How Rockefeller's Standard Oil grew so dominant that the Supreme Court split it apart
By 1904 a single American group refined 91 percent of the country's oil and controlled 85 percent of final sales. Customers loved its falling prices, rivals hated its secret railroad deals, and a journalist whose father it had ruined helped bring the whole edifice before the Supreme Court in 1911.
It started modestly. In 1863 John D. Rockefeller formed an Ohio partnership with his brother William, Henry Flagler, the chemist Samuel Andrews and others, and in 1870 he founded the Standard Oil Company of Ohio. Growth came from efficiency and ruthlessness in equal measure. Where rivals dumped unwanted gasoline in rivers, Standard burned it in its own machines and found buyers for heavy waste. In 1868 a deal with the Lake Shore Railroad gave the firm freight at 42 cents a barrel, a 71 percent discount, in exchange for guaranteeing 60 carloads a day. Kerosene fell from 58 to 26 cents between 1865 and 1870.
Tactics grew sharper. In 1872 Rockefeller joined the South Improvement Company scheme for rebates, and although Pennsylvania revoked its charter before any oil moved, Standard swallowed most Cleveland refiners in under two months. A New York inquiry in 1879 found that at least half the long-haul traffic on two major railroads got rebates, much of it Standard's, though by then pipelines mattered more.
State laws limited how big a company could grow, so on January 2, 1882, 41 investors pooled the securities of 40 companies under nine trustees, a trust valued at $70 million. Congress answered in 1890 with the Sherman Antitrust Act, passed 51 to 1 in the Senate. Ohio's Supreme Court dissolved the trust in 1892, but in 1899 Standard Oil of New Jersey became a holding company for the lot.
Ida Tarbell's exposé ran in McClure's from 1902 to 1904 before appearing as a book. In 1911 the Supreme Court found Jersey Standard guilty of anticompetitive practices, and the group was split into 39 companies. Jersey Standard became Exxon in 1973 and ExxonMobil in 1999, while Standard Oil of California lives on as Chevron.
Source: Standard Oil
