Standard Oil
John D. Rockefeller incorporated Standard Oil in Ohio on the 1st of January 1870, with one million dollars of capital. The initial stock split saw Rockefeller receive 2,667 shares out of 10,000 total. His partners included his brother William Rockefeller and Henry Flagler, who each received 1,333 shares. Stephen V. Harkness held 1,334 shares while Oliver Burr Jennings took 1,000 shares. The firm chose the name Standard Oil to symbolize reliable quality standards for the nascent industry. Rockefeller quickly centralized authority at their main office in Cleveland yet distributed policy tasks among committees. He dominated the combine as the single most important figure shaping the new oil business. In a seminal deal from 1868, the Lake Shore Railroad gave Rockefeller's firm a rate of one cent per gallon or forty-two cents per barrel. This effective discount represented seventy-one percent off listed rates in exchange for shipping at least sixty carloads daily. Smaller companies decried such deals as unfair because they could not produce enough oil to qualify for discounts. Standard's actions and secret transport deals helped kerosene prices drop from fifty-eight cents to twenty-six cents between 1865 and 1870. Rockefeller used the Erie Canal as a cheap alternative form of transportation during summer months when it was not frozen. In winter months, his only options were three trunk lines including the Erie Railroad and New York Central Railroad. Competitors disliked the company's business practices but consumers liked the lower prices. Standard Oil controlled all aspects of the trade before the discovery of the Spindletop oil field in Texas.
A group of forty-one investors signed the Standard Oil Trust Agreement on the 2nd of January 1882. This agreement pooled securities of forty companies into a single holding agency managed by nine trustees. The original trust held a value of seventy million dollars. John D. Rockefeller and William Rockefeller served alongside Oliver H. Payne, Charles Pratt, Henry Flagler, John D. Archbold, William G. Warden, Jabez Bostwick, and Benjamin Brewster. State legislatures had imposed special taxes on out-of-state corporations doing business within their borders. Other legislatures forbade corporations from holding stock of companies based elsewhere. Legislators established such restrictions hoping to force successful companies to incorporate and thus pay taxes in their state. By a secret agreement, existing thirty-seven stockholders conveyed their shares in trust to these nine men. Standard Oil's organizational concept proved so successful that other giant enterprises adopted this trust form. In 1896, John Rockefeller retired from the Standard Oil Co. of New Jersey but remained president and major shareholder. Vice-president John Dustin Archbold took a large part in running the firm after Rockefeller disengaged from business to concentrate on philanthropy. Other notable principals included Henry Flagler who developed the Florida East Coast Railway and resort cities. Henry H. Rogers built the Virginian Railway while managing his own interests. In 1885, Standard Oil of Ohio moved its headquarters from Cleveland to permanent offices at twenty-six Broadway in New York City. Concurrently, trustees chartered the Standard Oil Co. of New Jersey to take advantage of more lenient corporate stock ownership laws.
A. Barton Hepburn directed by the New York State Legislature in 1879 investigated railroad rebate practices. Merchants without ties to the oil industry pressed for hearings into these unfair arrangements. Prior to the committee investigation, few knew the size of Standard Oil's control over seemingly unaffiliated refineries. Hawke notes only a dozen or so within Standard Oil knew the extent of company operations. Committee counsel Simon Sterne questioned representatives from the Erie Railroad and New York Central Railroad. They discovered that at least half of long-haul traffic granted rebates came from Standard Oil. Even independent companies not allied with Standard confirmed receiving these rebates such as Simon Bernheimner. The committee then shifted focus to Standard Oil's operations where John Dustin Archbold denied association yet admitted directorship. The final report scolded railroads for rebate policies and cited Standard Oil as an example. This scolding was largely moot since long-distance pipelines became their preferred method of transportation. In 1904, Standard controlled ninety-one percent of oil refinement and eighty-five percent of final sales in the United States. The federal Commissioner of Corporations studied operations from 1904 to 1906 concluding dominant position resulted from unfair practices. These included abuse of pipeline control, railroad discriminations, and unfair methods of competition. The government identified four illegal patterns including secret semi-secret railroad rates and discriminations in open rate arrangements. Almost everywhere rates from shipping points used exclusively by Standard were relatively lower than competitor points. Rates made low let Standard into markets while high rates kept competitors out. Trifling differences in distances excused large differences favorable to Standard while ignoring large distance differences against them. Sometimes connecting roads prorated on oil making through rates lower than local combinations but results favored Standard.
Ida M. Tarbell wrote The History of the Standard Oil Company after her father's business failed due to Rockefeller's dealings. Her extensive interviews with sympathetic senior executive Henry H. Rogers fueled growing public attacks on monopolies. Tarbell published work in nineteen parts in McClure's magazine from November 1902 to October 1904. She released the book version in 1904 as a comprehensive history of the company. One of the original muckrakers, Tarbell investigated how Standard controlled a small group of families. Rockefeller stated in 1910 that Pratt family, Payne-Whitney family, Harkness-Flagler family, and Rockefeller family controlled majority stock throughout history. These families reinvested most dividends in other industries especially railroads. They invested heavily in gas and electric lighting including Consolidated Gas Co. of New York City. Large purchases included stock in U.S. Steel, Amalgamated Copper, and Corn Products Refining Co. Ida Tarbell's reporting shifted public opinion against corporate monopolies during the Progressive Era. Her work exposed how Standard used bogus independent companies to disguise illegal actions. The government alleged almost everywhere rates favored Standard over competitors despite distance differences. Public outrage grew as consumers learned about secret shipping agreements allowing Standard to undercut rivals through discriminatory pricing.
The Supreme Court upheld lower court judgment on the 15th of May 1911 declaring Standard Oil an unreasonable monopoly under Sherman Antitrust Act Section II. The court ordered Standard to break up into thirty-nine independent companies with different boards of directors. Biggest two companies were Standard Oil of New Jersey which became Exxon and Standard Oil of New York which became Mobil. John D. Rockefeller had long since retired from management roles but owned a quarter of resultant shares. Those share values mostly doubled so he emerged richest man in world after dissolution. Net value of companies severed from Jersey Standard in 1911 was three hundred seventy-five million dollars constituting fifty-seven percent of Jersey's value. After dissolution, Jersey Standard became United States second largest corporation after United States Steel. In 1890 Congress passed Sherman Antitrust Act overwhelmingly with Senate vote fifty-one to one and House vote two hundred forty-two to zero. Law forbade every contract scheme deal or conspiracy to restrain trade though phrase restraint of trade remained subjective. State of Ohio successfully sued Standard compelling trust dissolution in 1892. Response saw Standard separate Standard Oil of Ohio while keeping control. Eventually state of New Jersey changed incorporation laws allowing company to hold shares in other companies in any state. By 1911 market share dropped to sixty-four percent when ordered broken up. At least one hundred forty-seven refining companies competed including Gulf Texaco and Shell.
Jersey Standard renamed Exxon in 1973 and ExxonMobil in 1999 remains one of largest public oil companies worldwide. Many disassociated companies remained powerful businesses through twentieth century merging into others like Chevron Corporation. Chevron continues Standard Oil Company of California lineage while BP acquired Standard Oil of Ohio and Indiana later known as Amoco. BP founded separately from Standard's lineage but acquired these entities over time. Two original Baby Standards became ExxonMobil after merging their interests in Asia-Pacific region into joint venture Stanvac. Stanvac operated in fifty countries from East Africa to New Zealand before dissolving in 1962. Marathon Oil and Marathon Petroleum continue The Ohio Oil Company legacy while ConocoPhillips and Phillips 66 trace back Continental Oil Company. Three supermajor companies now own rights to Standard name: ExxonMobil, Chevron Corp., and BP. BP acquired rights through acquiring Standard Oil of Ohio and merging with Amoco. BP sells marine fuel under Sohio brand at marinas throughout Ohio. ExxonMobil keeps Esso trademark alive selling diesel fuel displayed on pumps. As of December 2024 Chevron registered new federal trademark for Standard name for electric charging stations. Some analysts argue breakup beneficial to consumers long run though no one proposes reassembling pre-1911 form.
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Common questions
When did John D. Rockefeller incorporate Standard Oil in Ohio?
John D. Rockefeller incorporated Standard Oil in Ohio on the 1st of January 1870 with one million dollars of capital.
What was the value of the original Standard Oil Trust Agreement signed by forty-one investors?
The original trust held a value of seventy million dollars when forty-one investors signed the agreement on the 2nd of January 1882.
How much oil refinement did Standard Oil control in the United States in 1904?
Standard controlled ninety-one percent of oil refinement and eighty-five percent of final sales in the United States in 1904.
Who wrote The History of the Standard Oil Company and when was it published?
Ida M. Tarbell wrote The History of the Standard Oil Company and published the work in nineteen parts from November 1902 to October 1904 before releasing the book version in 1904.
On what date did the Supreme Court declare Standard Oil an unreasonable monopoly under the Sherman Antitrust Act?
The Supreme Court upheld lower court judgment on the 15th of May 1911 declaring Standard Oil an unreasonable monopoly under Sherman Antitrust Act Section II.
Which three supermajor companies currently own rights to the Standard name as of December 2024?
Three supermajor companies now own rights to Standard name: ExxonMobil, Chevron Corp., and BP with Chevron registering a new federal trademark for the Standard name for electric charging stations as of December 2024.