Francois Micheloud's Homepage | En FRANCAIS s'il vous plaît
How John D. Rockefeller dominated the Oil Industry for 50 years


  5.1 Anarchy of the first drillings
John Benninghoff farm in  Oil Creek, Pennsylvania where you can see the anarchy of  1861

Before Mr. Rockefeller took the totality of this industry in his iron hand, the price of oil fluctuated wildly. It soared or fell quickly, depending on the market being flooded with an abundant supply or starved by a strong demand. In 1859 for example, the crude oil barrel was selling for  $20 and two years later only for 52 cents ... Speculators bought huge quantities of crude after an especially generous well (a wildcat) had made the prices go down (or knocked the bottom out of the market, in the colorful English of the oilmen) and stored it in tanks, waiting for the prices to rise again. To invest in such a business needed the temper of a gambler, which was not lacking to these men.

5.2 Rockefeller's vision

<<We reached the conclusion that there were three great divisions in the petroleum business - the production, the carriage of it and the preparation of it for market. If any one party controlled absolutely any one of those three divisions, it practically would have a very fair show of controlling the others.>>

Colonel Potts in 1888

In a first stage, Rockefeller devoted himself to the conquest of the better part of the refineries. He did not stop at this almost perfect  horizontal concentration of the refining business, though. He realized that by controlling the refining process, he was the master of the whole industry, and worked from that point on to a vertical concentration to the whole industry, taking over every stage of production, from extraction to retail, including transport, research, marketing and even the manufacture of barrels. This was an ambitious plan because of the fierce resistance of the staunchly independent producers, and the great diversity of operations, but nevertheless he succeeded above all hopes. At its peak, the Standard Oil owned not only all the infrastructures necessary to the making of refined oil, but also pipelines, cars, tankers, groceries. The few links that did not belong to it were in perfect monopsony situation, with the Standard as only buyer.

Click for next page


Table of contents


Francois Micheloud's Homepage