standard Oil name, so the company officially changed its name to Exxon in 1972.

STANDARD OIL COMPANY

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