|
Monopoly,
Part III
Brian
Trumbore
President/Editor, StocksandNews.com
[Note: The following won't make much
sense unless you read
part I or part
II.]
This
week we wrap up our story of how John D. Rockefeller's
Standard Oil Company used its influence over the railroads
to monopolize the petroleum industry, which in the
1870s and 1880s was primarily about the business of
kerosene, or "cheap light."
Following
are further excerpts from an extensive piece in The
Atlantic Monthly, 1881, as written by the famous muckraker
Henry Demarest Lloyd. Again, as you read this remember
Lloyd had an agenda just like all muckrakers did back
then (and more than a few journalists today), but
it's interesting history; including the environmental
damage that was taking place in those days as many
an operator was forced to pump his oil onto the ground
in order to save his pipes from damage. You also see
how Standard, like any monopoly, used the courts to
threaten those who sought to compete with them.
---
Henry
Demarest Lloyd:
Hundreds
and thousands of men have been ruined by these acts
of the Standard and the railroads; whole communities
have been rendered desperate, and the peace of Pennsylvania
imperiled more than once. The thousands of men thrown
out of employment in Pittsburgh between 1872 and 1877
were actors in the Pittsburgh tragedy of July, 1877.
The oil producers? declared that "the Standard and
the railroad companies leave to the people, whose
creatures they are, but two remedies, - an appeal
for protection first to the law of the land, and next
to the higher law of nature!" The very intelligent
and fair correspondent of the New York Sun, whom the
Standard could not seduce, as it did the representative
of another great New York daily, wrote from Titusville,
Pa., Nov. 4, 1878, "The fact is the State of Pennsylvania
has had a narrow escape from an internal war, that
would have required all its resources to control and
check, and the danger is not over yet?.Had certain
men given the word there would have been an outbreak
that contemplated the seizure of the railroads and
running them, the capture and control of the United
Pipe Line's [the Standard's] property, and in all
probability the burning of all the property of the
Standard Oil Company in the region."?.
Mr.
B. B. Campbell, who described himself as the unfortunate
owner of nearly a hundred producing wells, told a
story before the supreme court of Pennsylvania that
ought not to be uninteresting to the million of consumers
of kerosene. One day, returning to his home at Parker,
near Pittsburgh, the center of a great oil district,
he found the citizens in a state of terrible excitement.
The Standard, through its pipe line, had refused to
run oil, unless sold to them, and then declared it
could not buy, because the railroads could furnish
it no cars in which to move away the oil. Hundreds
of wells were stopped, to their great damage. Thousands
more, whose owners were afraid to close them for fear
of injury by salt water, were pumping the oil on the
ground. All the influence of a few leading men was
hardly enough to prevent an outbreak and the destruction
of railroad and pipe lines. Mr. Campbell telegraphed
the railroad authorities, "The refusal of the Standard
to run oil, unless sold upon immediate shipment, and
of the railroads to furnish cars, has created such
excitement here that the conservative citizens will
not be able to control the peace, and I fear the scenes
of last July will be repeated in an aggravated form."
The interview that followed convinced the railroad
men they had gone too far, and in a few hours afterwards
hundreds of empty cars suddenly appeared at Parker,
and for a week the railroad, which had said it could
furnish no cars, took away from Parker fifty thousand
barrels of oil a day!
If
we turn to the experience of the refiners we find
they fared as badly as the producers. The handful
of New York refiners who survived the conspiracy against
them testify that they had to keep their capacity
limited and to do as little as they could. They did
not dare to build large refineries, because they would
not be able to get enough oil carried to them to keep
them going. Mr. Alexander, of Cleveland, tells how
he was informed by Rockefeller, of the Standard, that
if he would not sell out he should be crushed out.
The Standard had a contract with the railroads which
made them master. He had to take their terms, and
sell for $65,000 a refinery which cost him $150,000,
and was making money. Refiner after refiner in Pittsburgh,
buying his crude oil in the open market, manufacturing
it at his works, shipping it to the seaboard, met
with a continued succession of losses, and was forced
into bankruptcy or a sale of his works to the Standard,
who always had a buyer on the spot at the right time.
The great majority of these refineries, when bought
by the Standard, were dismantled and the "junk" was
hauled to other refineries. The Vesta and Cosmos refineries,
which cost about $800,000, were sold at sheriff's
sale to the Standard for $80,000, and are now run
vigorously by that company. The Germania, which was
run to its full capacity as long as the Pennsylvania
Railroad gave its proprietor transportation, is now
leased to the Standard, but stands idle, as that concern
can make more money by limiting the production and
maintaining an artificial price than by giving the
people cheap light. The Standard became practically
the only refiner of oil in Western Pennsylvania, and
its rule was bankruptcy to all attempting to lead
an independent existence.
D.P.
Reichardt tells us how the agents of the Standard
came to him with the threat that if he did not come
into their combination they would drive him to the
wall. The Standard called upon this free man to choose
between financial ruin and joining them on these terms:
he was to refine only half as much as he had been
doing, and was to pay them a tribute of one cent a
gallon, a tax of five to twelve per cent. The selling,
storing, transporting, and price of his oil he was
to leave entirely to the Standard?.
The
Pittsburgh Chamber of Commerce reported April 3, 1876,
that there were twenty-one oil refineries idle in
that city, owing to freight discriminations and combinations.
There were $2,000,000 invested in these refineries,
and if in operation they would have required the labor
directly of 3060 men, besides the much larger number
of carpenters, masons, bricklayers, boiler- makers,
pump-makers, and other workingmen, who would have
employment if the oil refining business were prosperous?.
Its
genius for monopoly has given the Standard control
of more than the product of oil and its manufacture.
Wholesale merchants in all the cities of the country,
except New York, have to buy and sell at the prices
it makes. Merchants who buy oil of the Standard are
not allowed to sell to dealers who buy of its few
competitors. Some who have done so have been warned
not to repeat the offense, and have been informed
that, if they did so, the Standard, though under contract
to supply them with oil, would cut them off, and would
fight any suit they might bring through all the courts
without regard to expense?.
Today,
in every part of the United States, people who burn
kerosene are paying the Standard Oil Company a tax
on every gallon amounting to several times its original
cost to that concern. The average price of crude oil
at the wells or at Cleveland, as the railroads carry
the crude free to the Standard's refineries, was in
December last about three cents a gallon. The price
of refined at Cleveland was seventeen cents a gallon.
Oil that the Standard sells in New York at a profit,
at ten and one half cents a gallon, they charge nineteen
and three fourths cents for in Chicago. The average
cost, last December, of the one and third barrels
of petroleum needed to make a barrel of kerosene was
$2.05 at Cleveland. The cost of refining, barreling,
and all expenses, including a refiner's profit of
half a dollar a barrel, is, according to the testimony
of experts, $2.75 a barrel. To bring by rail to Chicago
costs seventy cents, making the total cost $5.50 for
a barrel of fifty gallons, or eleven cents a gallon.
The price the Standard charges in Chicago is nineteen
and three fourths cents a gallon, in which, as the
difference between eleven and nineteen and three fourths
cents, there is a tax on the public of eight and three
fourths cents. This tax is transmitted by the middle-men,
jobbers, and retailers to the consumer. When at twenty-five
cents a gallon the working-man buys kerosene because
it is cheaper than gas, or the student because it
is better, each pays the Standard this tax of eight
and three fourths cents a gallon. A family that uses
a gallon of kerosene a day pays a yearly tribute to
the Standard of $32, the income from $800 in the four
per cents?.
Today
the only visible hope of cheap light for the people
of this country is the discovery, announced by the
Atlantic cable of January 28th, that in the Hanover
petroleum district in Germany a basin has been found,
which is thought by experts to be, beyond doubt, as
large and rich as the one in Pennsylvania. In Europe,
such alliances between the railroads and the refiners
as created by the Standard monopoly are impossible.
German oil wells, German refineries, and the Canadian
canals may yet give the people of the interior of
this continent what the American Standard and the
American railroads have denied them, - cheap light.
It
is the railroads that have bred the millionaires who
are now buying newspapers, and getting up corners
in wheat, corn, and cotton, and are making railroad
consolidations that stretch across the continent?.
One
mind invented the locomotive, established the railroad,
and discovered the law of this new force. All railroad
history has been a vindication of George Stephenson's
saying that where combination was possible competition
was impossible?.
In
less than the ordinary span of a lifetime, our railroads
have brought upon us the worst labor disturbance,
the greatest of monopolies, and the most formidable
combination of money and brains that ever overshadowed
a state. The time has come to face the fact that the
forces of capital and industry have outgrown the forces
of our government. The corporation and the trades-union
have forgotten that they are the creatures of the
state. Our strong men are engaged in a headlong fight
for fortune, power, precedence, success. Americans
as they are, they ride over the people like Juggernaut
to gain their ends. The moralists have preached to
them since the world began, and have failed. The common
people, the nation, must take them in hand. The people
can be successful only when they are right. When monopolies
succeed, the people fail; when a rich criminal escapes
justice, the people are punished; when a legislature
is bribed, the people are cheated?.The nation is the
engine of the people. They must use it for their industrial
life, as they used it in 1861 for their political
life. The States have failed. The United States must
succeed, or the people will perish.
---
Wall
Street History will return in two weeks with the story
of Chernobyl.
Brian
Trumbore
|
