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How John D. Rockefeller dominated the Oil Industry for 50 years


7.5 Conquest of the Pipelines

The coal-oil business belong to us

After having tried to destroy several pipelines developments, Rockefeller saw that this was a much more efficient mean of transportation for oil. When each barrel cost 40 cents to carry to the railroads, which then made the Standard pay 85 cents (against an official rate of $1.30), pipeline transport only cost 16 cents a barrel. The success of the first experiments with pipelines was made by the Tidewater Company, which had its own network of refiners. Rockefeller tried every possible mean to secure control of the Tidewater, like making false rumors to be able to buy its stock at a low price, and finally took control by alliance.

He applied to pipelines the methods that had been so efficient with refineries, and in 1879 he controlled most of the oil-gathering pipelines, those which connected the wells to the shipping points. These lines were organized under the name of  United Pipe Lines.

At the summit of its glory, the Standard had thus a quasi monopoly on the US pipelines. more on pipelines

7.6 Expropriation of retailers

The avowed goal of  de John D. Rockefeller was to take control of the whole oil business. This implied the capacity of leading the fate of each barrel of petrol, from the time it came out of the earth until it was burned in the housewife's lamp.

He still had to control the retailer network, those who sell kerosene to housewives and lubricants to factories.

Letter from the  Standard to a grocer

John Fowler

January 14, 1891 Hampton, Iowa.

Dear Sir :-Our Marshalltown manager, Mr. Ruth, has explained the circumstances regarding the purchase and subsequent countermand of a car of oil from our competitors. He desires to have us express to you our promise that we will stand all expense provided there should be any trouble growing out of the countermand of this car. We cheerfully promise to do this; we have the best legal advice which can be obtained in Iowa, hearing on the points in this case. An order can be countermanded either before or after the goods have been shipped, and, in fact, can he countermanded even the goods have already arrived and are at the depot. A firm is absolutely obliged to accept a countermand. The fact that the order as been signed does not make any difference. We want you to absolutely refuse, under any circumstances, to accept the car of oil. We are standing back of you in this matter, and will protect you in every way, and would kindly ask you to keep this letter strictly confidential. . . .

Yours truly, E. P. PRATT

Source : Ida Tardell, op cit.

Some refiners had their own retailer network, others had wholesalers (or jobbers) who then sold to groceries. To achieve total integration of the industry he still needed his own retailers, which he promptly got. 

Very soon the whole US territory was covered with local retailers working under close supervision by the headquarters. The same perfection observed in other parts of the process could be seen in the retailing : excellent service, quality product delivered on time. Informers, often employed by the same companies they were spying, told the Standard Oil of every move of its competitors. If for example a retailer had ordered oil from an independent refiner, an agent of the Standard contacted him and offered cheaper Standard Oil oil. If for some reason the grocer did not want to do business with the Standard, he was then visited by a pseudo independent refiner who offered him special prices. After all the independent producers oil had been evicted from the local market by a few month of such a price war, the kerosene price quickly rose again at its initial level in this region.

If their methods came to public knowledge, the directors of the Standard accused "excessive zeal"  from their employees and promised to correct it. As Rockefeller said in a rare interview in 1890  « ... In a business as large as ours, conducted by so many agents, some things are likely to be done which we cannot approve. We correct them as soon as they come to our knowledge. The public hears of the wrong - it never hears of the correction.»

Carrying Standard Oil kerosene through the Danish countryside

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